The principle known as lsquo Most Favoured Nation rsquo or MFN under the General Agreement on ...........

Economic Affairs World Trade Organsiation (WTO)

The principle known as ‘Most-Favoured-Nation’ or MFN, under the General Agreement on Tariffs and Trade, essentially means that

Only one country can be designated as MFN by another nation as per its discretion, under which special favours such as lower customs duty rates can be granted to the MFN nation.

Any number of nations can be granted the MFN status by another nation as per its discretion, under which special favours such as lower customs duty rates can be granted to the MFN nation.

Countries cannot normally discriminate between their trading partners.

‘X’ nation with which ‘Y’ nation accounts for the largest share in value of the former’s foreign trade shall be granted special favours, in accordance with MFN norms, by the latter.

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Explanation:

First option is correct.

A most favored nation (MFN) clause is a level of status given to one country by another and enforced by the World Trade Organization. A country grants this clause to another nation if it is interested in increasing trade with that country. Countries achieving most favored nation status are given specific trade advantages, such as reduced tariffs on imported goods.