In international trade, the expression "most-favored-nation," usually abbreviated "MFN,"status (or treatment) has a specific meaning quite different from what it appears to mean. Because of this fact and for reasonsof historical continuity both terms (MFN and NTR) are used in this report with the identical meaningand also interchangeably with the term "nondiscriminatory," a term also often used in U.S. tradelegislation. In this report, the MFN (NTR) treatment is discussed in the specific context of tariffs,because of the origins and historical development of the concept in the U.S. law and practice,particularly the denial or restoration of such treatment to nonmarket economy countries

	Evolution of U.S. Most-Favored-Nation Policy

There are three basic, often overlapping, ways in which the United States accords generalMFN treatment to its trading partners. 876) applied theSection 5 suspension to "any country or area dominated by Communism" and thereby placed injeopardy MFN tariff status of Yugoslavia as well as of Poland. While restoration of permanent NTRtreatment can take place only through legislation enacted under general legislative procedure, NTRtreatment as such can be restored to a "nonmarket economy" (NME) country subject to Section 5suspension on a temporary basis by a specific procedure provided in Title IV of the Trade Act of1974. The continuation in force of an NME country's temporary MFN status is contingent on (1)automatic triennial extensions of the underlying trade agreement and (2) periodic renewal of theauthority of the Jackson-Vanik amendment. Periodic renewal of the Jackson-Vanik amendment authority by the President must takeplace: (1) in the case of full compliance with the requirements of the amendment, by semiannualreports (by June 30 and December 31) by the President to Congress that the country continues to be,in effect, in full compliance with the freedom-of-emigration requirements of the statute; and (2) inthe case of waivers, by a Presidential recommendation, which must be made by June 3 of every year,that the overall waiver authority and the existing individual country waivers be extended for another12-month period (through July 2 of the following year). Legislation was introduced, but not acted upon, to extend permanent nondiscriminatory tarifftreatment to Afghanistan (whose PNTR status has since been restored by Presidential action; seebelow), Cuba, Kazakhstan, Russia, Ukraine, Uzbekistan, and Yugoslavia (Serbia and Montenegro). By the time the mid-2001 waiver was issued for China , legislation to approve thecomprehensive bilateral trade agreement with China, containing a reciprocal grant of permanentnondiscriminatory treatment, had already been enacted (see p. 10). The invocation is still in effect since Moldova is still subject to theconditional MFN treatment under Title IV of the 1974 Trade Act. Countries to which MFN tariff status is at present being extended after having beenconditionally restored temporarily under the provisions of Title IV are:
(1) under the waiver of Jackson-Vanik amendment requirements, which must be renewedannually and the renewal of which is subject to disapproval by joint resolution of Congress: Belarus,Turkmenistan, and Vietnam (see p.17); and
(2) under the determination of continued "nonviolation" (i.e., full compliance with) theJackson-Vanik amendment criteria, which, after the initial one, must be renewed semiannually andis subject to disapproval by joint resolution of Congress at the time of year-end renewal: Azerbaijan,Kazakhstan, Moldova, Russia, Tajikistan, Ukraine , and Uzbekistan (see p. 16). The term "most favored nation" has been replaced in U.S. legislation by law in all seveninstances in which it appeared with the expression "normal trade relations" or another appropriateterm and is to be so replaced in all future legislation.
In international trade, the term most-favored-nation (MFN) treatment has a meaning atvariance with what it appears to mean: the expression means equal -- rather than exclusivelyfavorable -- treatment and is often used interchangeably with "nondiscriminatory." To make thisdistinction clearer and avoid a possibly misleading interpretation of the most-favored-nation term,legislation was enacted in 1998 to replace it in U.S. law with the term "normal trade relations," orNTR. In this report, both terms are used interchangeably with "nondiscriminatory." The UnitedStates accords general MFN treatment as a matter of international obligation as well statutory policyto all trading partners; however, MFN tariff treatment of several countries has been suspended underspecific legislation. Virtually all such suspensions, initially applied to 21 countries or politicalentities, took place under the mandate of the Trade Agreements Extension Act of 1951, and twomore under country-specific legislation. MFN tariff treatment of countries suspended under the 1951law can be restored and maintained in effect for one-year periods by using the procedure providedunder Title IV of the Trade Act of 1974 for such restoration to "nonmarket economy" (NME)countries. Under this procedure, an NME country needs to conclude with the United States a tradeagreement containing a reciprocal MFN clause, and be in compliance with the criteria of theJackson-Vanik (J-V) freedom-of-emigration provision of that act. The two countries whose MFNstatus was suspended by country-specific legislation could -- and did -- have it restored byPresidential action under conditions specified in the suspending law.
Trade agreements with NME countries must be approved by joint resolution, and aretriennially self-renewable, but their renewal is also subject to Presidential confirmation. To maintainin force the compliance with the J-V criteria (and the MFN status), such compliance must be eitherdetermined semiannually, or waived annually, by the Secretary of State, and such determinations orwaivers are annually subject to possible disapproval by joint resolution. Repeated past legislativeaction to disapprove some waivers, particularly those for China, has been unsuccessful and NTRtreatment contingent on a waiver has invariably remained in effect. Permanent restoration of NTRstatus of any country generally requires specific legislation.
Of the 29 countries, today's successors of countries or areas originally subject to the 1951suspension, 15 had their permanent NTR status restored by specific legislation (five directly and tenafter a period of conditional restoration under the Jackson-Vanik amendment), one (Poland) by thePresident under then existing statutory authority, and one (East Germany) administratively throughunification with West Germany. The status of seven of them is still temporary, subject to thedetermination of full-compliance with the Jackson-Vanik amendment, and of three of them underthe Jackson-Vanik waiver provision. Two countries (Cuba, and North Korea) are denied NTR statusaltogether. The NTR status of two countries, suspended by individual legislation, has been restoredpermanently by Presidential action as authorized by the suspending legislation.
This report will be updated as warranted.