Why in News
US and other members of the Group of Seven (G7) will revoke Russia's "Permanent Normal Trade Relations (PNTR)".
- The main reason for revoking trade relation is to heighten pressure on an economy on the brink of deep recession.
A recession is a period of declining economic performance across an entire economy that lasts for several months.
- The G7 is the group of developed western countries (UK, Canada, France, Germany, Italy, Japan and the US) established in 1975.
- Permanent Normal Trade Relations (PNTR) is a legal designation in the United States for free trade with a foreign nation.
Most Favoured Nation
- Article 1 of General Agreement on Tariffs and Trade (GATT), 1994, requires every World Trade Organization (WTO) member country to accord MFN status (or preferential trade terms with respect to tariffs and trade barriers) to all other member countries.
- India accorded MFN status to all WTO member countries, including Pakistan, from the date of entry into force of the so called Marrakesh Agreement, establishing the WTO.
- Therefore, MFN is a non-discriminatory trade policy as it ensures equal trading among all WTO member nations rather than exclusive trading privileges.
- If one country is granted a trade concession such as, for example, lower import duties, then all WTO members must be extended the same concessions.
- This principle is known as the Most Favoured Nation treatment. Despite repeated promises, Pakistan has never granted MFN status to India.
- India suspended Pakistan’s MFN status in 2019 after a suicide attack by a Pakistan-based Islamist group killed 40 police.
Losing of MFN status
- Revoking Russia's MFN status sends a strong signal that the United States and its Western allies do not consider Russia a economic partner in any way, but it does not in itself change conditions for trade.
- It does formally allow the Western allies to increase import tariffs or impose quotas on Russian goods, or even ban them, and to restrict services out of the country.
- All the European Countries has put 70% of sanctions on Russia and Belarus.