Despite its name, the most favored nation (MFN) clause of the General Agreement on Tariffs and Trade (GATT) does not mean that any one nation receives preference over another nation with regard to trade. Instead, members of the GATT are committed that products originating in one nation will receive the same treatment as products originating in any other nation. Discrimination and preferences are prohibited ("WTO," n.d., p. 2). However, Article I, which contains the MFN clause, also provides some exceptions to that clause, including customs unions and free trade areas. In general, however, the goal of MFN status is to give equal treatment to all countries and their goods and to prohibit any one nation from being favored over any other nation. In this sense, all MFN nations are "most favored."
The United States grants MFN status to nearly all of its trading partners: in 1997, only seven nations did not enjoy MFN status ("Ask Dr. Foreign," 1997, p. 23). However, even those nations which are granted MFN status may not have unconditional status. Waivers have been obtained by the president for a number of countries, including China, which otherwise would not be eligible for MFN under US rules. Such countries can enter into a bilateral trade agreement with the United States, or may be determined to be in compliance with the Jackson-Vanik amendment of the 1974 Trade Act (this amendment has implications for free emigration). It is under these conditions that China has been granted MFN status, but because China's status is not unconditional, it is subject to Congressional approval based on the president's recommendation ("Most Favored Nation," 1997, p. 1).
The issue of MFN status for countries is both political and economic. By reducing tariffs for Chinese goods, as an example, American companies which use those goods in their own products can purchase them at prices which are well below what they would have to pay if the MFN st...