Russia set to lose Most Favoured Nation trade status

Published 24th Mar 2022 by MY Export Hub

Under what is known as the “Most Favoured Nation (MFN)” system, the World Trade Organization (WTO) requires that the same trading terms be applied to all WTO members, unless there is a trade agreement between two or more countries. This means that the UK, for example, cannot offer better trading terms to one country and not another, unless through a specific trade agreement.

Following the invasion of Ukraine, it is now probable that the G7 countries — including the United States, Canada, the UK and France — will move to strip Russia of its MFN status.

“Russia and Belarus will join North Korea as the only countries whose imports are subject to the general tariff,” Canada said. The US also denies MFN status to North Korea, as it does to Cuba.

The proposed move will allow the G7 members to increase and impose new tariffs on all Russian imports, damaging its ability to export to wealthier Western markets.

Affected Russian goods (including vodka) will increase in price, lose competitiveness and ultimately sell in lower numbers in global markets. This will damage the Russian economy as it is export-driven and heavily reliant on foreign demand for its products.

“We are united in our determination to hold President Putin and his regime accountable for this unjustified and unprovoked war that has already isolated Russia in the world,” the G7 said in a statement.

The impact on the UK is likely to be relatively muted, with Russia accounting for 1.5% of total imports and just 0.7% of exports.


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