QUESTION- Prelims-IAS – ECONOMICS MCQ-35
- Most-favoured-nation (MFN): treating other people equally ; Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant some country a special favour (such as a lower customs duty rate for one of their products) and that country have to do the same for all other WTO members
- Some exceptions are allowed under this. For example, countries can set up a free trade agreement that applies only to goods traded within the group discriminating against goods from outside.
- Or they can give developing countries special access to their markets.
- Or a country can raise barriers against products that are considered to be traded unfairly from specific countries.
- And in services, countries are allowed, in limited circumstances, to discriminate.
- But the agreements only permit these exceptions under strict conditions.
- In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners’ whether rich or poor, weak or strong.
- IMF and World Bank are known as Bretton Woods twins.
- To make its financial support more flexible and tailored to the diversity of low-income countries, the IMF has established a Poverty Reduction and Growth Trust, which has three lending windows, all under highly concessional terms. These windows, which became effective in January 2010 and were further refined in April 2013 to improve the tailoring and flexibility of Fund support, are the following:
The Extended Credit Facility (ECF):
- Provides sustained engagement over the medium to long term, in case of protracted balance of payments problems;
- Offers more flexibility than before on program extensions, the timing of structural reforms, and formal poverty reduction strategy document requirements.
The Standby Credit Facility (SCF):
- Provides flexible support to low-income countries with short-term financing and adjustment needs caused by domestic or external shocks, or policy slippages;
- Targets countries that do not face protracted balance of payments problems but may need help from time to time;
- Can also be used on a precautionary basis to provide insurance.
The Rapid Credit Facility (RCF):
- Provides rapid financial support in a single, up-front payout for low-income countries facing urgent financing needs, and offers successive drawings for countries in post-conflict or other fragile situations; Provides flexible assistance without program-based conditionality when use of the other two facilities is either not necessary (because of the limited nature of needs) or not possible (because of institutional or capacity constraints faced by a borrower).
- MFN governs the trade in goods, services and even in intellectual property rights.
- There are some exception allowed in MFN rule and Free trade agreements are one of those exceptions. Others are: giving developing countries special access, a country can raise barriers against products that are considered to be traded unfairly
- NAMA refers to all products not covered by the Agreement on Agriculture. In other words, in practice, it includes manufacturing products, fuels and mining products, fish and fish products, and forestry products. They are sometimes referred to as industrial products or manufactured goods.
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