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. Whilesuggesting special and exclusive privileges granted to one country, it means in reality equal treatmentof all countries granted the MFN treatment. Defined in a more specific detail in Article I of theGeneral Agreements on Tariffs and Trade (GATT) 1994, an integral part of the World TradeOrganization Agreement, the term denotes the reciprocal extension of any concessions, privileges,or immunities granted, or yet to be granted, by a country in a trade agreement (or in some other way)to one country which is, or would be, the "most favored" in this respect to all countries to which itaccords MFN treatment. As a consequence, all countries to which a country extends MFN treatmentare, or would be, treated by the extending country equally or in a "nondiscriminatory" fashion. The understandable misinterpretation of the most-favored-nation term in its literal meaning,particularly in the context of U.S. trade policy of the mid-1990s toward China, gave rise tolegislation (1) to replace theoften misleading term "most-favored-nation" treatment in the seven instances in the existing and inall future U.S. legislation with the term "normal trade relations" (NTR) or another appropriateexpression. The MFN term, however, has remained universally in use in international trade relations,including trade agreements to which the United States is party. 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 practice, the principal benefit a country gains from being accorded MFN status by anothercountry is that the latter's imports from the former are dutied at concessional rates (often referred toas "MFN" rates, and listed in the U.S. tariff schedules as "General") rather than full rates. Thus, theextension of MFN treatment to a country can often mean a significantly lower cost and, hence,greater competitiveness of its products in the extending country's markets than would otherwise bethe case. 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 There are three basic, often overlapping, ways in which the United States accords generalMFN treatment to its trading partners. One is by means of a bilateral compact (e.g., a "friendship,commerce, and navigation" or similar treaty, or an executive trade agreement) in which MFN statusis accorded reciprocally. Another, much broader in its reach, is through being a member of theWorld Trade Organization (WTO), which, as a rule, carries with it the obligation of according MFNtreatment to all other members. In addition, the United States specifically accords to all foreign countries any concession ontariffs or other import restrictions agreed to in reciprocal negotiations with any trading partner by itsown law, first enacted in 1934 and now contained in Section 126 of the Trade Act of 1974 (19U.S.C. 2136). U.S. legislation provides no specific procedure for extending MFN status to a country(except in the case of restoration of the status to "nonmarket economy" countries discussed below)nor is there an official list of countries with MFN status. All countries other than those to whichMFN treatment is specifically denied by law (as listed in General Note 3(b) of the Harmonized TariffSchedule of the United States) have MFN status. The policy of general application of MFN treatment was modified when the President, in1951 and 1952, suspended (2) the application of MFN tariff rates to the Soviet Union and to allcountries or areas then under the control of international communism (in practice, the suspensionapplied to all countries of the then Sino-Soviet bloc but not to Yugoslavia). This action resulted inthe increase of customs duties assessed on the U.S. imports from the countries involved from theconcessional levels resulting from trade agreements with third countries to considerably higher levelsas enacted by the highly protectionist Tariff Act of 1930. The Communist countries and areas initially denied MFN tariff treatment under Section 5were: Albania, Bulgaria, China (any part under Communist domination or control), Czechoslovakia,Estonia, Germany (Soviet Zone and Soviet Sector of Berlin), Hungary, Indochina (any part ofCambodia, Laos, or Vietnam under Communist domination or control), Korea (any part underCommunist domination or control), Kurile Islands, Latvia, Lithuania, Outer Mongolia, Poland andareas under Polish domination or control, Rumania, Southern Sakhalin Island, Soviet Union, TannaTuva, and Tibet. (3) Subsequently, Poland's MFN tariff status was restored by the President in December 1960,while Cuba's was added to Section 5 suspensions by law in May 1962. Also in 1962, a list of"Communist countries" (all "Section 5" countries except Poland), to which MFN tariff status wasbeing currently denied, was included in the newly revised Tariff Schedules of the United States,enacted by the Tariff Classification Act of 1962, and thereby the denial of MFN treatment toindividual countries became part of the U.S. law rather than of implementing regulations astheretofore. Section 231 of the Trade Expansion Act of 1962 (P.L. 87-794; 76 Stat. 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. The implementation of this directivewas delayed and the law was later amended by allowing any country with MFN status at the time ofits enactment (December 16, 1963) to retain it if the President determines it to be in the nationalinterest. Such determination was made on March 26, 1964, for both countries (29 F.R. 4851 or4913). The Trade Expansion Act of 1962 also made the restoration of MFN tariff status to a countrysubject to Section 5 suspension possible only by legislation. 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. While Section 401 of the act requires the continuation in force of the then existing suspensionsof MFN tariff status, it also, in other provisions of its Title IV, authorizes the President to restore"nondiscriminatory" status to a nonmarket economy country and maintain it in effect on a temporarybasis by a specific procedure. The key elements of the procedure for temporary restoration of the MFN status to an NMEcountry are (1) conclusion of a bilateral trade agreement, containing a reciprocal grant of the MFNstatus and additional provisions required by law (Section 405, Trade Act of 1974; 19 U.S.C. 2435),and approved by the enactment of a joint resolution (4) considered under a specific fast-track procedure set out in Section151 of the Trade Act of 1974 (19 U.S.C. 2191); and (2) compliance with the freedom-of-emigrationrequirements ("Jackson-Vanik amendment;" Section 402; 19 U.S.C. 2432). The latter requirementcan be fulfilled either by a presidential report to Congress that the country is not in violation of (ineffect, is in full compliance with) the freedom-of-emigration criteria of the statute, or by apresidential waiver of such compliance under specified conditions. Neither the initial presidential determination of full compliance with the Jackson-Vanikamendment requirements nor his initial waiver of full compliance with them requires positivecongressional approval . However, the initial presidential determination of full compliance with suchrequirements (but not the initial waiver) is subject to congressional disapproval by a jointresolution (5) of eitherhouse, enacted under a specific fast-track procedure, laid out in Section 152 of the Trade Act of 1974(19 U.S.C. 2432). Following the main steps of the procedure, the disapproval resolution, whose language isprescribed by law, is referred, respectively, to the House Ways and Means Committee or the SenateFinance Committee, and must be reported within 30 days of session, or else the committeeconsidering it is subject to a discharge motion, the resolution may be amended only with respect toits country applicability, and the debate on the resolution and any procedural motions is subject tolimits. The resolution must be adopted within 90 days of session after the date the presidentialdetermination is delivered to Congress, and enters into force -- thereby, in effect, denying thenondiscriminatory treatment and other trade benefits to which it applies -- on the 61st day after itsenactment. If the President vetoes the resolution, the veto must be overridden within the 90 days orwithin 15 days of session after the receipt of the veto message, whichever is later. The date of theoverride is considered as the date of enactment.