India, EU Seal 5-Year MFN Pact Under Landmark Free Trade Agreement
Mumbai: India and the European Union have agreed to grant each other Most-Favoured-Nation (MFN) treatment for a period of five years once their long-awaited free trade agreement (FTA) comes into force a significant step aimed at boosting trade and services between the two economies.
Under the arrangement, listed sectors, services and service suppliers of both sides will receive treatment no less favourable than that accorded to any other country, subject to specific limits and conditions.
What the MFN Clause Means
The MFN provision, included in the Trade in Services chapter of the FTA text made public on January 27, ensures that neither India nor the EU can discriminate against each other in favour of another trading partner in the covered sectors.
However, the clause excludes certain areas such as taxation treaties, mutual recognition of standards or authorisations, and dispute settlement procedures. It also allows both parties to grant special advantages in contiguous frontier zones for services that are locally produced and consumed.
Review After Four Years
A Joint Committee will conduct a review in the fourth year of implementation, focusing on developments related to the entry and stay of Indian students in EU member states, their work rights, and arrangements for the temporary movement of service suppliers.
Based on this review, the Committee will determine whether to extend the MFN treatment beyond the initial five-year period.
Either side may also seek a review if circumstances arise that adversely affect their interests. If the Committee decides not to continue the arrangement, the obligation to extend MFN treatment will cease — although benefits already granted will remain unaffected.
A Long-Delayed Breakthrough
India and the European Union reached the long-pending trade agreement last month after years of negotiations. The deal aims to reduce tariffs, enhance market access, and strengthen economic cooperation across goods and services.
With the EU being one of India’s largest trading partners, the MFN provision is expected to provide greater certainty for businesses, service providers, and professionals operating across both markets — potentially opening new avenues for trade, investment and mobility.
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