**Introduction** Poorer and developing countries are disproportionately harmed when the “most-favored-nation” (MFN) principle erodes because MFN guarantees equal treatment across trading partners. It ensures that any tariff concession granted to one member is extended to all World Trade Organization (WTO) members. When this baseline of non-discrimination weakens, trade shifts toward selective access, preferential arrangements, and power-based bargaining. Structural asymmetries — economic size, fiscal capacity, and negotiating leverage — then become more decisive, placing lower-income economies at a relative disadvantage. **Contextual background** MFN, embedded in Article I of the General Agreement on Tariffs and Trade (GATT), anchors non-discrimination in the multilateral trading system. It reduces fragmentation by preventing selective tariff differentiation across members. Since 2020, new tariffs and trade-restrictive measures have increased, contributing to a more uncertain trade policy environment[1]. At the same time, pressures on multilateral disciplines and greater reliance on selective trade arrangements have intensified debates about the durability of non-discrimination norms[2]. In such an environment, the stabilizing function of MFN becomes more significant for countries that depend heavily on predictable external market access. **How MFN erosion disproportionately harms developing countries** **1.** **Loss of automatic equal treatment** MFN ensures that tariff concessions are applied on a multilateral basis. When a large economy reduces a tariff for one trading partner, that same lower rate must be extended to all WTO members. This automatic and uniform treatment is particularly important for developing economies, which often lack the negotiating leverage and administrative capacity to secure comparable bilateral concessions across multiple major markets. If MFN weakens in practice, market access becomes conditional rather than guaranteed. In an environment where trade-restrictive measures have increased in recent years[1], selective tariff differentiation raises the likelihood that smaller exporters encounter exclusion, delayed access, or less favorable treatment in key destination markets. **2.** **Growing dependence on preferential trade blocs** As non-discrimination weakens, preferential trade agreements become the primary mechanism for securing market access. Economies embedded in large preferential frameworks gain relative advantages, while those outside face competitive disadvantages. The continued expansion of regional and preferential arrangements has reinforced differentiated access conditions across trading blocs[3]. For developing economies not integrated into major preferential networks, trade and investment may shift toward countries with more secure preferential access, resulting in trade diversion and weaker participation in global value chains. **3.** **Increased exposure to power-based trade relations** MFN reduces the role of economic size in determining market access by requiring uniform treatment. Without it, larger economies gain greater flexibility to differentiate access conditions across partners. In a more fragmented and geopolitically polarized environment, smaller economies face higher adjustment costs and reduced diversification opportunities[4]. Market access becomes more influenced by bargaining power or strategic alignment rather than by uniform multilateral commitments, amplifying structural asymmetries. **4.** **Widening fiscal and industrial policy gaps** The erosion of MFN interacts with expanded industrial policy and subsidy use, as industrial measures — including local content requirements and targeted support programs — have become more prominent features of trade policy[2][5]. In this setting, fiscal capacity becomes increasingly consequential. Larger economies possess significantly greater fiscal space to subsidize domestic industries or offset discriminatory measures, while developing countries often lack comparable resources. In a fragmented system where non-discrimination norms weaken, these fiscal asymmetries translate into sustained competitive imbalances and a reduced ability to attract investment. **5.** **Higher compliance costs and regulatory complexity** MFN simplifies trade by harmonizing tariff treatment across partners. When it erodes, differentiated tariff regimes, varying origin requirements, and partner-specific entry conditions emerge, increasing the complexity of cross-border transactions. At the same time, rising trade policy uncertainty adds to compliance costs and risk exposure[1][4]. For firms in developing economies — particularly small and medium-sized enterprises — these higher administrative and adjustment burdens can function as effective barriers to export participation, limiting the developmental gains associated with predictable multilateral market access. **Conclusion** When MFN erodes, the trading system shifts toward selective and preferential arrangements in which access is no longer guaranteed on a multilateral basis. In such a setting, structural asymmetries become more influential. Poorer and developing countries — given their greater reliance on predictable market access, more limited negotiating leverage, and narrower fiscal space — are more exposed to trade diversion, discriminatory treatment, and intensified subsidy competition. The weakening of MFN therefore risks widening development gaps and reducing the inclusiveness of the multilateral trading system.
