The MFN is a status or treatment given by one country to another in trade matters. It means that the recipient country of MFN will nominally get equal trade advantage as the ‘most favored nation’ by the country granting the treatment
Why Pakistan is not extending MFN status to India?
India and Pakistan have great trade potentials. But trade among the two is not much because of political mistrust. India has given MFN status to Pakistan in 1996, one year after the establishment of WTO. But Pakistan is slow to take a positive decision on conferring the status to India.
An important factor that makes its difficult for Pakistan to confer MFN status to India is the political impact of the tone of MFN status. It may feel that India is the most favored nation for Pakistan in literary sense though MFN means non-discrimination. To overcome that, Pakistan has devised a new term called Non Discriminatory Market Access (NDMA) which is equivalent to MFN. Such alteration of the MFN is happening elsewhere as well. For example in the US, the MFN is named as Permanent Normal Trade Relations (PNTR) clause. Pakistan has recently promised that it will confer India the NDMA status soon.
When Pakistan is reciprocating India’s MFN with NDMA, both countries have to reduce their tariffs on several commodities. Pakistan has to open trade in 2150 commodities to India, whereas India has to open up trade in 630 commodities.