What is the principle of "most-favored-nation" (MFN)?

The principle of "most-favored-nation" (MFN) is fundamentally about ensuring equal trading advantages among countries. When a country is granted MFN status, it means that it will receive the same trade concessions or advantages provided to the most favored trading partner of a given country.

This status is a cornerstone of international trade agreements and aims to promote non-discrimination in trade, ensuring that any favorable trade terms extended to one nation will automatically apply to all other nations that also hold MFN status. This principle helps to create a more predictable and fair trading environment by preventing countries from favoring one trading partner over another.

The other options focus on different aspects of international trade. The preferential trade agreement refers to bilateral trade arrangements that may not extend the same benefits to all nations, while the policy to protect national industries speaks to protectionist strategies. Finally, the notion of trading on equal terms lacks the nuanced understanding of reciprocity and the equality of concessions that MFN implies. Thus, the correct answer effectively captures the essence of MFN and its role in international trade relations.