WTO needs to develop a set of parameters to ascertain which countries qualify as “developing” in order to wind up the challenge associated with S&DT.
The World Trade Organisation (WTO) aims to regulate and facilitate international trade between member nations. Needless to say, not all of its member states possess the same degree of economic prosperity or development. This has led to them have differing interests from those harboured by the developed nations. Consequently, there has been the rise of a group within the WTO consisting mostly of developing countries called the G90. Such a grouping is meant to secure special and differential treatment (S&DT) from the WTO in order for its member countries to realise their development goals. The issues most commonly paid attention to are technical barriers to trade and customs valuation. S&DT has been discussed numerous times in different forums and ministerial conferences of the WTO. Recently, at a negotiating meeting of the structured discussions on investment facilitation for development on 7-8 September 2021, WTO members discussed proposals on S&DT for developing and least developed country members. There have been several conflicting stands on the same and hence, it is imperative to understand India’s position on S&DT and the subsequent effect of maintaining that position during the next WTO Ministerial Conference (MC12) to be held later this year.
The number of provisions on S&DT for developing countries and least developing countries run beyond hundred and include technical assistance activities and longer transition periods to implement agreements. There are also proposals on agreements related to trade-related investment measures, tariffs and trade, non-tariff barriers, subsidies, sanitary measures, market access, etc. Developing countries are given a major boost by these S&DT provisions and can prepare themselves adequately for competing with the developed nations on an equal footing. Such a comprehensive list of areas up for differential treatment are seen as useful in helping the countries reach their sustainable development goals. Even countries like India benefit from the said special and differential treatment in terms of allowing for larger input subsidies and minimum price support.
At a negotiating meeting of the structured discussions on investment facilitation for development on 7-8 September 2021, WTO members discussed proposals on S&DT for developing and least developed country members.
However, as with all forms of special treatment, the S&DT has not been safe from criticisms and looming concerns. Most prominently, concerns have been raised over eligibility requirements vis-á-vis who gets to determine which country is a developing one and using what parameters. Currently, the WTO follows the practice of self-designation wherein anybody can categorise themselves as a developing country and their word would prevail. This has led to charges and fears of disingenuity on the part of various countries who want to avail special and differential treatment.
For instance, high-income countries like Singapore have time and again declared themselves as a part of the developing nation. The Singapore Ministry of Trade and Industry maintains the position that Singapore is a small economy devoid of natural resources and as such, being highly reliant on global trade. Another example is that of China. Despite being the second largest economy in the world or even the largest, if one goes by purchasing power parity, it is categorised as an “upper-middle-income” country by the World Bank. Such a status is welcomed and boosted by China itself who has declared itself as the ‘largest developing country.’ In a similar vein, India has self-designated itself as a developing nation and is accordingly, classified by the World Bank as a lower-middle-income economy.
Since such claims are constructed, there have been counter claims that have sought to challenge that construction. The United States, for instance, has vehemently opposed claims by multiple nations on their proclaimed ‘developing’ status. Advancing a counter view for international institutions to adopt and possibly abide by, the United States Trade Representative (USTR) has published a notice that amends the list of developing and least-developed countries that can potentially be eligible for preferential treatment with respect to countervailing duties (CVD) investigations.
This means that duties investigations for countries like India are in the pipeline and if the counter-view is the one that prevails, the US could then easily penalise India if its trade practices are found to harm US industries with ‘unfairly’ subsidised exports. This greatly increases the vulnerability of Indian exports to the US.
Notably, Singapore has complied with the US and decided not to avail itself of the benefits of the S&DT provisions. Similar behaviour has been observed in the case of Brazil and South Korea. India and China, however, remain undeterred. Contrary to the behaviour of the nations listed above, India and China have called on all developing nations to remain strong on their stands and hit back at the US by rejecting the memorandum completely. Safeguarding the S&DT agreement has become one of India's key objectives at the WTO. Hence, even the response to the counter-view advanced by the US has drawn mixed responses.
There is also a concern related to the monitoring of the implementation of the S&DT provisions. At the 2013 WTO Ministerial Conference concerns were raised as to whether these provisions are effective in the first place. Such an assessment requires the establishment of robust monitoring mechanisms.
WTO members could choose from a range of metrics such as the size of the economy, GDP per capita, or volume of trade, and determine a threshold above which countries should no longer qualify as “developing.”
In order for the trade dispute to end, we need to conceive a solution that can be agreeable to all the parties and can be enforced uniformly. A way to do so would be to develop an objective standard on the basis of relevant and reasonable metrics like the one used by the United Nations, International Monetary Fund, and to some extent, the World Bank. WTO members could choose from a range of metrics such as the size of the economy, GDP per capita, or volume of trade, and determine a threshold above which countries should no longer qualify as “developing.”
All member countries have a stake in maintaining and strengthening the WTO, and should work together to resolve classification of development status for S&DT and bring clarity to this issue. It is only under such conditions that we can ensure equality, equity, and the freedom from interference by other countries by way of imposing a subjective criterion on the other member states.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.