For developing countries, special and differential treatment still holds the key

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Published: April 10, 2019 2:02:20 AM

The adjustment costs borne by these countries in adapting to a changed environment have been disproportionately high. As a result, developing countries argue that taking on multilateral commitments and obligations would be difficult as they are currently in different stages of economic, financial and technological developments.

developing countries, special treatment, differential treatment, development statusFor developing countries, special and differential treatment still holds the key

The issue of special and differential treatment (S&D) has resurfaced in a contentious manner in the WTO negotiations as the US started redefining the rules of the game again. This was possible to an extent because Jair Bolsonaro, the President of Brazil, agreed to forgo S&D treatment at the WTO during his March 19-20 visit to the US. S&D treatment has been one of the cardinal principles of WTO functioning to keep the developing and developed countries under one roof and to sustain the interest of developing countries in multilateralism.

Since the inception of GATT, the rules of multilateral trade policy regime haven’t adequately addressed the needs and concerns of developing countries. The adjustment costs borne by these countries in adapting to a changed environment have been disproportionately high. As a result, developing countries argue that taking on multilateral commitments and obligations would be difficult as they are currently in different stages of economic, financial and technological developments. Leaders of these countries further insist that special advantages and flexibilities may be provided to them so that they are in a position to adopt appropriate national policies to support their trade regime. This, in essence, came to be known as S&D provisions.

However, the concept and interpretation of S&D provisions have changed over the years. From GATT to Uruguay Round (UR) to the establishment of the WTO in 1995, S&D provisions have undergone dramatic changes. Prior to the UR, the focus of S&D treatment was to recognise the special problem of development faced by developing countries and offer necessary flexibilities to pursue policy options appropriate for industrialisation and economic development, whereas in the UR it was geared towards recognising the special problems that developing countries may face in the implementation and signing the agreement as a single undertaking. Such a shift in focus tends to provide limited policy flexibilities for developing and least developed countries (LDCs) to negotiate on crucial issues such as agriculture, NAMA and services.

During the Doha Round of negotiations, the issue of S&D gained prominence as it had a direct bearing on the overall development dimension of developing countries. It was realised that to empower developing countries, it is important to strengthen S&D provisions. Member countries in the Doha Declaration agreed that all S&D treatment provisions should be reviewed with a view to strengthening them and making them more precise, effective and operational.

However, negotiations on S&D provisions for so many decades have led to serious differentiation between developed and developing countries, as it has become difficult to identify and assess countries with ‘developing-developed’ status as S&D provisions were primarily meant only for developing countries. According to these, it is only the developing countries that need to be benefiting from the system.

Currently, the US, under the leadership of Donald Trump, feels that many developing countries are taking the advantage of the provisions and the system because the way they have declared themselves as developing countries under self-declaration and self-selection is not correct, rather it’s mischievous or misleading. Trump is of the view that some developing countries have become major players in global markets in their own right. Their exports have grown to equate almost half of total world exports, with a group of largest developing countries accounting for some three-quarters of that share. Thus, the US believes such developing countries should be declared as ‘developed countries’ instead of them being called ‘developing’.

The US, in an attempt to redefine S&D provisions, has proposed to limit WTO’s practice of allowing countries to self-declare their developing status in order to receive special treatment. The US expects all large players—advanced or emerging—to play by the same rules. China, India and others have reiterated that their self-declaration is appropriate in the WTO context, highlighting the importance of S&D treatment for development. They argue that holding a high share in world trade doesn’t necessarily make a country ‘developed’. China, India and others rebut that per capita indicators have priority when assessing development levels, and it’s not the share in global trade beyond certain percentage points that can disqualify them to be termed as ‘self-selection or self-declaration developing country’.

Yet, in practice, the issue of heterogeneity across developing member countries and differentiation is seen. Implementation of the WTO Trade Facilitation Agreement (TFA) has witnessed significant differentiation as countries self-determine their need for transition periods and technical assistance. Nine developing members have notified their readiness to immediately implement all of their obligations, and 30 others—including Brazil and China—immediately implemented more than 75% of their commitments. Taiwan has also recently decided to give up S&D provisions.

This possibly convinces the US to take a fresh look at revisiting the terms and conditions of S&D provisions. To bridge the developed-developing country dichotomy among WTO members, a combination of actions may be considered. Countries can follow Taiwan’s example—and now Brazil’s—and not claim differentiated treatment, without the need to first declare themselves as ‘developed’. However, developing member countries argue technical assistance and capacity-building support for development and reform in developing economies is essential for success, and is in the interest of both the recipients and providers of assistance.

The author is professor, LBSIM, and former senior faculty, IIFT, Delhi

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