Developing Country Status Up for Debate at WTO

At the WTO General Council’s meeting this week in Geneva, the debate over developing country rights at the WTO came to a head. The United States has recently been especially outspoken in its criticism of developing country status for WTO members, which entitles the declared developing country to certain exemptions, longer timetables for implementation of commitments, and other flexibilities under WTO agreements to assist with integration into the world trading system – generally known as special and differential treatment.” Special and differential treatment provisions are found in virtually all WTO agreements, ranging from commitments to increase trade opportunities for developing country members, to requirements to protect developing country interests, to rules allowing for flexible implementation, transitional time periods, and technical assistance. For example, developing countries may extend for two additional years their own safeguard actions to restrict imports causing injury to their domestic industries, and are generally exempt from the application of other members’ safeguard actions. Since the WTO’s creation in 1995, however, the WTO has not specified any criteria or process for determining developing country status, allowing members to self-declare their status without meeting any analytical requirements.

According to the United States, this lack of discipline has led to unpredictable and illogical results, with some of the world’s wealthiest and fastest developing (in terms of economic, social, and other indicators) – and often most trade-distorting – countries putting themselves as the same category as the WTO’s least-developed members in order to strategically or uniformly avoid additional commitments. Some of the examples cited by the United States of those WTO members seen to be unreasonably declaring themselves as developing include China, India, Singapore, Israel, Mexico, Turkey, Chile, Indonesia, South Africa, South Korea, the United Arab Emirates, and Qatar. As the United States explained in a WTO communication issued in February 2019:

Simply put, self-declaration has severely damaged the negotiating arm of the WTO by making differentiation among Members near impossible. By demanding the same flexibilities as much smaller, poorer Members, export powerhouses and other relatively advanced Members . . . create asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to sustain viable outcomes. Members cannot find mutually agreeable trade-offs or build coalitions when significant players use self-declared development status to avoid making meaningful offers. Self-declaration also dilutes the benefit that the {least-developed countries} and other Members with specific needs tailored to the relevant discipline could enjoy if they were the only ones with the flexibility.

The United States’ February communication also proposed that the General Council adopt a new approach that would preclude special and differential treatment in current and future WTO negotiations” for countries that fall into at least one of four categories: members of the Organization for Economic Cooperation and Development (OECD); one of the G20 countries; classified as high income” by the World Bank; or account for no less than 0.5 per cent of global merchandise trade (imports and exports).”

In July 2019, President Trump bolstered the U.S. Government position by requiring the Office of the U.S. Trade Representative (USTR) to secure changes to the current WTO developing country rules within 90 days. If progress was not made within that time, President Trump authorized USTR to no longer treat as a developing country” any WTO member it views as improperly declaring itself a developing country and inappropriately seeking the benefit of flexibilities in WTO rules and negotiations.” The memo also directed USTR not to support OECD membership of that same country.

Just before the October 16th General Council meeting, India, China, and the WTO African Group preempted the anticipated discussion by issuing a statement in defense of the current system. The statement reaffirmed” several special and differential treatment principles, including that developing countries must be allowed to make their own assessments regarding their own developing country status.” The debate reached a peak, however, at the October 16th meeting when U.S. Ambassador to the WTO, Dennis Shea, reiterated the United States position that there is a group of self-declared developing country Members that are relatively advanced, wealthy, and influential and that should not have access to blanket special and differential treatment in current and future WTO negotiations.” He specifically identified China as a major perpetrator. While Ambassador Shea’s statement drew support from the EU, it drew the ire of both China and India, with India expressing concern that the actions outlined in President Trump’s July 2019 memo will cause special and differential treatment to become extinct at the WTO.”

Without any specific outcome on this issue from the General Council meeting, it remains to be seen how USTR will implement the White House’s July directive. Developing country status does not affect tariff commitments, but could affect rights under current agreements and is likely to have the greatest impact in ongoing negotiations (such as the fisheries subsidies negotiation), where self-declared developing countries rely on such status to establish their commitments. The July memo instructs USTR to publish on its website a list of all self-declared developing countries that USTR believes no longer deserve such treatment for purposes of WTO rules and negotiations.