WTO provision holds key

The issue of Special & Differential (S&D) treatment resurfaced recently in a contentious manner at the World Trade Organisation (WTO) negotiations as the US started redefining the rules of the game again.

This was possible to an extent because Brazilian President Jair Bolsonaro agreed to forgo the S&D treatment in his recent visit to USA. The S&D 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 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 WTO in 1995, S&D have undergone dramatic changes.

Prior to UR, the focus of S&D 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.

During 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 the S&D provisions.

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

Currently, the US under the leadership of Trump feels that many developing countries have the advantage of the provision and the system because the way they have declared themselves as developing countries under the self-declaration and self-selection is not correct rather 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. Therefore, the US believes such developing countries should be decaled as ‘developed countries’ instead being called ‘developing.’

Washington, in its attempt to redefine the provisions of S&D has proposed to limit the WTO’s practice of allowing countries to self-declare their developing status in order to receive special treatment. It 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 holding 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 gone beyond certain percentage points that can disqualify these countries to be termed as ‘self-selection or self-declaration developing country.’ Yet in practice, issue of heterogeneity across developing member countries and differentiation is seen.

Transition periods

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 decided to give up S&D provisions.

This possibly convinces USA 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 interests of both the recipients and the providers of assistance.

(The writer is Professor, LBSIM, Delhi)

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