The 'developed' and 'developing' debate in the WTO

Asjadul Kibria | Published: June 07, 2019 21:20:29 | Updated: June 11, 2019 21:37:43

-Reuters file photo

There are disagreements between developed and developing countries on many issues deliberated at the World Trade Organization (WTO). Many believe that such disagreements constitute the major obstacle to transform multilateral trade talks into positive, action oriented results.

Lately, the disagreements have taken a new twist. Developed countries, especially the United States (US), have expressed strong reservation on the current status of many developing members of the WTO.  It has been argued that big economies like China and India should no longer be considered developing counties. The US has also called for making the definitions of developed and developing countries clear and logical replacing the current practice of self-designation.  Some developing countries, however, have opposed the idea.

SELF-DESIGNATION IN WTO: WTO has no defined criteria to determine whether a country is a developing or developed one.  Only for the Least Developed Countries (LDCs), it follows the United Nation's criterion. The criterion for LDC is very clear and there is no ambiguity. So other members of the WTO have no reservation about the status of these countries. Again, the UN's World Economic Situation and Prospect (WESP) categorises countries of the world into three broad categories: developed economies, economies in transition and developing economies. But non-LDC developing economies or countries are mostly self-designated. They tag themselves as developing countries during their accession to the WTO. Similarly, developed countries are also self-designated as WTO doesn't have any criterion in this regard.

Economically and socially advanced countries are considered developed ones. Generally, members of the Organisation for Economic Cooperation and Development (OECD) are considered developed countries, though not all the current 36 members are classified as 'developed' in the WTO. Despite being members of the OECD, countries like Mexico, South Korea and Turkey have designated themselves as 'developing' in the WTO. 

Again, a number of non-OECD countries, though well advanced, are yet to be termed developed. Qatar, the number one country on the basis of per capital income (in purchasing power parity term) in 2019, is a developing country in WTO! Singapore, another high income country, also designates itself as a developing one.

In fact, the self-designation or self-selection mechanism allows many rich and resourceful countries to classify themselves as developing nations. As a result, they are eligible for the special and differential treatment (S&DT) in the WTO.

S&DT grants developing countries preferential access to the markets of developed countries and also allows these countries not to fully reciprocate negotiated trade benefits. Under the provisions, developing countries may also restrict import of selected products to protect their domestic industries for the time being.  More importantly, because of the S&DT, developing members of the WTO get longer time periods for implementing agreed commitments, measures to increase trading opportunities, and are allowed twice the amount of agricultural subsidies available to developed countries.

SETTING THE DEFINITIONS: It is the US which has been pushing for clear definition or benchmark for developing and developed countries. In this connection, the US formally submitted a proposal this February which outlined four alternative criteria to identify whether a country should be eligible for availing the S&DT provisions or not in the current and future trade negotiations. In other words, those which will not be eligible for S&DT by any of these criteria will be considered developed members of the WTO. According to the US proposal, a member of the OECD or a WTO member under accession process to the OECD will not be eligible for any S&DT. Again, a member of the Group of 20 (G20) or a country already classified as a 'high income' country by the World Bank, or a country that accounts for at least 0.5 per cent of global merchandise trade should also not be a beneficiary of any special treatment.

The US pointed out that a good number of developing countries have already advanced well in terms of economic growth and social development. So, there is no rational for them to continue to avail additional benefits from the developed countries, depriving the really poor nations. China is the most cited example for the US in this connection. When the country began the process of joining the WTO in 1986, its per capita income (in PPP terms) was only $677, compared to $19,078 of the US. But now China has become the second largest economy of the world. So, how such a country could still be labelled as a developing one?

Developing countries headed by China, India, South Africa, Venezuela, Bolivia, Lao, Kenya, Cuba and Pakistan submitted a counter paper in March this year justifying the current practice of S&DT. It argued that S&DT principle was adopted in WTO so that negotiated outcomes would accommodate differences in levels of economic development as well as the capacity constraints of developing countries. It also pointed out that the current S&DT provisions in the WTO agreements were established 'through negotiations and compromises' and were 'not gifts granted by developed' members. Moreover, most of the current S&DT provisions are 'best endeavour' clauses which indicate that these are not legally binding in most cases. "Their actual benefits to developing members have fallen far short of expectation," argued the paper adding, "in contrast, it is the developed members that have reaped substantial benefits by seeking and obtaining flexibilities in areas of interest to them-- a form of 'reversed' S&DT. The WTO rule-based system has helped in the growth of trade but has not made it equitable."

These countries also presented a series of statistics in the paper to demonstrate the differences between developed and developing countries in terms of social and economic indicators and also the vulnerabilities of the developing nations. For instance, it mentioned that 10 countries with the largest number of the world's under-nourished people are: India (195.9 million), China (124.5 million), Pakistan (39.5 million), Bangladesh (24.8 million), Ethiopia (21.9 million), Nigeria (21.5 million), Indonesia (20.2 million), Tanzania (17.8 million), Uganda (17.2 million) and Philippines (14.2 million). "The under-nourished people of these 10 developing countries account for 62 per cent of the world total," the paper said.

Through the paper leading developing countries gave a clear message that they are not ready to give up the current self-selection mechanism of developing country status and also not prepared to revise the S&DT benchmarks. 

Interestingly, Brazil has already announced that it would forego S&DT as it is trying to join the OECD.  The country is considered a strong member of global South  i,e. developing nations, and is always active in WTO negotiations. If Brazil finally sidesteps, the negotiating strength of the developing nations will no doubt be weakened. 

FUTURE COURSE: In this backdrop, it is difficult for the WTO to move ahead.  Both sides have valid logic in favour of their propositions. The debate on redefining developed and developing countries questions the validity of ongoing economic growth model followed by many developing countries. Despite posting higher or double digit growth rates for over a decade or two, countries like China and India are still suffering from high incidences of poverty and income inequality.  Thus, the much-hyped growth is either insufficient to address the problem, or growth distribution is highly unbalanced and concentrated to small sections of the population.

Bangladesh needs to review the situation carefully. The country is now at the final phase of graduation from LDC status by 2024 and also aspires to become a developed country by 2041.  Still, the country is trying to push for continuation of existing benefits in the post-LDC era for some more years. In this situation, Bangladesh will need support from other LDCs, and will also require positive note from the developing countries defending S&DT and self-designation.

(Asjadul Kibria is back from Geneva after attending an information seminar organised by the World Trade Organization and Friedrich-Ebert-Stiftung)


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