16 Sept 2019
South Korea Vows to Renounce WTO Developing Country Status at Behest of United States
South Korea’s Ministry of Trade, Industry and Energy announced on 4 September that South Korea is “poised to abandon” its World Trade Organisation status as a developing country. According to an informal translation, the ministry indicated that “the status is no longer beneficial and will result in some confrontation with the United States, which is undesirable, and inter-ministerial talks are currently underway regarding the waiver.”
The United States has demanded that WTO reform include a discontinuation of the policy that members self-designate as developing countries eligible for “special and differential” status, noting that the majority of the organisation’s 164 members claim such status. S&D treatment provides designated WTO members with trade facilitation assistance as well as with more time to implement trade liberalisation commitments. The United States has repeatedly insisted that mainland China in particular should no longer receive S&D treatment. However, a mainland Chinese representative declared at a WTO meeting on 10 December 2018 that while his country was open to taking on certain additional multi-lateral commitments commensurate with its improved level of economic development, it would not accede to U.S. demands that it abandon its S&D status.
In a February 2019 proposal to the WTO, the Trump administration suggested removing S&D status for any countries that (i) are members of the Organisation for Economic Cooperation and Development, (ii) are members of the G20, (iii) are designated as “high income” economies by the World Bank, or (iv) account for at least 0.5 percent of world merchandise trade. Analysts predicted at the time that those criteria would remove S&D eligibility for Hong Kong and mainland China, as well as Argentina, Brunei, Chile, Croatia, India, Indonesia, Israel, Mexico, Oman, Qatar, Saudi Arabia, Singapore, South Africa, South Korea and Turkey.
The Trump administration is taking several steps to create momentum to change WTO S&D policy. In a 19 March joint statement by the United States and Brazil, Trump noted his support for Brazil initiating the accession procedure to become a full member of the OECD. However, as part of that process and commensurate with its status as a global leader, Brazil would also agree to forgo its S&D status.
In addition to being a member of the OECD and the G20, South Korea is a leading exporter and on the World Bank high-income list. South Korean publications note that the country has been maintaining its developing country status since the establishment of the WTO in 1995 mainly to protect its sensitive agricultural sector. The ministry noted that free trade agreement provisions that protect South Korean agriculture would be unaffected by this WTO declaration, although the fact that the inter-ministerial talks are referenced means that this issue is not yet finalised even within the South Korean government.
President Trump established in July a 90-day period during which the Office of the U.S. Trade Representative would work to “secure changes” at the WTO to prevent certain countries from accessing S&D treatment. At the end of that period, the United States will ostensibly no longer treat as a developing country those WTO members it deems are improperly declaring themselves as such. It remains to be seen exactly what actions will be taken at the end of the 90 days, if any. The WTO General Council operates by consensus, so all members would need to agree with the U.S. proposal for it to go into full effect at the WTO level.