1 Aug 2019
U.S. Seeks to End WTO Flexibilities for Some Countries Claiming Developing Status
A new Trump administration policy seeks to prevent countries that meet certain economic and other indicators from utilising flexibilities for developing countries in World Trade Organisation rules and negotiations. Mainland China, the primary target of the new policy, denounced it as indicative of the United States’ “wayward arrogance and selfishness” and said it “will bring controversy and chaos, putting new obstacles in the way of WTO reforms.”
President Donald Trump issued on 26 July a presidential memorandum on reforming developing country status in the WTO. The policy section of the memo notes that nearly two-thirds of WTO members have self-classified as developing countries and lists seven countries and territories that currently claim developing country status even though they are among the world’s ten wealthiest economies in terms of per capita gross domestic product measured on a purchasing-power parity basis (i.e., Hong Kong, Macao, Singapore, Brunei, Kuwait, Qatar and the United Arab Emirates). The memo adds that Mexico, South Korea and Turkey are members of both the G20 and the Organisation for Economic Co-operation and Development yet “also claim this status.”
The memo also discusses mainland Chinese levels of economic development, export growth and defence expenditures and argues that other WTO members are disadvantaged when developing countries “claim entitlement to longer timeframes for the imposition of safeguards, generous transition periods, softer tariff cuts, procedural advantages for WTO disputes, and the ability to avail themselves of certain export subsidies,” concluding that “the WTO is in desperate need of reform.”
The memo directs the U.S. trade representative to “use all available means to secure changes at the WTO” and to report back to the president within 60 days. Moreover, if no changes are made at the WTO within 90 days USTR will have to publish a list of all self-declared developing countries that the agency believes are inappropriately seeking the benefit of developing-country flexibilities. The United States will no longer treat those countries as developing and will not support those countries’ bids for membership in the OECD.
The United States has repeatedly argued that “special and differential treatment” for developing countries should be reserved for those countries that most need it, such as least-developed countries. Last February, the United States submitted a proposal to the WTO General Council with four criteria to determine whether a WTO member would be eligible for “special and differential treatment.” Countries would be ineligible if they are (i) members of the OECD, (ii) G20 countries, (iii) countries classified as “high income” by the World Bank, or (iv) countries that account for no less than 0.5 percent of global merchandise trade (imports and exports). Analysts indicate that this list would cover many economies, including mainland China, Argentina, Chile, Croatia, India, Indonesia, Israel, Mexico, Saudi Arabia, South Africa and South Korea, among others.
Mainland Chinese publications speculated that the White House memo may have been issued at this precise time in an attempt to influence the newest round of Sino-U.S. trade talks. One article used terms like “arrogance and impudence” to describe the U.S. argument.
Rather than pointing fingers at mainland China, Trump’s tweet on the memo makes a broader claim that the world’s richest countries are “cheating” at the WTO. It is possible that USTR developed the memo in order to raise concerns about the dispute settlement mechanism and deflect concerns by other WTO members about the Appellate Body, which will lose its quorum in December if the United States continues to block the appointment of new judges.