21 Feb 2019
U.S. Seeks to Limit Special and Differential Treatment under WTO Rules
On 15 February, the Secretariat of the World Trade Organisation circulated a U.S. proposal aimed at limiting the rights of WTO members to self-designate as a developing country eligible for special and differential treatment. Most of the WTO’s current 164 members self-designate as developing countries, enabling them to benefit from S&D treatment such as trade facilitation assistance and more time to implement trade liberalisation commitments. The U.S. proposal would disqualify S&D treatment for any WTO member that:
- is a member of the Organisation for Economic Co-operation and Development or has begun the OECD accession process;
- is a member of the Group of 20 (G20);
- is classified as “high income” by the World Bank; or
- accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).
If the U.S. proposal were adopted as currently drafted, analysts predict that these criteria would remove S&D eligibility for mainland China, Hong Kong, Argentina, Brunei, Chile, Croatia, India, Indonesia, Israel, Mexico, Oman, Qatar, Saudi Arabia, Singapore, South Africa, South Korea and Turkey, among others.
The U.S. draft also provides that nothing in its proposal “precludes reaching agreement that in sector-specific negotiations other Members are also ineligible for special and differential treatment.” It is hard to assess how often WTO members would insist that a country that is neither a significant trader, an OECD/G20 member or classified as high income be denied S&D treatment in sectoral negotiations, but this specific U.S. proposal threatens that possibility.
In a WTO meeting held on 10 December 2018, the mainland Chinese representative said that mainland China was open to taking on certain additional commitments commensurate with its improved level of economic development but objected strenuously to the U.S. representative’s demand that mainland China be found ineligible for S&D treatment. Moreover, mainland China, India, South Africa and Venezuela stressed in an 18 February communication the continued relevance of S&D treatment for developing countries in order to promote development and ensure inclusiveness. The four WTO members decried “recent attempts by some Members to selectively employ certain economic and trade data to deny the persistence of the divide between developing and developed Members” while arguing that the development gap remains evident “in levels of economic development, industrial structure and competitiveness” and in “poverty levels, levels of under-nourishment, production and employment in agriculture sector, trade in services, receipts from IPR, share of trade in value-added under GVCs, energy use per capita, financial infrastructure, R&D capacity, company profits, and a range of institutional and capacity constraints, among other things.”
The four economies insist that per capita indicators must be given the top priority (although certain S&D beneficiaries such as Saudi Arabia, Qatar and Brunei have high GDP per capita when citizens only are included). The GDP per capita of the United States, Australia, New Zealand, Canada and the European Union ranges from about US$33,000 to nearly US$60,000, while the figures for mainland China, India and South Africa are all below US$10,000 (Venezuela’s GDP per capita used to be high but is estimated to be below US$10,000 at present). The report maintains that the divides between developing and developed members since the creation of the WTO “have not been substantially bridged and, in some areas, they have even widened,” noting that large developing country exporters such as India and Indonesia still have large numbers of the world’s poor and under-nourished.
The communication also claims that many WTO rules have actually favoured the United States and other developed countries in the areas of agricultural support, previous textile quotas, and especially intellectual property rights protection under the TRIPS agreement. It concludes that “the real threats to the relevance, legitimacy and efficacy of the WTO are the proliferation of WTO-inconsistent protectionism and unilateralism, the blockage of Appellate Body member selection process and the impasse of the Doha Development Round, not the self-declared development status of developing embers.” Many of these arguments have been made most often by India at the WTO.
The United States, meanwhile, claims that its proposal seeks to assist least-developed countries as well as “strengthen the negotiating function of the WTO to produce high-standard, reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.” However, the communication by mainland China, India, South Africa and Venezuela suggests the U.S. proposal will face significant opposition and will most likely be rebuffed, as the WTO General Council would have to approve it by consensus for it to go into effect.