Chasing The Windmill: What is wrong with the US approach on developing country status

The polarized positions in the WTO, particularly between the US and China, on developing country status and ‘special and differential treatment’ (S&D), makes it not only difficult to find a solution on this issue, but also impossible to foresee solutions on other  issues demanding WTO reform. 

The approach of the US Trump administration to deprive certain members of their developing country status under certain criteria has been fiercely opposed by most developing countries. In the WTO, there is no clear criteria for the definition of developing country, instead members can self-designate themselves as developing countries, a status which currently constitutes the majority of the WTO, including big economies like China and India and smaller ones like Singapore and Antigua and Barbuda.

However, developing country status doesn’t automatically lead to S&D privileges, as these are subject to various negotiations in the WTO. Members reacted differently to US pressure, with some choosing to give up their right to S&D while keeping their developing country status, and some others insisting on keeping their developing country status while showing willingness not to use S&D unless they have to.

The US approach to developing a graduation criteria for leaving ‘developing country’ status misses the real target, namely, the need to rebalance the rights and obligations of emerging countries. Members should work together on a pragmatic solution-oriented approach by adapting S&D to the particular situations of various developing members and adapting to specific negotiations issues, following already existing good examples of Trade Facilitation Agreement and Information Technology Agreement.

Background: A fracas in Geneva over developing country status

At the World Trade Organization (WTO) General Council meeting of 13 October 2020, the United States of America (US) and China, the two biggest players of the organization, clashed over the issue of ’special and differential treatment’ (S&D). At the General Council meeting of 16 December 2020, they repeated their stances. These were merely twice among the nine times of such rebuttals since the US tabled its position on this issue on 14 February 2019, also at the General Council, in which the US proposed to deprive China and some other developing members of their developing country status in the WTO, and their ensuing entitlement for S&D.

Essentially the US argued that some ‘significant players’ were using S&D to avoid undertaking meaningful obligations in the WTO, and cited this as one of the ‘root causes’ of the paralysis in the organization’s negotiating function. The US further insisted that the approach to S&D must evolve but refused to endorse the ‘case-by-case’ approach as proposed by some other members and already used in the Trade Facilitation Agreement (TFA). The US used China as the example why it is necessary to differentiate these ‘most advanced, wealthy, or influential Members’ from vulnerable ones such as the least developed countries (LDCs). The US also used figures such as merchandise exports, economic capacity, and per capita income to illustrate the huge difference between China and LDCs or other less advanced developing countries.

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The views expressed here are the author’s, and may not necessarily represent the views of the Institute for International Trade.