Debates over WTO reform intensify as Special and Differential Treatment faces scrutiny for its limited impact, vague design, and shifting global dynamics.
As of 2024, World Trade Organisation (WTO) membership comprises 166 countries, with developing nations accounting for over 60 percent. While this suggests greater inclusivity, it remains debatable whether such participation has meaningfully advanced the interests of developing countries. Amidst institutional challenges and limited progress in plurilateral agreements, scholars are increasingly questioning whether developing economies should shoulder greater responsibilities. Simultaneously, the effectiveness of Special and Differential Treatment (S&DT) provisions, originally designed to benefit these economies, has come under growing scrutiny due to their negligible tangible advantages.
Developing Countries’ Concerns with S&DT
S&DT was intended to grant flexibility and preferential treatment to developing nations, recognising their structural vulnerabilities. To the developing faction, S&DT provisions are a non-negotiable right. However, over time, S&DT has become increasingly contentious, as its beneficiaries accrue only minimal assistance, whereas developed nations argue that it is time to phase them out.
Existing provisions under S&DT were classified into six broad categories: measures granting greater market access to products significant to developing countries’ export baskets, safeguarding trade interests, and flexibilities in using trade policy instruments. Three other categories focusing on transition periods, technical assistance, and special provisions for Least Developed Countries (LDCs) have always been widely accepted as essential for supporting development. Transition timelines help developing members adjust to new rules, while technical aid and infrastructure support, though sometimes reluctantly conceded, are generally uncontroversial.
Among the most beneficial S&DT provisions is the Enabling Clause, allowing developing countries to undertake less than full reciprocity in trade commitments. However, the developed faction has recently pushed for greater reciprocity. The Doha Round launched in 2001, mandated the adoption of the Swiss formula by all members for tariff reduction. Although developed members permitted higher coefficients for developing countries, they also insisted that advanced developing nations participate in sectoral initiatives for tariff elimination. This marked a shift from the Uruguay Round, concluded in 1994, during which developed countries made significant non-agricultural tariff reductions without similar pressure on developing nations.
One of the primary challenges with S&DT lies in the vague and non-binding nature of its provisions. The language, such as ‘less than full reciprocity’, lacks precision and fails to offer meaningful protection, leaving room for developed countries to push for commitments from developing countries that are only marginally less onerous than their own.
The benefits that developing nations have derived from S&DT provisions have frequently fallen short of expectations, primarily due to their lack of precision, operational effectiveness, and enforceability. Several scholars have used the term ‘reverse S&DT’ to highlight how developed member countries have, in practice, secured advantages for themselves by leveraging flexibilities in areas of strategic interest. A case in point is the ‘Quantitative Restrictions’ dispute, in which India sought to justify import restrictions under the S&DT provisions. However, the dispute was concluded with a ruling in favour of developed members stating that such measures were no longer warranted.
Developed Countries’ Concerns with S&DT:
While no developed country has proposed abolishing S&DT, the United States (US) argues that treating developing countries as a homogenous group is outdated and advocates a distinction between ‘developing’ and ‘advanced developing’ nations, considering the significant differences in the levels of development. A primary catalyst for this demand is the treatment of China. After joining the WTO in 2001 with US backing, China’s trade surplus with the US surged, reaching US$365.7 billion by 2015. Its total trade in goods rose from US$ 516.4 billion in 2001 to US$ 4.1 trillion in 2017, fueled partly by the tariff reductions agreed upon during accession. The US grew increasingly uneasy with China’s continued claims to S&DT benefits, despite its global economic dominance. It demanded further liberalisation from China on issues such as intellectual property, subsidies, and market access.
This conflict reflects a broader shift in the global trade landscape. During the Uruguay Round, developing countries had limited negotiating power. However, by the early 2000s, emerging economies such as China, India, and Brazil had become influential players. Between 1995 and 2012, merchandise exports from developing countries increased sixfold, enabling them to challenge the US-European Union (EU) dominance.
In response, the US, supported by the EU, proposed excluding countries from S&DT eligibility if they fall into any of four categories: Organization for Economic Co-operation and Development (OECD) members or applicants, G20 members, high-income countries (per World Bank), or countries accounting for over 0.5 percent of global trade.
India, China and other developing nations have opposed the proposed criteria for limiting S&DT, arguing that they ignore persistent poverty and low living standards. India, in particular, emphasises the importance of S&DT in reflecting the heterogeneity among developing countries. Developing countries require fixated S&DT support on underdeveloped sectors while offering market access in more competitive areas. Although some critiques of broad S&DT eligibility are valid, using indicators such as trade shares or G20 membership as disqualifiers lacks economic nuance. A stronger case could be made for exclusion based on OECD membership or high-income status.
Though the US proposal is considered overly rigid, its underlying concern about China’s continued access to S&DT warrants attention.
Reforming S&DT
While S&DT was originally intended to support developing countries, its implementation has been weak, with only a small fraction of its provisions being legally enforceable. The Doha mandate did seek to strengthen the enforceability of S&DT, with 88 proposals, largely made by the African nations and LDCs, calling for reform. Another pivotal proposal traced the history of S&DT under GATT 1947, highlighting how earlier frameworks acknowledged the structural development challenges of poorer nations. Contrastingly, WTO agreements narrowed the focus, addressing only the implementation difficulties developing countries might face, often through limited transitional periods and technical assistance.
One potential compromise could involve restricting full S&DT benefits to the ‘LDC’ group. This would minimise disruption due to their nominal trade capacities and limited size while addressing developed countries’ concerns over free-riding. Differentiation in market access could also be handled through national commitment schedules, sidestepping broader disputes. This approach would preserve some flexibility for emerging economies while maintaining coherence in WTO negotiations.
Some nations once classified as developing have since fallen into the LDC category. The concept of the ‘new bottom billion’, which indicates that 72 percent of the world’s poor now live in middle-income countries, highlights that many developing nations face challenges similar to LDCs.The lack of concrete advantages of S&DT exacerbates the issue. A more pragmatic path to reforming S&DT is to adopt a case-by-case or issue-specific approach. Rather than debating broad eligibility or relying on self-declared ‘developing’ status, members should tailor S&DT provisions to the specific context of each agreement and the demands of the concerned country. A notable example of this approach is the Trade Facilitation Agreement (TFA), formalised in 2017, which allows for flexible, needs-based implementation.
Way Forward
As the widening gap between developed and developing countries remains a reality, reforming S&DT must stand at the forefront of the WTO’s reform agenda. While the U.S. proposal may not resolve the S&DT debate, a constructive, low-key discussion, possibly within the Committee on Trade and Development, could help lay the groundwork for meaningful progress through consensus. India must engage with like-minded partners, including the US, to shape a more equitable WTO. Crucially, any reform to S&DT must acknowledge that countries like India do not neatly fit into antiquated binary classifications and should be granted the policy space necessary to address their unique development challenges.
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