International Relations
Developing Country Status in WTO
- 26 Oct 2019
- 5 min read
The South Korean Government has decided not to seek any special treatment as a developing country from future negotiations at the World Trade Organization (WTO).
- However, this does not mean that the country would forego its developing country status at the WTO.
- South Korea, Asia’s fourth-largest economy, has maintained its developing country status as a member of the WTO since the body’s creation in 1995, mainly to guard its agriculture industry. E.g.:
- It imposes a tariff of more than 500% on rice imports.
Developing Country Status in WTO
- There are no WTO definitions of “developed” and “developing” countries. Members announce for themselves whether they are “developed” or “developing” countries.
- However, other members can challenge the decision of a member to make use of provisions available to developing countries.
- The WTO Agreements contain special provisions which give developing countries special rights. These provisions are referred to as “Special and Differential Treatment” (S&D) provisions.
- The special provisions include:
- Longer time periods for implementing Agreements and commitments,
- Measures to increase trading opportunities for developing countries,
- Provisions requiring all WTO members to safeguard the trade interests of developing countries,
- Support to help developing countries build the capacity to carry out WTO work, handle disputes, and implement technical standards, and
- Provisions related to least-developed country (LDC) Members.
- Benefits to Developing Countries in the WTO:
- The Agreement Establishing the World Trade Organization (also known as “the WTO Agreement”) specifies that international trade should benefit the economic development of developing and least-developed countries.
- General Agreement on Tariffs and Trade (GATT)— gives developing countries the right to restrict imports, if doing so would promote the establishment or maintenance of a particular industry, or assist in cases of balance-of-payments difficulties.
- Part IV of the GATT includes provisions on the concept of non-reciprocal preferential treatment for developing countries, i.e. when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return.
- However, developing countries claim that Part IV has been without practical value as it does not contain any obligations for developed countries.
- Issues:
- Recently, U.S. President had put pressure on the WTO to change how it designates developing countries, singling out China, with which the United States is engaged in a trade war, for unfairly getting preferential treatment.
- The United States also recently proposed, that in current and future negotiations, following should not invoke the self-declaration option:
- Members of the Organization for Economic Cooperation and Development (OECD)
- Members of the Group of 20 (G-20),
- High income countries as per the World Bank definition, or
- Countries that account for 0.5% or more of global merchandise trade.
- In a rebuttal to the US approach, China, India, South Africa, and others submitted a proposal of their own. While reiterating that self-declaration is appropriate in the WTO context, they make the point that per capita indicators must be given top priority when assessing development levels.
- WTO members can consider the following steps to help integrate developing countries in global trade:
- Countries can decide to follow South Korea’s example and not claim differentiated treatment, without the need to declare themselves “developed.”
- Negotiations should provide for differentiated treatment taking into account the policy making challenges in developing countries without establishing permanent exemptions. These provisions should either be time-bound or have clear threshold and phaseout criteria, as in the WTO Agreement on Subsidies and Countervailing Measures.
