The Development Dimension: What to Do About Differential Treatment in Trade

64 Pages Posted: 20 Apr 2020 Last revised: 21 Apr 2020

See all articles by James Bacchus

James Bacchus

Cato Institute

Inu Manak

Council on Foreign Relations

Date Written: March 5, 2020

Abstract

Rethinking developing country status at the World Trade Organization (WTO) is essential for the modernization and survival of the institution. The Trump administration has recognized this challenge and is seeking changes to the flexibilities provided to developing countries. Referred to as “special and differential treatment” (SDT), there are 183 provisions in the WTO agreements that give developing countries special rights. These include longer time periods to implement obligations, preferential tariff schemes, and technical support from developed countries. SDT was envisioned as a means to help the poorest WTO Members meet their obligations to the fullest extent possible. But, today, when rapidly growing markets with significant global reach lay claim to these special rights, does it serve this purpose?

The Trump administration thinks it does not. A recent reform proposal from the United States claims that SDT reflects an outdated dichotomy between developed and developing countries, and that the ability of countries to “self-declare” their developing country status amplifies this problem. Without a clear definition of what special rights SDT provides, the United States’ proposal argues, it is difficult to ascertain objectively who should receive those benefits, and for how long. A number of other developed countries have come out in support of reform, and their discussions highlight the need to establish a path forward. For their part, most developing countries continue to defend the current approach to SDT.

This paper argues that the basic flaw in the WTO’s current approach to SDT is that it is founded on seeking exemptions from WTO obligations instead of the means to enable developing countries to meet these obligations and thus integrate them fully into the multilateral trading system. The United States is correct in pointing out the inherent unfairness in the application of SDT, which does not differentiate between levels of development among developing countries. As a result, the poorest countries are made worse off, while those that are economically better off receive a “free ride” from the rest of the multilateral trading system. By adopting a new evidence-based, case-by-case approach to SDT, the concerns of the poorest countries can be better addressed, while at the same time ensuring that advanced developing countries carry their weight in the organization.

Keywords: special and differential treatment, World Trade Organization, WTO and development, WTO reform

Suggested Citation

Bacchus, James and Manak, Inu, The Development Dimension: What to Do About Differential Treatment in Trade (March 5, 2020). Available at SSRN: https://ssrn.com/abstract=3561131 or http://dx.doi.org/10.2139/ssrn.3561131

James Bacchus

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

Inu Manak (Contact Author)

Council on Foreign Relations ( email )

1777 F Street, NW
Washington, DC 20006
United States

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