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

24 Pages Posted: 11 May 2020

See all articles by James Baachus

James Baachus

University of Central Florida

Inu Manak

Council on Foreign Relations

Date Written: April 13, 2020

Abstract

Rethinking developing country status at the World Trade Organization (WTO) is essential for the institution’s modernization and survival. 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), 183 provisions in the WTO agreements give developing countries special rights. These include more time to implement obligations, preferential tariff schemes, and technical support from developed countries. SDT was meant 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 A reform proposal from the United States claims that SDT reflects an outdated dichotomy between developed and developing countries and that the ability of countries to “self‐​declare” their developing country status amplifies this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. Many 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 is that it is founded on seeking exemptions from WTO obligations instead of enabling 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. Adopting a new evidence‐​based, case‐​by‐​case approach to SDT could ensure both that the concerns of the poorest countries are addressed and that advanced developing countries carry their weight in the organization.

Keywords: WTO, World Trade Organization, WTO Exemptions, SDT, special and differential treatment, WTO provisions, free trade, trade regulations, trade exemptions, developing countries

JEL Classification: E1, E10, E6, E60, F00, F01, F02, F1, F10, F12, F13, F15, F16, F19, F5, F50, F53, F55, F59

Suggested Citation

Bacchus, James and Manak, Inu, The Development Dimension: What to Do About Differential Treatment in Trade (April 13, 2020). Cato Institute, Policy Analysis No. 887, Available at SSRN: https://ssrn.com/abstract=3577106

James Bacchus (Contact Author)

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Inu Manak

Council on Foreign Relations ( email )

1777 F Street, NW
Washington, DC 20006
United States

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