Insights into Editorial: Still a developing country
India is that of a country making rapid developmental strides since 2014, on the other, when it comes to developmental status at the World Trade Organisation (WTO), India is trying hard to prove that it is a poor country.
US president has asked for changing the WTO rules for changing the developing country status of countries like India and China and other countries.
The WTO (World Trade Organisation) Agreements contain provisions which give developing countries special rights under the WTO framework. These rights are called “special and differential treatment” provisions.
WTO norms for recognition of Developed, Developing and LDCs:
- Under the WTO system, generally, countries are designated as developed, developing, and least developed countries (LDCs).
- The uneven level of development between developed and developing countries in the WTO is a well-recognised fact.
- Article XVIII of the General Agreement on Tariffs and Trade (GATT) recognises that attaining the objectives of this agreement would require facilitating the progressive development of those countries that can only support low levels of development and are at the early stages of development.
- Accordingly, countries self-designate themselves as ‘developing country’ to take advantage of provisions like Article XVIII of GATT and other special and differential treatment (S&DT) provisions in the WTO agreements.
- These provisions are aimed at increasing trade opportunities for developing countries, ensuring longer transitional periods to comply with WTO obligations, and affording technical assistance to countries, among other things.
- Article IX.2 of the WTO agreement provides that the LDC status of a country in the WTO is based on such status being recognised by the UN.
- But the agreement does not mention any criterion to determine a ‘developing country’ status.
Developing country status for India at the WTO: Why this dichotomy?
While the former assertion is made to please the domestic constituency, the latter proclamation is because of U.S. President Donald Trump’s threat that countries like India should be stripped off their ‘developing country’ status in the WTO.
Regarding Special and Differential Treatment provisions:
The WTO Agreements contain provisions which give developing countries special rights. These are called “special and differential treatment” 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.
- Part IV of the GATT includes provisions on the concept of non-reciprocal preferential treatment for developing countries that when developed countries grant trade concessions to developing countries, they should not expect the developing countries to make matching offers in return.
US demand and opposes Developing Countries Criteria:
- The US opposes self-selection of the developing country status and demanded stopping of developing country concessions to several of these countries including China and India.
- Reform submitted by the US to the WTO urges to withhold special treatment from countries classified as “high income” by the World Bank, OECD members or acceding members, G20 nations and any state accounting for 0.5 percent or more of world trade.
- It is not immediately clear what action the US can take unilaterally as decisions at WTO are on consensus basis and most developing countries have vehemently opposed the idea proposed by the US.
- The US is however set to paralyse the apex adjudicating body at the WTO-the appellate tribunal by not allowing appointment of new judges to the body.
A few days back, South Korea capitulated to this pressure, giving up its ‘developing country’ status. The heat is on India.
US argued and wants India not to enjoy the Special and Differential Treatment provisions:
In January 2019, the U.S. made a formal submission to the WTO that countries like India are no more ‘developing countries’ and thus should not enjoy the S&DT benefits.
It presented data such as the fact that India’s GDP has grown from $0.60 trillion in 1995 to $2.63 trillion in 2017.
The U.S. proposed that any country that meets one of the following criteria shall not be eligible for S&DT benefits: membership of, or seeking accession to OECD; membership of G20; share in world exports exceeding 0.5% or classified as high-income group by the World Bank.
India is a member of the G20 and its share in world exports is around 1.7% as of early 2019. So, as per these criteria, India will not qualify as a developing country.
In a paper submitted to the WTO, it gave several numbers to show that it is still a poor country and thus requires S&DT provisions.
For example, the paper showed that India’s GDP per capita is very low; India has 364 million people living in multidimensional poverty; the domestic subsidies provided to per farmer is a meagre $227; and India has a very low research and development capacity.
Any unilateral action by the U.S. would be a violation of international law and yet another onslaught on trade multilateralism.
While graduating to a ‘developed country’ status would have been a matter of joy, the ground reality is very different. India rightly countered the U.S.’s argument.