US Revises and Resubmits Draft Proposal on Special & Differential Treatment at WTO

Alicia Nicholls

On November 25, 2019, the US recirculated a Draft General Council Decision entitled “Procedures to Strengthen the Negotiating Function of the WTO” for consideration by the World Trade Organization’s General Council – that organisation’s highest decision-making body – at its upcoming December 9-11, 2019 meeting.

Background

In recent times, the ability of WTO Members to self-designate as ‘developing countries’, and thereby be eligible for special and differential treatment under the WTO’s agreements, has become increasingly contentious. Thus far, the European Union (EU), Canada, the US and Norway have tabled proposals, which to varying degrees, call for a rethinking or reforming of the current eligibility model for special and differential treatment in the WTO. Developing countries, on the other hand, argue for a retention of the eligibility status quo, while noting that the focus should be on the Doha mandate of ensuring effectiveness of special and differential treatment.

Earlier this year, the US took the call for reform a step further by not only tabling a lengthy paper in which it argued that self-designation risks condemning the WTO to institutional irrelevance, but followed this up with a draft General Council decision in which it proposed four non-cumulative, exclusionary criteria which would, if approved and implemented, exclude a large number of developing countries from eligibility from special and differential treatment in current and future WTO negotiations.

Recall also that on July 26, 2019, United States (US) President Donald Trump signed a memorandum on reforming developing country status in the World Trade Organization (WTO). This memorandum mandated the United States Trade Representative (USTR) to secure changes to the current method of WTO members’ eligibility for special and differential treatment (S&DT) in the WTO. Failing this, it outlined specific steps the USTR should take.

The resubmitted proposal

The resubmitted proposal dated November 25, 2019 has been slightly amended. It still proposes four exclusionary and non-culminative criteria which, if approved and implemented, would preclude Members meeting any of the criteria from eligibility for special and differential treatment in current or future WTO negotiations or under any of the Agreements coming out of such negotiations. However, criteria three and four have been amended as follows (see bold text):

i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;
ii. A WTO Member that is a member of the Group of 20 (G20);
iii. A WTO Member that the World Bank has classified as a “high income” country for the three consecutive years immediately prior to the date of this decision or classifies as a “high income” country for a third consecutive year or any three consecutive years thereafter; or
iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports) for the three consecutive calendar years immediately prior to the date of this decision or for a third consecutive year or any three consecutive years thereafter.

It also added that “Nothing in this Decision precludes a Member seeking to address particular needs during a current or future WTO negotiation” .

It is no secret that the US’ main targets are larger emerging economies, such as China and India, which continue to self-designate as developing countries. Indeed, the first two criteria are hardly problematic as a country which is an OECD or G20 member, or is acceding to the OECD, would have a level of economic clout that makes the argument for special and differential treatment unpalatable. Additionally, criterion 4 is meant to capture a number of emerging economies with shares of world merchandise trade of 0.5 percent or more.

But much like the original proposal, criterion 3 of this revised proposal still unfortunately manages to potentially capture a few small States which really are deserving of special and differential treatment.

Currently, four Caribbean countries (Antigua & Barbuda, Barbados, St. Kitts & Nevis and Trinidad & Tobago), and small States like Brunei Darussalam and Seychelles, which are presently classified as “high income” countries by the World Bank for lending purposes could potentially still be excluded from special and differential treatment if they have been classified by the World Bank as “high income” for a third consecutive year or any three consecutive years thereafter .

The “high income” and the “upper middle income” classifications, have always been problematic for the Caribbean because they rely primarily on GNI per capita, an ineffective measure of development. It has been on this ineffective criterion that some Caribbean countries have been excluded from much needed concessionary financing.

Introducing such a criterion into the WTO for the basis of determining development level would only continue this injustice. It would also be manifestly ‘anti-development’ because it would exclude these small countries from accessing flexibilities, such as longer transition times and technical assistance, needed in order to meet their WTO commitments under future WTO agreements.

Moreover, these countries are too small to have any appreciable ability to affect or distort global trade. Perhaps it may be best to either remove the “high income” criterion from the US proposal, or at the very least, link it with another criterion like criterion four.

On another note, the General Council will also, inter alia, be considering a draft decision on the functioning of the Appellate Body in a last ditch effort to save the WTO’s appellate jurisdiction.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

DISCLAIMER: All views expressed herein are her personal views and do not necessarily reflect the views of any institution or entity with which she may be affiliated from time to time.