Clara Weinhardt (Maastricht University) and Aniekan Ukpe (Lex Mercatoria Solicitors, Abuja) (2024)
Policy Brief 03/2024
Summary:
Policy challenge.
Special and Differential Treatment (SDT) is a set of legal provisions that give developing countries special rights and allow developed countries to treat them more favourably than other World Trade Organization (WTO) members. SDT acknowledges that countries at different stages of development need different rules to support economic growth. However, since countries in the WTO self-declare their status as “developing”, SDT has often been a contested matter. Tensions around SDT have more recently increased, with developed members — notably the United States (US) — questioning whether large emerging economies such as China should continue to claim SDT despite having achieved significant economic growth. This raises questions of whether and how to set criteria that delimit access to SDT while accounting for divergent levels of development.
What is at stake for the European Union (EU)?
The EU has joined the US in calling for a reform of differential treatment in the WTO, complaining that ‘[i]t is not sustainable that two-thirds of the membership – including some of the world’s most significant economies – claim special and differential treatment’ . More specifically, its 2019 reform proposal on SDT suggests a combination of cross-cutting criteria for graduation from the developing country status with an ‘agreement-by-agreement’ approach that adjusts SDT across negotiation issues. So far, however, the EU reform proposal has not received the support necessary. Yet, reaching an agreement on differential treatment has become a key part of ongoing efforts to reform the WTO. In a world in which economic heterogeneity of countries is growing and increasingly cuts across ‘North-South’ divides, WTO members need to find new and convincing ways to address economic inequality in global trade governance. At a time when geopolitical tensions are rising, defending and transforming trade multilateralism is inextricably linked to taking the reform of SDT seriously. If the EU is seen to promote a reform approach that a majority of developing members of the WTO oppose, it stands to lose its attractiveness and credibility as a partner of these countries in the Global South.
What are the options?
WTO members have three main options. First, they can leave the status quo (self-declaration) unchanged and rely on bottom-up voluntary graduation of large emerging economies from the developing country category. Second, they can seek to introduce cross-cutting criteria in a top-down manner that would limit who gets access to SDT — as the US (and the EU, in part) has suggested. Third, WTO members could opt for “differentiated differentiation”, and introduce issue-specific criteria that delimit access to differential treatment based on sector-specific capacity- or competitiveness-related indicators. This third approach is consistent with the EU’s proposal for an agreement-by-agreement approach to SDT, one that is needs-driven, more targeted, and focused on helping developing countries overcome capacity constraints to assume their full WTO commitments. Instructively, the EU’s calls for more differentiation between developing countries for the purpose of SDT to be reflective of the capacity needs of these countries.
We offer a classification of negotiation issues to assess the likelihood of these different approaches succeeding. Based on this assessment, we recommend that the EU supports a layered approach that combines the introduction of sector-specific criteria for access to SDT (option 3) with a pragmatic push for voluntary graduation (option 1). For the EU, this would entail compromising and giving up the proposal to introduce cross-cutting criteria for graduation from SDT (option 2).
