Geneva: Continuing his trade wars on multiple fronts, President Donald Trump has dropped another bombshell. He threatened on Friday that the US will no longer treat China, India, South Africa, and Indonesia as developing countries for availing special and differential treatment during the current and future multilateral trade deals negotiated at the World Trade Organization (WTO).
The US, he said, will “use all available means to secure changes at the WTO that would prevent self-declared developing countries from availing themselves of flexibilities in WTO rules and negotiations that are not justified by economic and all other indicators.”
In 90 days, China, India, South Africa, Indonesia , and 30 more countries must stop designating themselves as developing countries for availing what is referred to as the S&DT (Special and Differential Treatment).
Otherwise, the US (a) “will not support any such country’s membership in the OECD (the Organization for Economic Cooperation and Development)”; (b) “consider the WTO member’s involvement in global trade, membership in key economic decision-making groups, placement within relative economic and other indicators, and any other factors the USTR (United States Trade Representative) deems appropriate”; and (c) the USTR shall publish on its website a list of all self-declared developing countries that the USTR believes are inappropriately seeking the benefit of developing country flexibilities in WTO rules and negotiations.”
In addition to the trade wars with China over a range of issues and with France on the new tax to be levied by Paris on transactions of major international internet behemoths, President Trump lunched this multilateral trade war with some 30-odd countries over a treaty-embedded right — S&DT — for developing countries since the establishment of the WTO in 1995.
“How absurd it is to launch a multilateral trade war against developing countries by President Trump and his trade representative Ambassador Robert Lighthizer,” said a developing country trade envoy, who preferred not to be quoted. “It is only on Wednesday ( 24 July) that a large majority of countries rejected the US’ proposal, for the third time, on differentiation/graduation for availing S&DT among developing countries.”
The US is aggressively pursuing a ” slash-and-burn” strategy at the WTO by destroying a major arm of the dispute settlement system — the Appellate Body — while making “outrageous demands for denying S&DT to developing countries,” the envoy maintained.
Coming back to the S&DT provisions, developing countries are allowed under S&DT longer time periods for implementing WTO agreements and commitments, lower level of commitments or what are called less-than-full reciprocity and measures to increase trading opportunities.
Further, there is a built-in non-reciprocity provision under the S&DT architecture, implying that developing countries are not required to provide the same level of market access to developed countries.
The Decision on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries — called the Enabling Clause in trade jargon — was adopted under the Tokyo round of the GATT in 1979.
But the US and President Trump have turned their back to the international legal obligations. The US terminated more than $6 billion benefits accruing to Indian exporters under the Generalized System of Preferences Scheme last month, in flagrant violation of global trade rules. Successive US administrations beginning with President George Bush have launched a sustained assault on the S&DT, with China, India, Brazil, and South Africa being declared as advanced developing countries that no longer be provided with S&DT at the WTO.
Early this year, the US received a shot in the arm in its campaign against the S&DT. Brazil’s new President Jair Bolsonaro declared in the presence of the US President Donald Trump on 19 March that Brazil will begin to forego S&DT at the WTO.
Subsequently, there have been sustained attempts by the US to bring about differentiation/graduation to deny S&DT to China, India, South Africa, Indonesia and 30 more countries in the current and future trade negotiations at the WTO and outside the trade body.
In a letter sent to trade ministers of developing countries on behalf of President Trump on 26 April, the US Trade Representative Ambassador Robert Lighthizer wrote “I am reaching out to you to ask you to support this [American] initiative by agreeing to forego special and differential treatment in current and future WTO negotiations.”
Nevertheless, developing countries remained solidly opposed to the US’ proposal. China, which is cited by President Donald Trump as one of the developing countries that do not deserve the S&DT, asked the US “not to do anything more than three times,” suggesting that the US’ proposal to bring about differentiation/graduation for accessing S&DT among developing countries has been rejected in three successive General Council meetings.
“China’s position remains unchanged on development , and special and differential treatment,” the Chinese trade envoy Ambassador Zhang Xiangchen told his American counterpart Ambassador Dennis Shea at the GC meeting on 24 July.
“The centrality of the Special and Differential treatment,” said Ambassador J S Deepak, India’s trade envoy at the General Council meeting, remains “non-negotiable, treaty-embedded right for developing members and the least-developed countries.”
“ It is essential to preserve S&DT for allowing developing countries the space to formulate their domestic trade policy, in a way that helps them to reduce poverty, generate employment and integrate meaningfully into the global trading system,” India maintained.
India has adopted a prudent strategy of engaging on all issues with the US and other industrialized countries while adhering to its core trade priorities based on S&DT, said a Geneva-based legal analyst, who asked not to be quoted.
Moreover, “despite significant progress achieved by developing countries since the creation of the WTO, old divides have not been bridged and, in some areas, they have even widened,” Ambassador Xolelwa Mlumbi-Peter of South Africa maintained. “While new divides, such as those in the digital and technological spheres are becoming more pronounced, in addition, despite progress achieved, developing countries have not come anywhere near catching-up with developed members,” she told her US counterpart at the General Council meeting.