Published 28 January 2025
The emergence of many developing countries, most notably China and India, as economic and geopolitical competitors with global clout has altered the template which sustained the international trading system for decades. So long as the world’s largest economies get to designate themselves with developing status, a classification that comes with a slew of privileges, chances of real reform at the WTO are all but dead.
Economic development among the trading nations of the world should be an easily agreed goal. How it is being handled at the World Trade Organization has instead become one of the biggest threats to the future of the global trade rulemaking body.
Every WTO member brings its own perspective on what development means and how it can best be achieved. But the discord over the issue is no longer sustainable. Without resolution of the many divisive positions among WTO members over the use and abuse of privileges accorded to countries that designate themselves as developing economies, the WTO has no prospect of making progress on its raison d'être to make and govern global trade agreements.
At the root of the discord over development is the question of how trade generally and global trade rules specifically aid or hinder developing countries. Are developing countries’ interests best served by implementing and applying WTO rules or by being exempted from them, fully or partially? The Washington Consensus may have dictated that adherence to the rules and progressive liberalization of trade were in the interests of all. But many developing countries believe development is best achieved via exemptions from the rules.
Download Why the development debate at the WTO has become a crisis by Keith Rockwell:
This wasn’t much of a problem when the multilateral trading system consisted of a couple dozen countries. But there are 166 WTO members now, and some three-quarters of them say they are developing countries. There are 22 countries in the queue to accede to the WTO and all of them consider themselves to be developing countries.
The classification matters. Under WTO rules, a country’s level of development determines the level of obligations they assume. Developing countries are not expected to undertake the same level of tariff cuts or subsidy reductions as developed countries. Developing countries can, for instance, provide agricultural subsidies equal to 10% of the value of production, while for advanced countries the limit is 5%. Special and differential treatment provisions are extended broadly to all developing-country members. These SDT provisions are embedded in every WTO agreement, including the administration of agriculture import quotas.
Today a core group of developing countries, most notably led by India - the world's fifth-largest economy - South Africa, and Indonesia, consistently rejects negotiations toward any agreement on new areas of trade in fear of losing the special treatment they receive.
Meanwhile, China, the world’s second-largest economy, continues to benefit from protections its developing status provides – something Beijing and capitals of other developing countries now view as an entitlement.
If the WTO is ever to re-emerge as a center for meaningful trade negotiations, the fundamental issue of how countries are classified by development levels must be addressed, writes Senior Research Fellow Keith Rockwell. Governments will abandon the organization if members don’t agree to be reasonable on development and negotiate in good faith.
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Author
Keith M. Rockwell
Keith M. Rockwell is a Senior Research Fellow at the Hinrich Foundation. Prior to his retirement in June 2022, Keith served as a Director at the World Trade Organization (WTO) and spokesperson for the organization for more than 25 years. He also is Global Fellow at the Wilson Center.
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