The WTO, the successor of GATT, an organisation born out of negotiations, deals with trade-related matters between nations globally. World Trade Organisation got a life on 1st Jan 1995 through the Marrakesh Agreement signed at the culmination of the Uruguay Round (1986-1994).
GATT was a product of the 1944 Bretton Woods Conference. The WTO replaced GATT as the latter was lacking organisational structure and a suitable dispute settlement mechanism.
Functions of WTO
WTO is a forum where countries liberalise trade and sort out trade problems they face with each other. It is an organisation where countries come together, sign and negotiate and set the rules for international commerce. The ultimate goal is to help various agencies such as exporters-importers to conduct their business and allow the government to achieve social and environmental objectives.
With trade also comes various trading disputes. The organisation also acts as a trading dispute settlement mechanism. It also helps achieve economic growth by lowering the trade barriers under the non-discrimination principle. The idea of “good governance” is also used to ensure transparency. This forum also ensures clean trade measures for environmental protection and maintains peace and stability.
WTO Classification of Developed and Developing Countries
WTO does not define any country as developed or developing, but instead, countries classify themselves as developed and developing. However, the basis of the grouping is on specific criteria set out by the organization. It gives special privileges to developing countries known as ‘Special and Differential Treatment (S&D)’.
To oversee the Special and Differential Treatment, the 4th Ministerial WTO conference in Doha made the committee on trade and development. The special provisions include:-
- A longer time frame for developing countries for implementing agreements and commitments.
- Measures to increase trading opportunities.
- All WTO measures must safeguard the interest of developing countries.
- Incentives to help developing countries build enough capacity to carry out WTO workload.
- Provisions related to least developed countries.
Benefits to Developing Countries
During the Doha meeting, all members agreed that all special and differential agreements are an essential part of WTO, and these should be strengthened and made more effective. Hence, the Bali conference in 2013 established a mechanism to review S&D principles.
World Trade Organisation mandates that international trade should aid both developed and developing countries’ economic growth.
General Agreement on Trade and Tariff allows the countries to limit their imports to protect a particular industry and grow without external competition. Part IV of GATT includes – “non-reciprocal preferential treatment for developing countries,”i.e. when developed countries offer some concessions to developing countries such as tax concessions, it should not expect the developing countries to do the same. Developing countries can also readjust while committing to various norms. Countries can also protect their domestic tariffs. Due to such advantages, 2/3 of the members classify themselves as “Developing”.
Dominance by Some Leading Industrialised Countries
WTO is a democratic institution but still dominated by leading industrialised economies such as the EU, US or Japan. Most of the members classify themselves as developing and can influence any decision.
Nevertheless, these nations have never used such influential power to their capacity. They are dependent on some large economies for their imports, exports, and security or trade reasons. ‘Reciprocity’ or trade-offs is the basis of most trades, such as if one country offers a concession, the other country is also bound to do the same.
The trade-offs benefit large economies and increase their trade inflow. Also, due to human resources constraints, most developed countries could not make it to every meeting held in Geneva and hence could not participate in discussions.
Nelson Mandela, commenting on the Uruguay Round, said:
“The developing countries were not able to ensure that the rules accommodated their realities… it was mainly the preoccupations and problems of the advanced industrial economies that shaped the agreement.”
He added that rules applied uniformly are not necessarily fair because of the different circumstances of members.
The Recent Issue on China’s Developing Country Tag
China recently classified itself as a developing country in WTO which became an issue altogether. Many countries have expressed their displeasure in this regard. As in 2019, even South Korea left the developing status not to seek any special treatment. WTO does not classify any nations under “developed” or “developing”, but other members can criticise the action. This gives an added advantage to some member states since they classify themselves under the “developing tag” and enjoy the unique and differential treatment, such as China.
According to the world bank classification, china belongs to the “upper-middle-income country” category. Besides, there are also accusations of unfair trade practices from China. So most of the other countries took a firm stand in asking china to leave the tag of a developing nation or not to enjoy many benefits associated with it. Ironically, China is the world’s second-largest economy with steadily rising per capita income.
European Union said in the latest review of China’s trade policy held in October 2021: “One way for China to demonstrate leadership would be to refrain from claiming benefits in ongoing negotiations that would correspond to a developing country.” Australia too had asked China to give up its’ developing tag’ as it would be unfair for other small nations. Further, Bangladesh has also been criticised about the ‘least developing country’ tag as the nation will be surpassing India in terms of GDP very soon.
Most developed nations, such as the US, are asking WTO to end all the benefits given to developing countries.
Read another exciting article on China’s trade protectionism here!
China has claimed to be the ‘world’s largest developing economy. However, some reports indicate that China is ready to leave some advantages attached to the tag under WTO. China is willing to reduce fishing subsidies to prevent over-fishing.
To avoid such global conflicts, the WTO must define a country as developing or developed or make some criteria to let the country place itself under such tags. Every member should consider withdrawal from S&D treatment willingly. Countries should also be “graduated” from a certain level as whenever they meet criteria, they must be asked to leave the “developing status”.
About the Author:
Tanya and optimism go well with each other !! She is a shopaholic and loves to get on new trends. Besides this, Tanya has been a political science student and has a great interest in international affairs.
Currently pursuing a master’s in the same from Delhi University, she is determined and hardworking. Tanya aims to make a space for herself and make contributions by interning with “The International Prism”, which acts as a podium to voice the concerns of the youth.