In News
- China’s status as a ‘developing country’ at the World Trade Organization (WTO) has become a contentious issue with a number of countries raising concerns over the upper-middle-income nation deriving benefits reserved for developing countries under WTO norms.
About
- The WTO lacks a proper definition of a developing nation although two-thirds of its 164 members classify themselves as developing.
Benefits of the ‘developing country’ tag?
- Special rights: Certain WTO agreements give developing countries special rights through ‘special and differential treatment (S&DT) provisions, which can grant developing countries longer timeframes to implement the agreements and even commitments to raise trading opportunities for such countries.
- Lenient targets: WTO pacts are often aimed at reduction in government support to certain industries over time and set more lenient targets for developing nations and grant them more time to achieve these targets compared to developed ones.
- Preferential treatment: The classification also allows other countries to offer preferential treatment.
How is a ‘developing country’ decided and why are some against China being classified as one?
- Voluntary declaration: The WTO has not defined ‘developed’ and ‘developing’ countries and therefore member countries are free to announce whether they are ‘developed’ or ‘developing’.
- China’s classification: given the rise in China’s per capita income to become an upper-middle-income country according to the World Bank.
- And the country’s alleged use of unfair trade practices such as preferential treatment for state enterprises, data restrictions and inadequate enforcement of intellectual property rights.
- A number of nations have called on China to either refrain from seeking benefits available to developing countries or forgo its classification as a developing country altogether.
- Leadership: One way for China to show leadership would be by refraining from claiming benefits that would correspond to a developing country in ongoing negotiations.
- Australia too had recommended that China relinquish its access to special and differential treatment. China’s per capita income was $10,435 in 2020 according to the World Bank while that of India was $1,928.
China’s response and impact of China losing this status
- China’s stand: China has consistently maintained that it is the “world’s largest developing economy” but has recently indicated that it may be willing to forego many benefits of being a developing country.
- Cutting fishing subsidies: Countries may forego all exemptions available to developing countries in negotiations aimed at cutting fishing subsidies to curb overfishing.
- Impact negotiations: A change in status for China to a “developed country” would impact negotiations in future agreements.
LDC Classification
- Classification by the UN: The WTO recognises LDCs relying on a classification by the UN based on criteria that are reviewed every three years.
- LDCs are often exempted from certain provisions of WTO pacts: Bangladesh, currently classified as an LDC, receives zero duty, zero quota access for almost all exports to the EU.
- It is, however, set to graduate from the LDC status in 2026 as its per capita GDP has risen sharply surpassing that of India in FY21.
Way Forward
- Early classification: WTO must clearly define a developing nation at the earliest so that only such nations can claim S&DT.
- The US has been demanding: that China and India should voluntarily give up S&DT benefits due to their rapid economic progress.
- Neither China nor India has yielded to such pressure.
- National interests: Adopt a procedure wherein each nation, keeping its national interests in mind, makes withdrawal strategies to claim S&DT benefits and ultimately from developing nation status.
- Graduation: Another idea is ‘graduation’ whereby as and when member nations meet certain objective criteria, they won’t be subject to developing country status.
Source: IE
