wto-classification-of-developed-and-developing-countries-summary

Context:As China is considered as a developing nation in WTO,the President of the U.S has accused it of taking advantage of the US and other countries through the medium of WTO.

China in WTO

  • Membership
    • China became a WTO member in 2001, the organisation’s 143rd. 
  • Argument against calling it developing nation
    • As per a WTO document noting its better performance from the time of accession to the organisation till 2011, 
      • China became the second-largest economy in GDP terms
      • The first largest merchandise exporter
      • The fourth largest commercial services exporter and 
      • The first destination for inward FDI among developing countries.
  • Argument in favour of calling it developing nation
    • Implications on other developing countries:If China is forced to forgo the benefits of a developing country, the other developing countries that are ahead of China (at least in per capita terms) can be asked to do the same.
    • By this logic, the developing country status of China is of interest not only to China, but also to their counterparts in other developing countries.
  • Stance taken by China:
    • It has maintained that it will not give up its rights as a developing country. As a large developing country, It has been trying to make more contributions to the multilateral trading system within their capabilities. 
    • The country is also facing various challenges, difficulties and gaps in achieving a balanced and adequate development. So they have decided not to give up their rights as a developing Member.

About developed and developing countries classification in WTO

 

Procedure for classification:

The WTO doesn’t define countries as ‘developing’ or ‘developed’. 

Member nations themselves are required to declare which category they fall under.

  • It is in contrast to the World Bank that classifies countries based upon per capita income.

But these declarations can be challenged by other member nations.



 

Advantages of a ‘developing country’ status

Some WTO agreements give developing countries special benefits and rights, which are referred to as “Special and differential treatment provisions”.

  • It allows for reduction of adjustments that a developing country has to make while commiting to various agreements under the WTO.
  • S&DT has an important provision of Non-reciprocity by developing countries.
    • Under it, the developed countries do not expect any reciprocity for the commitments made on their behalf in trade negotiations.
    • It helps developing countries immensely in protecting their domestic industries by means of imposition of Import Tariffs.
  • Provisions under these include a longer time period for implementing agreements and commitments or measures to increase trading opportunities for developing countries.
  • Also under these agreements, developed countries may treat developing countries more favourably than other WTO members. 

But on the other hand a country that announces itself as ‘developing’ does not automatically benefit from unilateral preference schemes.

Current status:

Developing nations:Over two-thirds of WTO’s 164 member countries are considered as developing countries.


 

About World Trade Organisation (WTO)

  • The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. 
  • At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. 
  • The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
  • Origin:The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT)
  • Members:The WTO has 164 members (including European Union) and 23 observer governments.
  • Ministerial Conference:
    • The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years.
    • It brings together all members of the WTO, all of which are countries or customs unions.
    • The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.
    • Decisions are normally taken by consensus.
Source:knowledge.wharton