TWN Info Service on UN Sustainable Development (Oct19/02)
23 October 2019
Third World Network

South firmly rejects US Presidential memo on S&DT
Published in SUNS #9000 dated 18 October 2019

Geneva, 17 Oct (D. Ravi Kanth) -  More than 50 developing and least-developed countries on Wednesday (16 October) rejected the US Presidential Memorandum for bringing about differentiation/graduation among developing countries for availing of special and differential treatment (S&DT) in current and future trade negotiations at the World Trade Organization, trade envoys told the SUNS.

At an extended WTO General Council (GC) meeting on Wednesday, India, China, members of the African Group, Bolivia, Cambodia, Cuba, Laos, Oman, Pakistan, and Venezuela issued a powerful statement asserting that S&DT is an unconditional right in WTO rules and it must continue uninterrupted.

On behalf of the 52 countries, India said that the developing countries "must be allowed to make their own assessments regarding their developing country status."

The existing S&DT provisions must be upheld and S&DT must be provided in current and future negotiations, the developing countries and LDCs demanded.

Denouncing the concerted US "attempt to divide developing countries," India said "many more members have expressed support and are seeking capital clearance to co-sponsor this paper."

The submission by 52 countries came a day after the US trade envoy Ambassador Dennis Shea threatened major developing countries such as China, India, South Africa, Indonesia, and Turkey among others that they must forego their S&DT flexibilities, failing which they will be declared as countries not eligible for S&DT on the US website on 24 October. (See SUNS #8999 dated 17 October 2019).

In the face of the threat by the US administration, India's trade envoy Ambassador J S Deepak, who introduced the joint statement at the GC meeting, said categorically: "The Marrakesh Agreement establishing the WTO recognizes that international trade is not an end in itself, but a means of contributing to certain objectives, including ensuring that developing countries and LDCs secure a share in international trade commensurate with the needs of their economic development."

S&DT, said Ambassador Deepak, "is a right of the developing countries, and is as much treaty-embedded as the other core principles of our rule-based multilateral system, such as the MFN and National Treatment."

The developing countries and LDCs must "continue to benefit from their right to S&DT in WTO rules and negotiations," as long as their "development challenges and the differences in levels of development persist," he said.

Without naming the US, India's trade envoy said "any unilateral attack on S&DT is an onslaught on the very tenets of multilateralism that WTO seeks to protect. This will cause lasting and systemic damage to the multilateral trading system."

The underlying "rationale behind S&DT is simple and obvious - it recognizes the enormous difference in the levels of development between different Members of the WTO, and allows developing Members 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," Ambassador Deepak argued.

Many developing countries and LDCs would not have signed and ratified the "Marrakesh Agreement" without the insurance of the S&DT provisions, the Indian envoy emphasized.

Therefore, it would be a gross violation to deprive the developing countries and LDCs "their rightful policy space in future agreements, a policy space that has been enjoyed by developed Members in their process of structural transformation and economic growth," he maintained.

Further, attempts to deny S&DT to developing countries and LDCs would amount to "a gross violation of the basic tenets of equity and justice and would strike at the very legitimacy of the rules-based system," Ambassador Deepak said.

In effect, the ongoing attempts to deny S&DT, he said, "would compound the wrong which has resulted from the non-completion of the Doha Work Programme which sought to mainstream development in the multilateral trading system and make provisions of the Uruguay Round Agreements more precise, operational and enforceable."

He urged the US and other developed countries to "be cognizant that developing economies themselves, and they alone, have adequate knowledge of their local conditions to decide whether they should be categorized as developing Members to avail S&DT or not."

"There is no "one size fits all" definition of development, and any attempts at differentiating between developing Members based on arbitrary and selective criteria must be avoided at all costs," India maintained.

The US Presidential memo as well as the US submission made in February "seek to reduce special and differential treatment from a treaty-embedded right available to all developing Members including LDCs, into a plea for mercy, based on arbitrary and changing parameters," Ambassador Deepak pointed out.

Although only four developing countries are targeted out of the 52 signatories to the statement, he cautioned, "there is no guarantee that other developing Members would not be targeted for graduation on the basis of a growing set of conditions, in the near future."

"The large developing economies are sought to be graduated in the first instance, so that the collective negotiating ability of the South is weakened and smaller developing countries are saddled with the burden of proving, on a case-to-case basis, that they need S&DT, sector by sector, product by product and maybe line by line as is happening in the case of accessions," he grimly warned.

Little wonder that the "US President's Memo of 26 July 2019, thus strikes a death knell for the principle and practice of S&DT which will become extinct at the WTO."

Commenting on the widening gaps between developing and developed countries, he said "catching-up is a challenge because of the non-level playing field and structural obstacles faced by developing countries."

Therefore, he said, "it is essential to preserve the S&DT for allowing developing Members the space to formulate their trade policies in a way that helps them to integrate meaningfully into the global trading system."

Moreover, "it is a necessary condition for inclusive development and for taking everybody along," the Indian envoy maintained.

The 52 countries want to "reiterate that S&DT is not derailing the negotiations", he said, suggesting that the root cause for the inability to conclude the DDA negotiations is "a lack of attention to mandates."

"Any attempt to water down the core principle of S&DT would be a recipe for intractable deadlock at the WTO," Ambassador Deepak warned, insisting that "it is in the interest of the entire membership to avoid this situation."

He summarized the key points of his submission, as follows:

(i)  S&DT for developing countries, including LDCs, is a right for which we have made payments in the form of obligations in the UR Agreements like the Agreement on Agriculture and TRIPS.

(ii) It is part of the basic structure of the multilateral trading system and abandonment of S&DT would imply abandoning a core principle of the WTO agreement.

(iii) The US is using arbitrary parameters, many of them unrelated to development, together with unilateral enforcement, to target the Members and to divide developing countries.

While some developing Members may have made progress in overall or per capita GDP, huge gaps between developed and developing countries remain, and have in many cases widened, as outlined in our submission to the GC in February 2019 (WT/GC/W/765/Rev. II).

A country like India with a per capita income of about US$2,000, and home to 35% of the global poor, cannot be placed in the same development category as the US with a per capita GDP of more than US$70,000.

(iv) 52 developing Members, representing more than 75% of the people of Africa and Asia, across the development spectrum, have rejected the US narrative as unacceptable. Their voice cannot be ignored.

(v)  Finally, pursuing the course of action, outlined in the [US] Memo, will result in a complete breakdown of trust in the WTO, raise unilateralism to a new height and jeopardize current and future negotiations, including those on fisheries subsidy disciplines.

In his intervention at the GC meeting, China's trade envoy Ambassador Zhang Xiangchen said "resorting to unilateral coercion is intrinsically incorrect", arguing that "the current serious crisis for the multilateral trading system is by no means caused by special and differential treatment."

"As a matter of fact," said the Chinese trade envoy, "the historical bad debt of special and differential treatment is up to our neck, causing severely imbalanced status of Members' rights and obligations."

"Hence, without an equitable and sufficient fix to this problem in current and future trade negotiations, the chance to reach an agreement would be fairly slim," the Chinese envoy cautioned.

Neither is S&DT a free lunch for developing countries, "nor is it a shield not to make any contribution to the multilateral trading system," Ambassador Xiangchen argued.

He rejected the case-by-case approach, pointing out that China is facing various challenges and difficulties and that it "will not make commitments beyond our capabilities, nor will we give up our legitimate and institutional rights as a developing member."

"For future special and differential treatment in specific negotiations, if it is needed, indeed, we will be honest to speak out and spare no efforts, trying to get it through negotiations; if not, we will, without any hesitation, leave the chance to other developing Members, who really need it," the Chinese envoy argued.

In her intervention at the GC meeting, South Africa's trade envoy Ambassador Xolelwa Mlumbi-Peter categorically said her country will "not waive its right to self-declare its development status and to S&DT".

Because of its earlier experience of taking the same commitments as developed countries under the previous Uruguay Round, South Africa had to suffer "premature de-industrialisation of our economy," she said.

"Therefore, any discourse on development should have the objective of making the WTO more equitable, balanced, development orientated, inclusive and transparent in decision making," Ambassador Xolelwa argued.

She emphasized that "S&DT is a treaty-embedded right" and "a fundamental principle in GATT and forms an integral part of WTO Agreements, including the principle of self-declared development status."

South Africa will not support "attempts to reverse the earlier gains made by developing countries in the GATT, achieved through long and hard negotiations which resulted in Part IV of the GATT recognizing differences between developed and developing countries and subsequently captured in WTO Agreements," she said.

She cited several indicators to show the continued "persistence of the enormous development divide between the developing and developed Members of the WTO," arguing that "the development divide is evident in levels of economic development, industrial structure and competitiveness, such as GDP per capita, poverty levels, levels of under-nourishment, production and employment in agriculture sector, trade in services, receipts from IPR, share of trade in value-added under GVCs, energy use per capita, financial infrastructure, R&D capacity, company profits, and a range of institutional and capacity constraints, among other things."

Despite significant progress achieved by developing Members since the creation of the WTO, "old divides have not been bridged and, in some areas, they have even widened, while new divides, such as those in the digital and technological spheres, are becoming more pronounced," Ambassador Xolelwa argued.

Consequently, notwithstanding the progress achieved, "developing countries have not come anywhere near catching up with developed Members," the South African trade envoy maintained.

"All developing countries are entitled to S&DT and cannot be excluded upfront from claiming the flexibilities that they are entitled to even before negotiations begin," she emphasized.

South Africa, she said, will not support "a case-by-case approach" as advanced by the US and several other developed countries.

"In conclusion," the South African envoy said, "we want to underscore developing countries` unconditional right to S&DT" and "emphasise the importance of the principle of self-declaration and that existing S&DT provisions must be upheld and S&DT must be provided in current and future negotiations."

She urged the developed and other countries to deliver "on the agreed mandate of making S&DT more precise, effective and operational."

"This is the only way of making trade inclusive and to ensure effective integration of developing countries in global trade," she maintained.

Jamaica, on behalf of the ACP (Africa, Caribbean, and Pacific) group of countries, and Chad, on behalf of the LDCs, strongly endorsed the joint statement by the 52 countries.

The US made a brief intervention at the meeting against the S&DT, pointing a finger at China's need for S&DT. But other developed countries remained silent at the meeting, several trade envoys told the SUNS.