TWN Info Service on WTO and Trade Issues (Feb19/10)
14 February 2019
Third World Network

US denounced for proposing “differentiation” among South countries

Published in SUNS #8845 dated 13 February 2019

Geneva, 12 Feb (D. Ravi Kanth) – China and India have denounced the United States for launching a “divisive” debate under the pretext of “development” to bring about “differentiation” among developing countries for availing special and differential flexibilities at the World Trade Organization, trade envoys told SUNS.

At a meeting of the informal group of developing countries (IGDCs) on Monday (11 February), China and India reminded the US that the “developed countries” are the largest beneficiaries of the reverse special and differential treatment over the past seven decades.

The US and the developed countries set the “golden rules” at the WTO because they controlled all the “gold”, said India’s trade envoy Ambassador J S Deepak, according to people present at the meeting.

The US was invited by the IGDCs to make a presentation of its paper, “An Undifferentiated WTO: Self-declared Development Status Risks Institutional Irrelevance”.

The deputy US trade envoy Chris Wilson argued that its paper seeks to explain how “self-declaration and the inability to differentiate among Members puts the WTO on a path of failed negotiations”.

According to the US, there is something wrong at the WTO when five of the six richest countries are claiming developing country status.

The US Trade Representative Ambassador Robert Lighthizer had raised this issue at the WTO’s eleventh ministerial conference in Buenos Aires in December 2017.

Wilson said the Doha Development Agenda negotiations had failed without success because of an “unsustainable proliferation of expectations”, particularly when some developing countries claimed special carve-outs from the proposed rules.

The US, according to Wilson, finds it difficult to accept the categorization of development and special and differential flexibilities at the WTO because they are quite “blunt”, and “simplistic”, as compared to the “subtler graduated way” in which they are made available to developing countries in other international organizations.

The 45-page US paper, which provides data from the UN Development Program Report and Human Development Report, according to Wilson, suggests the broad changes that have taken place among some developing countries, particularly given their performance in global trade and foreign direct investments.

Without naming China, India, Brazil, South Africa, and Indonesia among others, Wilson said some developing countries who claim special and differential treatment “are also immense powerhouses in the global trading environment, including in the context of high-technology products”.

“So it seems strange to us these distinctions have not been taken into the context of how [they] work at the WTO, and how we approach development in the context of negotiations,” said Wilson, according to a participant who asked not to be quoted.

But none of the macro-economic factors are taken into consideration at the WTO, he said, emphasizing that the conclusion the US draws from this current approach to development on the basis of self-declaration at the WTO is often quite disconnected from some of the economic facts.

The US reckons that members’ inability to address this issue, particularly the way the developing countries are progressing, is responsible “for some of the paralysis we have seen in the negotiating way in the WTO,” the US deputy trade envoy argued.

“Put in most simple way citizens of the country [the US] that I represent [ are alarmed] over how some of the wealthiest countries and some of the biggest trading countries or countries [that] are spending on the defence priorities can apply in a uniformed way [for special and differential flexibilities] to undermine the shared goals and outcomes at the WTO,” the US said, according to a trade envoy from a South American country.

The US trade official said Washington is not questioning special and differential treatment (S&DT) or the concept of S&DT but asking for a healthy debate on the issue of differentiation, according to a participant from an African country who asked not to be quoted.

China sharply disagreed with the US assessment on S&DT and development, pointing out that developed countries availed of reverse special and differential treatment.

India’s trade envoy Ambassador J S Deepak inveighed against the US proposal , saying that it comes at a time of a sustained assault on most-favored nation status [as witnessed in the unilateral US tariffs under the US Section 232 security provisions], multilateral framework [threats to close the WTO] and now the special and differential treatment.

Ambassador Deepak said all the central pillars – most-favored nation principle, non-discrimination, multilateral framework for making rules, and now the special and differential treatment – are under attack.

He said the development debate is potentially divisive, arguing that India would have preferred to avoid it but since the US has chosen to introduce its paper at the upcoming General Council meeting, there is no escape from the discussion.

Two things are striking about the US paper, according to Ambassador Deepak.

First, all the WTO rules and disciplines apply to developed countries alone while developing countries are seeking derogation from the established discipline and rules at the WTO.

And the second set of arguments presented by the US, including the economic parameters, are an attempt to insinuate that some developing countries do not need S&DT.

“We believe they are wrong on both counts and also there is an element in this so-called analytical paper to drive a wedge between developing countries,” India said, according to an African official, who asked not to be quoted.

Ambassador Deepak said the US paper tries to build a particular kind of narrative around development, implying that it is the “development” that is responsible for the failure of negotiations at the WTO instead of coming to grips with the fundamental issues that members are encountering everyday.

The selective US narratives ignore several hard truths from which the US cannot run away, India suggested.

Among others, the hard truths include the issue of compliance by developed countries with the WTO rules, particularly the US, he suggested.

He said the fact is the developed countries made the rules, suggesting that the golden rule at the WTO is that the member who has gold makes the rules.

Disturbingly, the developed countries don’t follow the rules they had made or finalized in the rulebook, he argued.

There are any number of “derogations, waivers, exceptions which developed countries had used,” he said, adding that China and India are issuing a joint paper that exposes all the fallacious arguments in the US paper.

The developed countries, according to Ambassador Deepak, are the biggest beneficiaries of reverse S&DT which has now become a rule.

He gave the examples of how developed countries use quantitative restrictions on agriculture products under Article 11 to deny market access to developing countries.

He said the developed countries had used the restrictions on textiles and clothing products, particularly the US, for more than 44 years.

The developed countries perpetuate “asymmetric” rules in the domestic support for their agricultural products which amounts to more than US$160 billion, Ambassador Deepak maintained.

He said the developed countries are the beneficiaries of the special safeguard (SSG) which is used time and time again to restrict the imports of agricultural products from developing countries.

Besides, the developed countries, particularly the US, have concentrated their AMS (aggregate measurement of support) and trade-distorting subsidies for products such as cotton, dairy and poultry products.

He asked about the flexibilities that are availed by the developed countries in the TRIPS [trade-related aspects of intellectual property rights] agreement.

India challenged the US narrative on the per-capita income in some developing countries, saying that the US was making an argument that there is no North-South division.

He said that it is erroneous to argue that the North-South divide does not exist at a time when the top ten largest developing countries are also the poorest countries, with India having 35% of the world’s poor population.

In sum, the discussions at the informal developing country group meeting brought out clearly that the US and its allies are making a concerted effort to drive a wedge among developing countries.

Unless the developing countries remain solidly united, the US and its allies will succeed in their efforts to differentiate among developing countries (ala their divide and rule policies of the colonial era) for availing S&DT along with their attempts to transform the WTO into a world plurilateral organization without an effective adjudicating body for trade disputes.