TWN Info Service on WTO and Trade Issues (Feb20/04)
18 February 2020
Third World Network

US declares several South countries as developed in CVD decisions
Published in SUNS #9067 dated 13 February 2020

Geneva, 12 Feb (D. Ravi Kanth) — The United States has declared India, South Africa, Indonesia, Malaysia, Thailand, Vietnam, Brazil, Argentina, Colombia and Costa Rica among others as developed countries and thereby, will not be considered as developing countries under its 2% de minimis standard for purposes of imposing countervailing duty (CVD) decisions.

In what appears to be a prelude for introducing “differentiation/graduation” in the current and future negotiations at the WTO’s 12th ministerial conference (MC12) in Nur Sultan, Kazakhstan, in June, the USTR has issued a new decision on “designations of developing and least-developed countries under the countervailing duty law.”

The decision comes at a time when WTO members are negotiating a new agreement for prohibiting certain categories of fisheries subsidies under the Doha rules negotiations that contribute to IUU (illegal, unreported, and unregulated) fishing, and overcapacity and overfishing.

Last week, the ACP (African, Caribbean, and Pacific) group of developing countries demanded special and differential treatment (S&DT) for developing countries that currently have a share of less than 2 per cent in global fish catch.

The ACP decision came under criticism as several other developing countries will remain excluded from S&DT despite millions of artisanal fishermen being dependent on fishing for their livelihood.

India and Indonesia among others have a share of more than 4% in global fish catch and millions of their small- scale fishermen survive on fishing-related activities.

The US has repeatedly argued that the proposed agreement on fisheries subsidies must not include S&DT, insisting that S&DT will be considered on a case-by-case basis.

Earlier, the USTR had called for comprehensive changes in the WTO’s negotiating function based on its unilateral criteria for availing S&DT.

The USTR said that it will exclude several developing countries from availing “themselves of special and differential treatment in current and future WTO negotiations” based on a four-point criteria.

The four points include:

i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;

ii. A WTO Member that is a member of the Group of 20 (G20);

iii. A WTO Member that is classified as a “high income” country by the World Bank; or

iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).

Against this backdrop, the USTR, Ambassador Robert Lighthizer, on Monday designated WTO members that are eligible for special de minimis countervailable subsidy and negligible import standards under its countervailing duty (CVD) law.

As per its obligations under the WTO Subsidies and Countervailing Measures (SCM) Agreement, “WTO members that have not yet reached the status of a developed country are entitled to special treatment for purposes of countervailing measures,” it has stated.

Under different thresholds, the SCM Agreement provides special and differential treatment to developing and least-developed countries.

Article 11.9 of the SCM Agreement requires authorities to terminate a CVD investigation if the amount of subsidy is de minimis, which is normally defined as less than 1 per cent ad valorem.

For developing countries under Article 27.10 (a), the de minimis standard is set at 2 per cent or less.

In a similar vein, under Article 11.9 of the SCM Agreement, authorities are required to terminate a CVD investigation if the volume of subsidized imports from a country is negligible.

The USTR said it has treated both developing and least-developed countries on the same footing for purposes of the de minimis threshold, suggesting that “both are eligible for the same 2 percent rate.”

The USTR said it had earlier developed the list of “Members” eligible for the 2 percent de minimis standard on the basis of (a) per capita income, (b) share of world trade, and (c) other factors such as membership in the Organization for Economic Cooperation and Development (OECD), the European Union, and the G20 (Group of 20) countries.

It stated that WTO members with a per capita gross national income below $12,375 were treated as eligible for the 2 per cent de minimis standard for purposes of CVD decisions until now.

Consequently, in 1998, the US had categorized Hong Kong, Korea, and Singapore as “ineligible” for developing country treatment since these three countries accounted for a share of world trade in excess of 2 per cent.

Against this background, the USTR said it “now considers 0.5 percent (instead of the earlier threshold of 2%) to be a more appropriate indicator of “significant” share of world trade.”

The USTR stated on Monday that, “for purposes of US CVD law”, it “considers countries with a share of 0.5% or more of the world trade to be developed countries.”

“Thus, Brazil, India, Indonesia, Malaysia, Thailand, and Vietnam are ineligible for the 2% de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI (gross national income) below $12,375,” the USTR said.

Even the new EU members such as Bulgaria and Romania are ineligible for the 2 per cent de minimis standard despite their per capita income being less than $12,375, the USTR said.

Applying the OECD membership criteria, including countries that are seeking OECD membership, namely Colombia and Costa Rica, the USTR said these two countries will not be eligible for the 2 per cent de minimis threshold even though their per capita gross national income is below $12,375.

Due to the membership in the G20 that was established in the wake of the 2008 financial crisis that erupted in the US, the USTR has said that Argentina, Brazil, India, Indonesia, and South Africa are developed countries and thereby, ineligible for the 2 percent de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI below $12,375.

In the face of likely criticisms from India and South Africa, the USTR said that it did not consider “social development indicators such as infant mortality rates, adult illiteracy rates, life expectancy at birth, as a basis for changing a designation.”

Incidentally, India is the highest disease-burdened country with one of the highest infant mortality rates.

The USTR said even the new members of the WTO such as Albania, Armenia, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Montenegro, North Macedonia, and Ukraine are developed countries, as they did not declare themselves as developing countries in their accession to the WTO.

In sum, Washington has escalated its war against special and differential treatment at the WTO by declaring countries that are ineligible under the de minimis standard for imposing CVD decisions. +