Special & differential treatment for developing countries
Published: The Kathmandu Post, 23 February 2007
By: Shivendra Thapa


There are significant differences between World Trade Organization (WTO) members. Most developing and least developed members are characterized by weak institutions, poorly diversified industries, under-developed markets, insufficient infrastructure, geographical constraints, limited access to health and education, and lack of access to information and communication technologies, among others. Since developed and advanced developing members supersede most of these constraints and are better positioned to reap the benefits of trade liberalization, a need to provide special and differential treatment (S&DT) to the developing and least developed members was an agenda since the operation of the General Agreement on Tariffs and Trade (GATT) began in 1947.

Although not known as S&DT, there was acknowledgement among GATT members regarding the 'special needs' of developing and least developed members. The 1979 Tokyo Round recognized "the importance of the application of differential measures in developing countries in ways, which will provide special and more favorable treatment for them in areas of negotiation where this is feasible." Such ways were sought by conceptualizing the notion of positive discrimination, which implies that developing and least developed members should be encouraged to integrate into the multilateral trading system through market access, protection for infant industries, non-reciprocity, etc even if it undermines the most favored nation (MFN) principle.

The first preferential scheme put in place by a number of countries was the generalized system of preferences (GSP). Other schemes include the African Growth and Opportunity Act (AGOA) and the Caribbean Basin Initiative of the United States and the European Union's 'everything but arms' initiative for the least developed countries (LDCs). Nepal as an LDC qualifies for most of these preferential schemes. Despite these provisions, there is a widely held belief that the benefits from them have been outweighed by the increasing discrimination against developing members by developed ones.

Proponents of S&DTs argue that the special circumstances of developing members are such that they ought to be given the flexibility to pursue development through trade policies even if these policies involve negative externalities for other countries through positive discrimination. Opponents disagree and claim that these provisions undermine the core WTO principle of reciprocity and encourage protectionist trade policies in developing countries.

Since there have been numerous calls to give S&DT more clarity and specificity, a significant compromise on S&DT has been suggested at the WTO. The proposal suggests that vulnerable developing and least developed members should have the Doha "Round for Free". In other words, in current and future negotiations, they should not be made to open up markets beyond their existing commitments and should also be able to benefit from increased market access offered by both developed and advanced developing countries.

Regarding this issue, there are two schools of thought. One school of thought welcomes the proposal since they believe that the issue of S&DT is well-founded and should not be up for political debate. Though they welcome the offer, they are also cautious about a situation, in which, developing and least developed members may be exempted from further commitments but it could also exclude them from key negotiations under the Doha Round, as was the case in previous rounds.

The other school of thought says that the "Round for Free" approach might actually turn out to be a disincentive for developing and least developed members. They claim that if the most vulnerable members of the WTO were required to do the least in negotiations yet still be able to retain veto rights over a Round, it would create a scenario where other members would have little choice but to liberalize their trade outside the multilateral system resulting in the proliferation of bilateral and regional trade agreements, and thereby undermining the scope and objectives of the rules-based multilateral trading system.

In this respect, what will be a more pragmatic option to pursue so that differences in circumstances and capacities are addressed? An option will be to follow the original notion of positive discrimination and implement S&DTs accordingly. Formulating, incorporating and implementing S&DTs based on such notion will not only help the vulnerable members but will also add to the objectives of the WTO.