Daily News Analysis

World Trade Organization                                                                                                                

11th January, 2022 International News

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Context: China's status as a 'developing country' at the World Trade Organization has become a contentious issue.


About World Trade Organization:

  • It was established on January 1, 1995 through the Marrakesh Agreement, as the successor to the General Agreement on Tariffs and Trade (GATT).
  • It covers trade in services and intellectual property and introduced procedures for dispute settlement.
  • It is a Binding institution and its working is Consensus-based.
  • Presently 151 members that negotiate to reduce barriers in trade.
  • This Geneva based organisation governs nearly $23 billion of global trade.
  • This ‘member-driven’ organization is viewed as an
    • International platform to negotiate multilateral and plurilateral agreements dealing with trade
    • Dispute settlement system for disputes arising out of negotiated agreements


Benefits of WTO membership:

WTO membership provides: 

  • most favoured nation treatment, which means equal access for all companies of all WTO Members to the markets of all Members of the Organization;
  • national treatment that prohibits national producers from gaining advantages over importers;
  • reduction of trade barriers, primarily tariffs and quantitative restrictions, which provides for increased trade between Members;
  • predictability and transparency of international trade – WTO Members have bound their tariffs and cannot, except for good reason, introduce other import restrictions, such as bans or quotas;
  • increased competitiveness by eliminating unfair practices between trading partners aimed at stimulating trade, primarily export subsidies and dumping;
  • opportunity to defend trade interests at the WTO Dispute Settlement Body, since all Members will have international commitments towards Belarus for non-application of trade restrictions.


What is the concern raised by other developing countries?


  • China is an upper middle-income nation that derives benefits reserved for developing countries under WTO norms.
  • Bangladesh is losing its least developed country’ (LDC) status, after surpassing India in terms of GDP per capita.


What are the benefits of ‘developing country’ tag?

  • Certain WTO agreements give developing countries special rights through ‘special and differential treatment’ (S&DT) provisions.
  • Under S&DT provision, WTO can grant developing countries longer timeframes to implement the agreements and even commitments to raise trading opportunities for such countries.
  • WTO pacts are aimed at reduction in government support to certain industries over time and set more lenient target for developing nations.
  • The classification also allows other countries to offer preferential treatment.


How is a ‘developing country’ decided and why are some against China being classified as one?


  • WTO has not defined ‘developed’ and ‘developing’ countries.
  • Member countries are free to announce whether they are ‘developed’ or ‘developing’.


What are the benefits of LDC classification?

  • The WTO recognizes Least developing country (LDCs) relying on a classification by the UN based on a criteria that is reviewed every three years.
  • LDCs are often exempted from certain provisions of WTO pacts.
  • Country classified as an LDC, receives zero duty, zero quota access for almost all exports to the EU.


What is India’s current status?

  • India has self-designated itself as a developing nation and is accordingly, classified by the World Bank as a lower-middle-income economy.