World Trade Organization
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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.