The World Trade Organisation (WTO) recently conferred the ‘developing country’ status upon China, which has incited disputes among numerous nations. This status comes after the South Korean Government’s decision in 2019 to waive any special treatment as a developing country during future WTO negotiations.
Classification by the WTO
The WTO does not provide definitions for ‘developed’ and ‘developing’ countries, allowing member countries to announce their own development level. Nonetheless, this freedom to self-identify can be contested by other members, especially if a nation takes advantage of provisions designed for developing countries. As a result, countries like China can leverage the designation to broaden their global trade influence.
China’s Controversial Status
With China’s burgeoning per capita income classifying it as an upper middle-income country, according to World Bank standards, its claim to be a developing nation is being challenged. The country’s alleged employment of unfair trade practises, such as preferential treatment for state enterprises, data restrictions and inadequate enforcement of intellectual property rights, has drawn criticism from international parties. For instance, the European Union, United States and Australia have all urged China to relinquish its privileges as a developing country.
World Bank’s Classification of Countries
Every year on July 1st, the World Bank assigns economies to one of four income groups based on Gross National Income (GNI) per capita. In the 2020-21 classification, India was categorized as a lower-middle-income country, but with China’s per capita income significantly surpassing India’s, a debate ensues over the validity of China’s claim to be a ‘developing’ country.
Issues Raised Against China’s Status
A number of countries have voiced concerns about an upper middle-income nation like China reaping the benefits typically reserved for developing countries under WTO regulations. There is also controversy surrounding the Least-Developed Country (LDC) tag, with speculation that Bangladesh might lose this status after surpassing India in terms of GDP per capita.
Advantages of ‘Developing Country’ Status
The ‘developing country’ status accords certain rights and provisions through Special and Differentiated Treatment (S&DT). These benefits can include longer timeframes to implement agreements, commitments to enhance trade opportunities, and measures that protect the trade interests of developing countries. The S&DT also extends support to help these nations build capacity to execute WTO work, handle disputes, and enforce technical standards.
India’s Stance on WTO Reforms
As developed nations advocate for WTO reforms that could weaken the impact of S&DT provisions, India has stated its intention to champion the preservation of these provisions for the developing world. However, India has also indicated its willingness to engage in discussions regarding the criteria for ‘developing country’ designation.
China’s Perspective on Its Status
Despite maintaining its position as the “world’s largest developing economy”, China has suggested possible concessions, such as forgoing certain benefits associated with being a developing country. Specifically, in negotiations aimed at reducing fishing subsidies, China has reportedly agreed to waive exemptions typically available to developing countries.
Suggested Course of Action for WTO
In order to prevent further disputes, the WTO should devise explicit guidelines for the classification of a developing nation. Furthermore, adopting a process where each nation formulates strategies for withdrawing from the ‘developing nation’ status could be beneficial. The concept of ‘graduation’, in which members lose their ‘developing country’ status once they meet specified criteria, could also be considered.
