‘Developing’ Country Status at WTO

‘Developing’ Country Status at WTO

Subject – Economy

Context – China’s status as a ‘developing country’ at the World Trade Organization (WTO) has become a contentious issue with a number of countries raising concerns over the upper middle-income nation deriving benefits reserved for developing countries under WTO norms.

Concept –

What are the benefits of ‘developing country’ tag?

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

How is a ‘developing country’ decided?

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

Why are some countries against China being classified as ‘developing country’?

• Given the rise in China’s per capita income to become an upper middle-income country according to the World Bank and the country’s alleged use of unfair trade practices such as preferential treatment for state enterprises, data restrictions and inadequate enforcement of intellectual property rights, a number of nations have called on China to either refrain from seeking benefits available to developing countries or forego its classification as a developing country altogether.

What are the benefits of LDC classification?

• The WTO recognises LDCs relying on a classification by the UN based on criteria that is reviewed every three years.
• LDCs are often exempted from certain provisions of WTO pacts.
  • Bangladesh, currently classified as an LDC, receives zero duty, zero quota access for almost all exports to the EU. It is, however, set to graduate from the LDC status in 2026 as its per capita GDP has risen sharply surpassing that of India in FY21.