On Dec. 29, Sen. Pat Toomey (R-Pa.) and Rep. Ron Kind (D-Wisc.) offered some parting advice to the 118th Congress on how to rebuild “a bipartisan, pro-trade consensus.”
All five recommendations are useful, the common theme being that Congress must claw back its role overseeing U.S. trade policy. One of the recommendations is about the need to reform the World Trade Organization (WTO). Among other things, Toomey and Kind say that developing countries should be permitted to invoke special and differential (S&D) treatment only “in fair and appropriate circumstances.”
This is a longstanding U.S. concern. Congress should address it. But it’s really two problems in one: who is eligible, and for what? A lot of ink has been spilled tackling the first problem. More attention should be spent on the second.
To be eligible for S&D, a country can simply identify itself as developing. Some two-thirds of WTO members claim this status, including China, India, Singapore and South Korea. There’s no definition on the books, and thus no way to contest these self-declarations.
In 2019, the Trump administration penned a memorandum to stop China and others from invoking S&D. It instructed the United States trade representative (USTR) to use its best judgement in deciding which countries are “improperly declaring” as developing. The African group of countries, Cuba and India have warned that “unilateral action depriving” countries of S&D would “cause lasting and systemic damage to the multilateral trading system.”
Debating eligibility is the wrong fight for Congress. Instead, the goal should be to separate out the textual content of S&D provisions from the much broader narrative that surrounds them.
S&D provisions are largely aspirational. There are 183 S&D provisions (155 unique ones), 47 of which call on developed countries to account for the interests of developing ones. Another 44 S&D provisions set out “flexibilities,” almost half of which are about subsidies and agriculture. These give developing countries more time to phase-in obligations, for example, or ease the burden of reporting requirements. Some WTO agreements have one or two flexibilities, like the one on regulatory measures. Not one S&D provision has ever swayed the outcome of WTO litigation. The point is that when it comes to the content of most S&D provisions, there’s not a lot of there, there.
The take-away is that the U.S. should get past the fight over eligibility. Developing countries argue that S&D is “unconditional and treaty-embedded.” Yes, but while eligibility is self-declared, the content of S&D provisions isn’t. India typically takes artistic license in framing its rights under S&D. The broader narrative about S&D is a much bigger problem than any specific provision, or even the absence of eligibility criteria.
None of this is to say that the U.S. should back off naming and shaming countries that have pushed the bounds of what it means to be developing. After all, the strategy seems to have done the trick with respect to South Korea and Singapore, both of which have vowed never to use S&D.
But the U.S. should avoid unilaterally declaring countries ineligible for S&D, since this would trigger WTO litigation, and possibly even retaliation. The optics would also be nightmarish.
Instead, Congress should instruct the USTR to insist on an S&D reality check at the next ministerial meeting, scheduled for March, 2024. Busting the broader narrative would be the win.
Developing countries explain they need S&D to close the wealth gap with developed ones. This is false. While the technical assistance can help, the flexibilities and transitional periods can hurt by delaying political reform and postponing the benefits of free trade. In short, S&D is more the problem than the solution.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University. Follow him on Twitter @marclbusch.