China’s status as a “developing country” at the World Trade Organization (WTO) has become a controversial issue, with a number of countries worrying that the upper-middle-income nation is pulling back. advantages reserved for developing countries under WTO standards. In addition, concerns have been expressed regarding “Least Developed Country” (LDC) status, with Bangladesh potentially losing this label after overtaking India in terms of GDP per capita.
What are the advantages of the “developing country” tag?
Some WTO agreements grant developing countries special rights through “special and differential treatment” (S&D) provisions, which may give developing countries longer periods to implement the agreements and even commitments to increase trade opportunities for these countries.
WTO covenants often aim to reduce government support to certain industries over time and set more lenient targets for developing countries and allow them more time to meet those targets compared to developed countries.
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?
The WTO has not defined “developed” and “developing” countries and member countries are therefore free to announce whether they are “developed” or “developing”.
However, given the increase 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-owned enterprises, data restrictions and inadequate enforcement of intellectual property rights, a number of countries have called on China to either refrain from seeking benefits available to developing countries or completely abandon its classification as than developing countries.
“One way for China to show leadership would be to refrain from claiming benefits that would correspond to a developing country in the ongoing negotiations,” the European Union said in a statement on the latest policy review. China’s trade conducted in October 2021. The United States Trade Representative also issued a similar statement.
Australia had also recommended that China waive “its access to special and differential treatment”. China’s per capita income was $ 10,435 in 2020 according to the World Bank, while that of India was $ 1,928.
How did China react? What would be the impact of the loss of this status for China?
China has always claimed that it is “the world’s largest developing economy,” but recently indicated that it might be willing to forgo many of the benefits of being a developing country.
Li Chenggang, Chinese ambassador to the WTO, has reportedly said the country could waive all exemptions available to developing countries in negotiations to reduce fisheries subsidies to tackle overfishing.
Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said that a change in China’s status to a “developed country” would have an impact on negotiations for future agreements. “Indeed, China has (like developed countries) reduced its tariffs on most products to a fairly significant extent.”
What are the advantages of the PMA classification?
The WTO recognizes LDCs based on a UN classification based on a criterion revised every three years. LDCs are often exempt from certain provisions of WTO covenants. Bangladesh, currently classified as an LDC, enjoys tariff-free and quota-free access for almost all exports to the EU. However, it is expected to graduate from LDC status in 2026, as its GDP per capita has risen sharply, surpassing that of India in FY21.
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