Team Members: S. Bippert, L. Parramore, and E. Pedro*

*Note: The team members contributed equally and are listed in alphabetical order.

Blog Post

State Participation & the World Trade Organization

Introduction of the WTO

The World Trade Organization (WTO) is a multilateral organization that regulates and supports international trade.1 The organization is used by governments to create, update, and enforce international trade rules. Like many other International governmental organizations the WTO is managed by the governments of its members. The membership as a whole makes all significant decisions1. Thus making state participation a cruel component in the success of the WTO. 

The Exploitation of Special and Differential Treatment: The Cases of China and Singapore

China has been abusing the benefits of special and differential treatment (SD&T) since its integration into the organization in 2001. When they first joined, China’s per capita income was on par with that of Sudan, and today it has risen to that of Mexico 2020.2  That is a jump from 1,850 Purchasing Power Parity (PPP) dollars to 17,810 PPP dollars since their inclusion.3 As of today, China is the second largest economy in the world, so it begs the question, why is China still reaping the rewards of SD&T and classifying themselves as a developing country? Based on the economic statistics of the state, it doesn’t stand to reason that a country like China would require other WTO members to protect their trading interests and promote new trading interests.

Singapore and other high-income countries have declared themselves to be underdeveloped countries. Singapore's Ministry of Trade and Industry says that the country is a small economy with few natural resources, making it extremely reliant on global trade. In a similar spirit, India has defined itself as a developing country and is categorized as a lower-middle-income economy by the World Bank..

It is clear, however, that there is not a binary distinction between developed and developing nations.  Instead, development should be considered on a more continuous scale.  While China is not nearly as in need of special treatment as the least-developed nations, they are not nearly as developed as much of the Western world.  China currently has a GDP per capita of $16,842, ranking 79th in the world and 15th in the G20.  Italy, the G7 country with the lowest GDP per capita, has a GDP per capita of $40,924 [4].  According to the World Bank, China has the world’s lowest poverty rate at only 0.6%, however 43.34% of Chinese citizens earn less than $10 a day [5].

A Solution to the Problem

Over the years there have been countless proposals to limit the exploitation of the SD&T system. The United States has been an active voice in the talks for a change to WTO’s self-declaration rules. Stating that some states are taking advantage of SDT when they are not in a stage of development that requires it. For example, in 2019, the Trump Administration released a proposal for the WTO to change its rules regarding self-declaration. It included that members of the Organization for Economic Cooperation and Development, the Group of 20, and states which make up 0.5% or more of global trade will be unable to self-declare as a developing nation.

We suggest that there be categories for developing nations that progressively have fewer benefits for the nations in that category.  Classification in these categories would be based on certain key metrics such as GDP per capita and poverty. States would only be able to self-declare as more developed as their current classification and would be unable to unilaterally gain more special and differential treatment.  Currently, the WTO already specifies a subset of nations as “least-developed nations”, though the only difference between them and the rest of developing nations is that they automatically get S&DT without needing to self-declare.  This category could be repurposed for the maximum S&DT, with new categories such as “underdeveloped” and “developing” having fewer S&DT.

References

[1] Understanding the WTO - Whose WTO Is It Anyway?” WTO. Accessed March 1, 2022.

https://www.wto.org/english/thewto_e/whatis_e/tif_e/org1_e.htm.

[2] Petros, M., & Andre, S. (n.d.). China and the WTO: An uneasy relationship. VOX, CEPR Policy Portal. Retrieved February 22, 2022, from 

https://voxeu.org/article/china-and-wto-uneasy-relationship  

[3] "GNI Per Capita, PPP (Current International $) | Data". 2022. Data.Worldbank.Org. https://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD.

[4] Worldometer. 2017. “GDP per Capita.” https://www.worldometers.info/gdp/gdp-per-capita/

[5] World Population Review. 2022. "Poverty Rate by Country 2022.”  https://worldpopulationreview.com/country-rankings/poverty-rate-by-country