The WTO Effect and Developing Countries
3.1 The countries that are developing countries
3.1.1 Fan Cui’s position
Fan Cui makes the salient point that ‘[n]either the WTO agreement nor GATT 1947 regime has made a precise legal definition for the term “developing country” ’.187 He notes, as a footnote to this remark, that:
Article XVIII of the GATT does provide that members whose economies ‘can only support low standards of living and is in the early stages of development’ may invoke the article. But this can hardly be a precise legal definition. Article XVIII of the GATT does not provide how low the standards of living should be and almost all members can claim that they are in the early stages of
development.188
And he notes that the WTO admits that:
[t]here are no WTO definitions of ‘developed’ and ‘developing’ countries. Members announce for themselves whether they are ‘developed’ or ‘developing’ countries. However, other members can challenge the decision of a member to make use of provisions available to developing countries.189
Cui’s comment on the enormous difference between the GATT and WTO concepts nevertheless remains only implicit. Yet the conjecture is unavoidable that the WTO intentionally distanced itself from the GATT recognition of developing countries as the poor ones by allowing WTO member states to self-designate as ‘developed’ or
‘developing’. Cui does not conjecture thus, but proposes instead that:
187 Cui, Fan ‘Who Are the Developing Countries in the WTO?’, vol.1, issue 1, The Law and Development Review, 2008, p. 123.
188 Ibid. footnote 1.
189 WTO, Who are the Developing Countries in the WTO?,
[a]lthough ‘self-designation’ is considered to be the basic method of designating developing country Members, some other methods are also used, and are often used along with ‘self-designation’, which attract less attention but are also important. In fact, the claim that ‘self-designation’ by ‘Special and Differential Treatment’ (SDT) beneficiaries is the basic method of identifying developing country Members is quite misleading. In practice, SDT grantors have more power than grantees in identifying developing country Members, which derogates from the effect of SDT provisions.190
He then proceeds to note that ‘The WTO secretariat has classified 145 separate SDT provisions contained in the WTO agreements into six categories’,191 and that those provisions ‘only apply to the least developed country Members’,192 but he again refrains from commenting on the evasion of the ‘developing country’ concept that this SDT factor achieves. He is instead happy to proceed with what he calls the ‘main topic’ of his paper: ‘who should be given SDT, in other words, who are developing countries in the WTO’. The decks thus cleared, Cui continues to speak as if the ‘developing countries’ concept entails only least-developed countries. That is well and good insofar as SDT-worthy countries are the issue, but it is a move that gives up on the scrutiny of the WTO- recognised, albeit not defined, ‘developing country’ concept. He does not return to the ‘developing country’ definition issue until page 131 of his article. But even here, there is a conflation of the concepts ‘least-developed’ and ‘developing’ countries:
Developing countries are different in many aspects. Some countries such as South Korea have GDP per capita close to USD 20,000, but other countries such as East Timor have only GDP per capita as low as USD 400.193
His proposition at this point is that South Korea and East Timor are both developing countries promises to obscure rather than crystallise the possibility of distinguishing
190 Cui, note 187. 191 Ibid. p. 124. 192 Ibid. p. 125. 193 Ibid. p. 131.
developing and least developing countries in terms of GDP. Cui himself concedes that much with his remark that:
… if all the developing countries, maybe 90% of WTO Members, were to claim that they are developing countries and should be treated equally, hence South Korea and Somalia are treated the same way, the countries that most need SDT will not benefit much from it …’194
Quite rightly, he notes that the classification ‘least-developed country’ is a United Nations one, not a WTO one:
The list of LDCs is reviewed every three years by Committee for Development Policy (CDP) under the mandate of the United Nations Economic and Social Council (ECOSOC).195
Cui notes also that ECOSOC ‘keeps the number of LDCs as fifty’, while paragraph 2(a) of Article 27 of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) provides that:
… the prohibition of export subsidy does not apply to the LDCs and a list of 20 developing countries, which are identified in the Annex VII. For these twenty countries, they have the same rights as LDCs as long as their GNP per capita is lower than USD 1,000.196
He adds that on the SCM Agreement:
[a]ll developing countries are classified into four categories. The first category is the least developed countries. The second category is the twenty countries listed in Annex 7 whose GNP per capita is less than USD1,000. The third category is those countries ‘in the process of transformation from centrally-planned into a market, free enterprise economy’. The fourth category is the other developing country Members.197 194 Ibid. p. 133. 195 Ibid. p. 135. 196 Ibid. 197 Ibid. p. 137.
Having noted this, and having made the further point that that the World Bank loans scheme contemplates similar categories, as do the International Food and Agricultural Trade Policy Council and EU proposals,198 he returns to the WTO-recognised self-
designation of developing countries as the right of members, and proceeds to outline how this right of self-designation can be restricted when SDT is the issue.199 He concludes that legal uncertainty attends countries’ SDT expectations, despite the fact that they self- designate as developing countries. What remains unclear in Cui’s position is why he does not think that the SCM Agreement’s list of twenty developing countries does not settle the issue of which developing countries can expect SDT. Also, implicit in his proposal of the criteria upon which developing countries can be identified200 is that the countries thus identified are entitled to SDT. This SDT-tied concept of developing countries is, on Cui’s own demonstration, the derivative of a complicated minutiae of criteria. Even if it were pragmatic to pursue a definition of developing countries thus, one wonders whether the effort would be worth it, since SDT is not made obligatory by any aspect of WTO law.
In any case, Cui’s intention is primarily to propound an argument that legal certainty should attend countries’ SDT expectations. He points to a conflation of the concepts ‘developed’ and ‘least-developed’ country in footnote 3 of the Enabling Clause,201 but points out that although the Panel in the EC Tariff Preferences case202 ‘found that the term “non-discriminatory” requires that “identical tariff preferences under GSP schemes
198 Ibid., pp. 137-138. 199 Ibid. pp. 139-143. 200 Ibid. pp 143-150.
201 Differential and More Favourable Treatment: Reciprocity and Fuller Participation of Developing Countries, GATT BISD, 26th Supp, 203, GATT Doc L/4903, 3 December 1979, Multilateral Trade
Negotiations Decision, adopted on 28 November 1979.
202 European Communities–Conditions for the Granting of Tariff Preferences to Developing Countries,
be provided to all developing countries without differentiation, except for the
implementation of a priori limitations” … the Appellate Body203 … reversed the Panel's finding that “developing countries” means all developing countries: the benefits under the Enabling Clause need not be granted to all developing countries, but rather only to those that are “similarly situated” ’.204 The upshot of this move is to highlight the fact that the ‘similarly situated’ criterion is inexplicit, and in fact allows one WTO member to become a GSP donor to a country, but does not oblige another to do likewise. Also significant for him is that ‘a general recognition of the developing country Member status does not mean the country can get all the SDT’.205 Cui’s tacit premise appears to be that a perfectly delineated ‘developing country’ concept would allow a country that designates itself thus, if its self-designation is not disputed by other WTO members, to expect across-the-board STD. Cui’s reference in the context of this discussion206 to China and Chile as failed defenders before the DSB of their STD-deserving developing-country status makes a very telling point: If China with its GDP per capita of US$6,000 is no better placed than Chile with its GDP per capita of US$14,900 for that status, then the DSB’s tools for measuring the STD-deserving status of developing countries is very blunt indeed.
Cui finally posits the desirability of mandatory STD, and at the same time, proposes that this is the objective of the ‘commonly acceptable objective criteria’ that would define the concept ‘developing country’:
203Ibid. Appellate Body Report, WT/DS246/AB/R, 7 April 2004. 204 Cui, note 187, p. 136.
205 Ibid. p. 140. 206 Ibid.
To design commonly acceptable objective criteria, especially numerical thresholds, is difficult, but it is necessary for any mandatory SDT to be operational.207
This position is tenable, however, only if one concedes that mandatory SDT is desirable. The counter-proposal that SDT would be rendered irrelevant if all developing countries (as they are yet to be defined in the WTO context) are exempted from all WTO burdens of membership and endowed with all its benefits immediately destroys the basis of the mandatory-STD aim. Otherwise, the present thesis writer is sympathetic with Cui’s point that ‘national income indicators may be used as the foremost criterion’, but proposes that his subsidiary criteria208 are superfluous when GDP per capita is the definer. This is
asserted firmly, given the absence of any demonstration that GDP per capita is not a sufficient definer. (This point will be defended later in this Chapter.)