Your book critiques the current approach to special and differential treatment (SDT) in the WTO, arguing that it is too rigid and outdated. What are the biggest flaws in the current system? How does your "Differentiated Differentiation Approach" address them?
To answer this question, we need to first understand the fundamental reasoning behind the conception of “special and differential treatment” (SDT) within the WTO. Originally, SDT was set up to address the unique challenges faced by both developing and least-developed countries within the global trading system. The idea was to create a more equitable framework that recognises the disparities in economic development and capacity between developed and developing countries: countries at different stages of development need different rules to support their economic development.
To this end, SDT shielded developing countries from the strict application of WTO rules, giving them more leeway in the pursuit of economic opportunities. This, however, led to some serious inequities, mainly flowing from a fundamental problem within the WTO’s set-up: the organisation lacks a clear, formal definition of what constitutes a ‘developing’ country, as well as any identifying criteria.
In this definitional vacuum, it is up to countries to self-declare as ‘developing,’ resulting in a number of the world’s largest economies identifying as a developing country and therefore claiming “special and differential treatment” in the same way as the poorest countries. Such an approach to SDT fails to respond to actual development needs and, in some cases, even creates unfair competition between developing countries when it comes to trade opportunities.
Let’s take the example of two developing countries, Nigeria and Mexico. The former, with a GDP per capita as low as US$1596 (2023), must compete with an industrialised developing country like Mexico, with a GDP per capita of almost US $13,790 (2023). Not only does this undermine the ability of the multilateral trading system to respond to the needs of its poorest members, but it also entrenches deep-seated inequality in developing country trading.
Such an approach to SDT fails to respond to actual development needs and, in some cases, even creates unfair competition between developing countries.
This status quo also allows advanced developing economies like Mexico or China to free-ride on the rest of the multilateral trading system, rather than pull their weight. Again, this distorts the competitive environment the WTO seeks to establish. In this case, it obfuscates trading competition between developed trading partners (such as the United States or European countries) and advanced developing countries (like China); the current SDT rules give advanced developing countries a head-start vis-à-vis their developed trading partners. No surprise, the developed countries have rejected this as unfair and insist on more differentiation between levels of development as a precondition for advancing negotiations on SDT, which are currently stalled.
One way to tackle these issues would be to establish a rules-based approach to defining access to SDT, as set forth by the so-called Differentiated Differentiation Approach. This method identifies SDT access criteria that are both objective and flexible by adjusting access based on disparate socio-economic needs. This approach also sets triggers that limit access to SDT on a provision-by-provision basis, ensuring that only countries that truly need access get it. Differentiated differentiation aims to move the WTO toward an evidence-based, case-by-case approach to SDT, while making SDT wholly transitory and aimed at full compliance with WTO members’ obligations.
Traditionally, the EU has been a strong voice for WTO reform. How do you see its role in shaping the future of special and differential treatment?
The EU is indeed a leading voice for WTO reform, including on SDT rules. The EU’s latest proposal to move away from the rigid developed-developing binary and toward a needs-based framework that targets SDT provisions based on specific development indicators is a good first step. Unlike the US criteria-based approach, the EU's proposal emphasises flexibility, suggesting a ‘graduation’ mechanism that would encourage countries to gradually move away from SDT benefits as they achieve certain development milestones. Furthermore, the proposal highlights that SDT should be needs-driven and evidence-based; it stresses that SDT benefits should go to countries that genuinely need them, while reflecting the diverse economic realities among WTO members.
Beyond articulating reform proposals within the WTO, the EU has a greater responsibility to help move SDT negotiations forward. To do so, the EU must balance the interests of its member states with those of other WTO members, particularly developing countries, and should seek convergence in areas where EU interests or positions may diverge from others. The EU can and should leverage its relationships within the WTO to build a critical mass to drive the momentum for SDT reform.
The EU needs to step up its advocacy for SDT reforms, ensure it remains consistent, and push for progress within negotiations and beyond.
For instance, given the historical relations between the EU and the African, Caribbean and Pacific Group of States (the ACP countries) – which constitute more than half of the WTO membership – there is no reason that the EU’s proposal should not have received the required support in the WTO to, at minimum, remain an active negotiating issue. The fact that these negotiations have stalled illustrates where EU advocacy is lacking.
The EU needs to step up its advocacy for SDT reforms, ensure it remains consistent, and push for progress within negotiations and beyond. Such advocacy should not be limited to Geneva, but should be taken to capitals across the world where the EU continues to support development. A mindset shift is needed for developing countries to realise that moving beyond exemptions from rule obligations will serve them in the long run. Fully integrating into the trading system promises sustainable development beyond the outlying trading relations of the past.
Amid ongoing trade wars, the rise of trade agreements outside the WTO, and significant cuts to development spending, how should the WTO balance development priorities with demands by major trading nations such as the US for fairer trade rules?
The WTO faces a delicate balancing act when addressing these challenges. However, demands for fairer trade rules are not necessarily in conflict with the development aspirations of the WTO system. Proponents of trade reform acknowledge that SDT is an important step toward equity within the WTO and that good rules should contain elements of SDT, but argue that SDT should never be a basis for permanent exemption from rules. As discussed, the current SDT access regime, with permanent exemption from strict WTO stipulations, denies developing countries the opportunity to restructure their economies within a competitive environment, while simultaneously creating an unfair trading advantage for advanced developing countries over their developed trading partners.
This is the critique at the heart of the current US Trump administration’s call for fairer trade rules – advanced developing countries should carry their weight as much as developed countries are expected to, and should not be allowed to hide under the cover of a blanket SDT.
Trump 2.0, with its emphasis on protectionism and bilateral trade deals, seriously challenges the existing SDT framework. It undermines multilateral trade cooperation and could further hinder progress on SDT reform. But it also presents opportunities for the WTO to move toward more inclusive trade policies and address concerns about unfair trade practices, including by creating strengthened dispute resolution mechanisms and aiming for greater transparency in trade negotiations.
Trump 2.0, with its emphasis on protectionism and bilateral trade deals, seriously challenges the existing SDT framework.
The WTO must prioritise reforming the dispute settlement system to address legitimate concerns about unfair trade practices and restore trust among major trading countries. Finally, the organisation should update trade rules to address unfair subsidies and other market access barriers, while ensuring that these rules do not disproportionately disadvantage developing countries.
This blog post is based on the author's book, Special and Differential Treatment Reform in the WTO: The Differentiated Differentiation Approach.
Aniekan Ukpe is a Partner at Lex Mercatoria Solicitors, an Abuja-based international trade law and policy consultancy, and a researcher in the field of international economic law. He holds a PhD in international trade law from Wageningen University & Research.
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Photo: WTO/TomasCesalek BAP Services (via CC BY-SA 2.0)
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