The developing/developed countries taxonomy became common in the 1960s as a way to easily categorize countries in the context of policy discussions on transferring resources from richer to poorer countries.[1] For want of a country classification system, some international organizations have used membership of the Organization of Economic Cooperation and Development (OECD) as a main criterion for developed country status. Though not expressly stating a country classification system, the preamble to the OECD convention does include a reference to the belief of the contracting parties that “economically more advanced nations should co-operate in assisting to the best of their ability the countries in process of economic development. This consequently resulted in about 80-85 percent of the world’s countries labeled as developing and 15-20 percent as developed. There is currently no strict definition of either class of countries at the moment. Thus, there are no yardsticks for these classifications of countries into the various groups.[2]
1 Self-Declared Development Status
The term ‘developing country’ has been argued to be “an ambiguous one and does not clearly differentiate between those who are more likely to use the WTO system”.[3] The selection or categorization is made when members declare for themselves whether they are developed or developing countries, thus the status is based on self-declaration. One benefit of the above classification is that countries with similar interests can band together to promote their interests in the WTO and the classification can be a unifying factor for such countries. However, the mere fact that a WTO member announces itself to be a developing country does not automatically mean that it will benefit from the preference schemes available.
The World Trade Organization uses a unique self-declaration method to evaluate a nation’s development status which differs from the approaches adopted by other international organizations. In comparison: The United Nations uses a systematic model like the Human Development Index to assess countries according to metrics including life expectancy and education while providing rankings that do not rely on self-declaration.[4] The IMF together with the World Bank establishes country categories based on income levels while the World Bank specifically employs Gross National Income per capita to assign nations to income brackets through a data-dependent classification system. The European Union requires countries to fulfill detailed economic and political standards like the Copenhagen criteria for membership which involves strict assessments and eliminates the option of self-declaration. The African Union evaluates governance and socio-economic development through specific criteria like the African Peer Review Mechanism and uses peer reviews to classify member states rather than self-declaration.[5]
1.1 The Rationale Behind the Self-Declaration of Status in the World Trade Organization
The rationale behind the self-declaration of status of countries in the World Trade Organization is bound by the ethos of equity and justice. In the WTO framework, the country decides its status as developed or developing, which directly reflects its respective level of commitment and benefits that accrue to it from the WTO agreements.[6] In fact, this system has been specifically laid out to address the needs and challenges of developing countries through special and differential treatment, because their needs and the entire system of production and competitiveness are different.[7]
1.1.1Promoting Economic Development
The primary objective of the system is self-declaration to reorient and facilitate economic development. In that spirit, the WTO adopts measures that include preferential treatment for the LDCs regarding implementation periods and access to technical assistance. This whole process comes to help create a trading system, fair and equitable, with a stronger possibility for the developing countries to gain ground on increasing their economic strength and competitiveness.[8]
1.1.2 Encouraging Participation
Flexibility of the self-declaration system raises no barriers for any nations to join the WTO and thus speaks well for the establishment of an inclusive and representative world trading system. As countries are able to determine their own status, the barriers to entry and also participation in the WTO become more relaxed. This inclusivity is very essential to make sure that many very different countries may benefit from the world trading system, hence making the WTO much more effective and legitimate.[9]
1.1.3 Addressing Inequities
The self-declaration system clearly recognizes that not all nations might start from the same position in terms of economic strength. Additionally, developing countries end up receiving some special treatment and much more flexibility, which eventually helps them to fully compete with the more established economies. Moreover, by addressing many of the long-standing economic imbalances that exist, this particular approach makes international trade become more equitable and sustainable for each participant involved. Furthermore, the system is not just about creating fairness; it also ends up strengthening the entire framework of global commerce because it ensures that all participants still have a real chance to fully succeed in the marketplace.[10]
1.2 Implications of WTO’s self-declaration system
Self-declaration can lead to unpredictable and illogical results in the operation and implementation of existing WTO agreements. For example, Kazakhstan — ranked in UNDP’s “Very High Human Development” quartile and having made no previous claim to developing Member status—claimed such status for the first time for the purposes of implementing its obligations under the Trade Facilitation Agreement.[11] Some of the wealthiest WTO Members — including Singapore; Hong Kong, China; Macao, China; Israel; the State of Kuwait; the Republic of Korea; United Arab Emirates; Brunei Darussalam; and Qatar — insist on being considered developing Members and can avail themselves of S&D provisions at their discretion – just like Sub-Saharan Africa.[12]
In addition, the Bali Decision on tariff rate quota administration saw the creation of a mechanism to ensure unfilled TRQs were not a result of protectionist measures. Unfortunately, in the end, the mechanism applied only to developed Members; self-declared developing Members were only required to address the issue on a best-endeavor basis. While additional flexibilities and exemptions had been proposed in the Doha agriculture text and rejected, Bali was the first time that Members agreed to use development status to exempt all self-declared developing Members from a new commitment rather than take a smaller cut or a longer time to implement.[13]
In 2018 the US circulated a position paper entitled “An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance” which advocated the removal of the self-declaration of developing countries. It argued that this mechanism prevents “true liberalization” and is no longer relevant in light of the “great development strides” of recent decades.[14] The continued absence of specific criteria for determining whether a country qualifies as “developing” or not, has seen countries with significant differences, e.g. in size, population, economic and trade capacities, geographical and political conditions, which include Chile, Brazil, India and Korea, being treated as developing countries in WTO jurisprudence.[15] Such factual discrepancy between legal uniformity and economic diversity underscores the need to achieve a balance in the application of trade rules for countries at the WTO. In this context, the principle of differentiation is rooted in the need to treat similarly situated developing countries similarly.[16]
The Appellate Body in EC Tariff case not only gave judicial backing to the principle of differentiation but also set out the conditions authorising the application of differentiation between developing countries in preferential trade regimes. The Appellate Body ruled that in granting differential tariff treatment, preference-granting countries are required by virtue of the term “non-discriminatory”, to ensure that identical treatment is available to all similarly situated beneficiaries of a generalised scheme of preferences (GSP). In other words, all GSP beneficiaries with the same “development, financial and trade needs” are entitled to the same treatment that a particular GSP scheme offers in response to such needs. The term “non-discriminatory” does not prohibit developed countries from granting different tariffs to products originating in different GSP beneficiaries, provided that such differential tariff treatment meets the remaining conditions in the Enabling Clause.[17] The “similarly situated” approach advocated by the Appellate Body provides legal support to initiatives that propose differentiating between developing countries for purposes of according SDT only to those that actually need it.
Differences in economic and technological capabilities among the countries result in classification of countries. In general, the existence of countries in the world can be grouped into several classifications.[18] The common classification is the developed countries, developing countries and Least Economic Development Country (LEDC) or commonly known as the underdeveloped countries.[19] The classification of countries is simply based on the economic capacity of each country. Usually, the assessment of a country economic development and the classification of the state are differentiated from rich and poor countries.[20]
In practice it is the preference giving country (usually a developed nation), which decides the list of developing countries that will benefit from the preferential treatment. Notably, the criteria for classification of members may be found in text of the covered agreements or be determined with reference to World Bank criteria (for least developed countries). Both developing countries and Least Developed Countries are granted flexibilities for the implementation of their obligations under the WTO Agreements.[21] The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system’s agreements. The agreements themselves inherit the earlier provisions of GATT that allow for special assistance and trade concessions for developing countries.[22] The preamble of the WTO underscores the economic development of developing countries as a major objective and encourages “positive efforts” by developed country members to actualize it.[23]
Some countries have, in alleged instances, misused the self-declaration system. They have purportedly exploited the system to gain benefits without a genuine need for them, thereby calling into question the integrity of the self-declaration system and raising the demand for more oversight. For instance China[24] insists it is a developing country, although it is the world’s second-largest economy. Critics say this status gives China an unfair advantage over countries truly in need of preferential treatment. South Korea[25], another advanced economy, continues to benefit from S&D provisions in ways that raise questions about the effectiveness and fairness of the self-declaration system. Despite being a high-income economy and a global financial hub, Singapore[26] maintains its developing country status at the WTO and is criticized for using a financial loophole to gain WTO benefits while it hardly qualifies as a developing country anymore.
Simply put, self-declaration has severely damaged the negotiating arm of the WTO by making differentiation among Members near impossible. By demanding the same flexibilities as much smaller, poorer Members, export powerhouses and other relatively advanced Members create asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to sustain viable outcomes.[27] Members cannot find mutually agreeable trade-offs or build coalitions when significant players use self-declared development status to avoid making meaningful offers. Self-declaration also dilutes the benefit that the LDCs and other Members with specific needs tailored to the relevant discipline could enjoy if they were the only ones with the flexibility.[28]
Over the years, the developing country status has led to controversy. In the US–Steel Safeguard dispute China did not expressly declare her developing country status in her Accession protocol.[29] This led to ambiguity on the appropriate WTO procedure to utilize.[30] Similarly upon adoption of the Panel and AB reports in the Korea – Beef Case, the European Union stated that it did not consider it appropriate for Korea to be considered a developing country for the purpose of the Agreement on Agriculture.[31]
1.3 The WTO’s Unique Self-Declaration System: A Comparative Analysis.
The World Trade Organization uses a unique method for identifying the development status of countries which depends mostly on nations declaring their own status. At first glance the system seems simple but it differs significantly from the classification approaches used by leading global organizations. This analysis compares different classification methods by showing how the UN, IMF, World Bank, EU, and AU use specific criteria with data assessments to assign member states status while pointing out the distinct and problematic nature of the WTO’s self-declaration system.
The United Nations uses a structured methodology to classify countries which differs from WTO’s approach. The Human Development Index (HDI) serves as an example because it ranks countries using composite measures that include life expectancy, education attainment, and per capita income according to the UNDP Human Development Report 2016. The classification process depends on concrete data and benchmarks to provide a more objective evaluation of development progress instead of self-determination.[32]
Both the International Monetary Fund and the World Bank implement classification systems that depend on data analysis. The World Bank uses Gross National Income (GNI) per capita to divide countries into four economic categories: low-income, lower-middle-income, upper-middle-income, and high-income levels. The evaluation process applies empirical data instead of self-assessment to produce clear and consistent results about economic status.[33]
Regional organizations like the European Union (EU), offer another example of assessment processes based on strict standards. The EU requires that potential member nations satisfy particular economic and political requirements, called the Copenhagen criteria, before they are accepted. This strict process which has detailed evaluations, shows the EU’s dedication to objective and provable standards when deciding membership status. In a similar way the African Union (AU) uses predefined standards to group its member nations. The African Peer Review Mechanism (APRM) checks governance and socio-economic growth via reviews by other nations. This collaborative process, which includes detailed assessments, differs much from the self-declaration method seen in the WTO.
As critiqued in the paper “An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance,”[34] the WTO’s self-declared system lets members identify themselves as “developing countries,” so entituating them to special and differential treatment.[35] The paper claims that this behavior compromises trade negotiations and hurts really developing nations.[36] The strict evaluation techniques of other international bodies contrast sharply with the reliance on self-declared, without clear, objective criteria, so casting doubt on fairness and efficacy inside the WTO framework. The UN’s, IMF’s, World Bank’s, EU’s, AU’s, methods offer a helpful counterpoint to the WTO’s.[37]
[1] Pearson, Lester B, et al, 1969, Partners in Development: Report of the Commission on International Development (New York: Praeger Publishers).
[2] Anyiwe, L.N., Ekhator, E.O., Developing Countries and the WTO Dispute Resolution System: A Legal Assessment and Review, 2013, Vol. 2, Iss. 1. Journal of Sustainable Development Law and Policy pp. 121-138.
[3] Gregory Shaffer, ‘Developing Country Use of the WTO Dispute Settlement System: Why it Matters, the Barriers Posed’ in James Hartigan (ed.) Trade Disputes and the Dispute Settlement Understanding of the WTO: An Interdisciplinary Assessment (Frontiers of Globalization, Volume 6 Emerald Publishing 2009) 170.
[4] Sieber-Gasser, C. (n.d.). Developing Countries and Preferential Services Trade. Cambridge University Press. Retrieved from https://www.cambridge.org/9781107147560
[5] Ibid
[6] https://www.tralac.org/news/article/13839-an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance.html?form=MG0AV3 accessed 15 February 2025
[7] https://www.emerald.com/insight/content/doi/10.1108/jitlp-01-2023-0003/full/html?form=MG0AV3 accessed 15 February
[8] https://www.meti.go.jp/english/report/data/2022WTO/pdf/06.pdf?form=MG0AV3 accessed 11 February 2025
[9] https://www.tralac.org/news/article/13839-an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance.html?form=MG0AV3 accessed 15 February 2025
[10] https://www.emerald.com/insight/content/doi/10.1108/jitlp-01-2023-0003/full/html?form=MG0AV3 accessed 14 February
[11] An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance. WT/GC/W/757/Rev.1. 2019
[12] Chinese Taipei set an encouraging example for other Members at its Trade Policy Review meeting in September 2018, stating that it will not claim special and differential treatment afforded to developing country Members in future rounds of WTO negotiations. See WT/TPR/M/377.
[13] An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance. WT/GC/W/757/Rev.1. 2019
[14] Alex Fawke “South Korea and the developing country saga at the WTO” https://www.linklaters.com/en/insights/blogs/tradelinks/2020/february/south-korea-and-the-developing-country-saga-at-the-wto Accessed 23 October 2024
[15] Rolland, S. (2012), Development at the WTO, p. 80, Oxford University Press. Ox
[16] WTO Appellate Body Report, European Communities-Conditions for the Granting of Tariff
Preferences to Developing Countries, WT/DS246/AB/R (7 April 2004).
[17] Ibid para 160-62
[18] Surono, A. and Hidayati, M.N., 2019. Special and Differential Treatment in the WTO Agreement on Agriculture and the Benefits for Developing Countries. Academic Journal of Interdisciplinary Studies, 8(4), p.132.
[19] Nafziger, E.W., 1990. The Economics of Developing Countries. New Jersey: Prentice-Hall Inc.
[20] Mitchell, A.D., 2006. A legal principle of special and differential treatment for WTO disputes. World Trade Review, 5(3), pp.445-469.
[21] Alex Fawke “South Korea and the developing country saga at the WTO” https://www.linklaters.com/en/insights/blogs/tradelinks/2020/february/south-korea-and-the-developing-country-saga-at-the-wto Accessed 23 October 2024
[22] Principles of the trading system
https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm#:~:text=The%20system%20does%20allow%20tariffs,secure%20fair%20conditions%20of%20trade. Accessed 27 October 2024
[23] Preamble to the Marrakesh Agreement Establishing the WTO, available at: https://www.wto.org/english/res_e/publications_e/ai17_e/wto_agree_preamble_jur.pdf (accessed 1 November 2024).
[24] https://www.wita.org/atp-research/an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance/?form=MG0AV3 accessed 17 February 2025
[25] https://www.tralac.org/news/article/13839-an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance.html?form=MG0AV3 accessed 17 February 2025
[26] https://www.economicshelp.org/blog/4/trade/criticisms-of-wto/?form=MG0AV3&form=MG0AV3 accessed 17 February 2025
[27] An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance. WT/GC/W/757/Rev.1. 2019
[28] Ibid
[29] World Trade Organization – Dispute Settlement, Dispute DS252: ‘United States – Definitive Safeguard Measures on Imports of Certain Steel Products’ http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds252_e.htm accessed 20
October 2024
[30] WTO, Accession of the People’s Republic of China (2001) http://www.worldtradelaw.net/misc/chinaaccessionprotocol.pdf accessed 20 October
2024
[31] World Trade Organization – Dispute Settlement, Dispute DS161: ‘Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef ‘
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds161_e.htm accessed 20 October 2024
[32] UNDP, Human Development Report 2016: http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf )
[33] World Bank, World Development Indicators:http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators#
[34] https://www.tralac.org/news/article/13839-an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance.html accessed 17 February 2025
[35] WT/GC/W/757/Rev.1, 1.7
[36] https://www.tralac.org/news/article/13839-an-undifferentiated-wto-self-declared-development-status-risks-institutional-irrelevance.html accessed 17 February 2025
[37] WT/GC/W/757/Rev.1: https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/53535986/9697045b-dad2-4b16-9ebc-e9cf4aa3a290/W757R1.pdf accessed March 7 2025
