Are Brazil, India and China advantaged at the World Trade Organization?
Till Schöfer and Clara Weinhardt detail the BIC countries’ responses to pressure to give up their developing country status at the WTO.
The World Trade Organization (WTO) affords particular rights to ‘developing’ as opposed to ‘developed’ countries, and Brazil, India and China (BIC) have historically been afforded such differential treatment. However, as some of the largest economies today, the BICs are now being pressured to give up their status as developing countries.
Drawing on their article in the November 2022 issue, Till Schöfer and Clara Weinhardt explain the position of developing countries at the WTO, how the position of BIC countries have changed over time, and why we need to pay attention.
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Historically, how have developing economies been treated at the WTO?
Clara Weinhardt: In response to pressures from newly independent developing economies, the WTO’s predecessor — the General Agreement on Tariffs and Trade — introduced several provisions on development in the 1960s and 1970s. The basic idea was to counterbalance demands for trade liberalization with the special needs of developing economies, given their disadvantageous position in global trade. Notably, the legal principle of Special and Differential Treatment (SDT) meant that developing country members were supposed to receive exemptions from trade liberalization commitments. At the same time, developed countries were asked to provide developing countries with more favourable access to their own markets.
When the WTO was established in 1995, the principle of differential treatment for developing countries was carried over. Yet, instead of outright exemptions from trade liberalization, it became common practice that developing countries receive financial assistance or flexibility in implementing policies.
Despite these changes, developing economies continue to have privileged access to certain resources. The WTO itself, however, does not define which members count as ‘developing’ countries that can access these resources. This has led to pressure on large developing economies — such as Brazil, India and China (BIC) — to give up their access to these rights. Are they still in a disadvantaged position in the world economy?
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How have Brazil, India and China responded to pressure to give up their privileges?
Till Schöfer: The greatest pressure for reform of the WTO’s developing-country status has come from the United States, particularly from 2019 onwards. While yet to result in major change, this pressure has led the BIC states to respond in different ways.
Brazil’s push for further legislation on agriculture has led it to reconsider its previous trade strategy that relied on its leadership on behalf of the global South and stalling talks. President Jair Bolsonaro’s administration’s attempts to join the Organization for Economic Co-operation and Development (OECD) and realign Brazil more closely with the United States underscored its announcement to give up its developing country privileges.
Conversely, India has steadfastly opposed any redefinition of its SDT privileges. Both continued developmental challenges — particularly concerning food security and subsistence farming — and a long-held, historically grown identity as a geopolitical leader of the global South have kept India from giving in to such pressure at the WTO.
China’s trade policy reflects a more mixed approach. While China has been more flexible on giving up privileges in sectors where it thinks it has a comparative advantage, it also continues to make use of privileges afforded to it elsewhere, such as in agriculture. Moreover, China has clung onto its self-labelling as a developing country, particularly following the start of the US–China trade war.
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Why should we pay attention to the role of BRICS and other growing powers at the WTO?
Clara Weinhardt: The global power shift towards the BRICS and other emerging economies means that non-western states have more of a say in WTO politics. The outcome of current efforts to reform the WTO will hence partly depend on their positions. While discussions on developing-country status are part of current reform proposals, our research shows that there is no agreement among the major trading nations on whether and how to reform existing rules. So to understand why WTO reform is moving so slowly, it is crucial to pay attention to what emerging economies want.
The contested issue of developing-country status also illustrates why disagreement on WTO reform is so persistent. Reform is entangled with a broader political power struggle between emerging and established powers. Whether or not large emerging economies maintain the status — and the compensatory rights it comes with — affects their relative power position vis-à-vis others. How much power imbalance WTO members can live with and what development models the institution should incentivize remain contested topics on which emerging countries themselves disagree. The fact that these debates all link to developing-country status make re-writing the existing rules challenging to say the least.
Till Schöfer: The negotiation behaviour of emerging powers has been of primary interest to trade analysts and WTO watchers for at least two decades. By the early 2000s, growing co-ordination between the BRICS states allowed analysts to predict a more unified stance in international negotiations. At the WTO, such cooperation yielded the G20 and G33, which managed to block talks and upend established patterns of trade legislation.
However, the positions of the BIC states have not remained static over this period. India and China have both emerged as major agricultural subsidizers, while Brazil continues to push for lowering subsidies and agricultural tariffs across the board. China has further become a major patent producer and innovator, resulting in a recalibration of its domestic intellectual property regime in ways that depart from India’s positions on IP. In certain areas, such as e-commerce, fisheries subsidies or waivers for COVID-19 vaccine production, this divergence of country positions is particularly pronounced.
The most salient question for those interested in WTO politics is consequently whether the BICs states have outgrown their former common negotiation stance and whether cooperation on trade law is still feasible between these emerging powers. As Kristen Hopewell argues in the November issue of International Affairs, China’s rapid economic and geopolitical changes have led to a fracturing of the emerging economy alliance. This divergence is why their shared classification as WTO developing country members is particularly controversial.
Till Schöfer holds a PhD from the Hertie School in Berlin and currently teaches courses on China and international trade at the Freie Universität/Free University in Berlin.
Clara Weinhardt is an Assistant Professor in International Relations at Maastricht University and a Non-Resident Fellow at the Global Public Policy Institute (GPPi) in Berlin.
Their article ‘Developing-country status at the WTO: the divergent strategies of Brazil, India and China’ was published in the November 2022 issue of International Affairs.
This blogpost was commissioned by Isabel Muttreja, Marketing Manager at International Affairs
All views expressed are individual not institutional.