On New Year’s Day, a highly anticipated trade deal went into force. It’s called the Regional Comprehensive Economic Partnership (RCEP), and it combines the 10 members of the Association of Southeast Asian Nations (ASEAN) with five other countries, most notably China.
The pact is a headache for Washington. It showcases China’s leadership in the region, and will cost the U.S. an estimated $5 billion in lost exports to the Asia Pacific. But there is some good news. Not in Asia Pacific, mind you, but in Geneva, where the U.S. wants to reform so-called special and differential (S&D) treatment at the World Trade Organization (WTO).
First the backstory. The WTO lets its members self-declare as a developed or developing country. Developing countries get S&D. For example, there are 27 relevant provisions on longer “transitional periods” for bringing obligations into effect, and 25 on “technical assistance.” By agreement, there are 10 provisions on technical barriers to trade, 10 on subsidies, but only a couple on health and safety standards, among others. The provisions say things like “take account of the special needs of developing country Members.” They have even come up in litigation a few times.
Where things get interesting is that the U.S. doesn’t like S&D. It argues that these provisions dilute developing country obligations at the WTO, and can encourage cheating. Not long ago, the Trump administration decided to do something about it.
In July 2019, the U.S. issued the “Reforming Developing-Country Status in the World Trade Organization” memorandum. Referencing “China and too many other countries,” it says it’s time for the Office of the United States Trade Representative (USTR) to act unilaterally and to “no longer treat as a developing country for the purposes of the WTO any WTO Member that in the USTR’s judgment is improperly declaring itself a developing country and inappropriately seeking the benefit of flexibilities in WTO rules and negotiations.” This means S&D.
The reaction abroad was over the top and predictable. India said the memo “strikes a death knell for the principle and practice” of S&D, and that it would “cause lasting and systemic damage to the multilateral trading system.” China conceded that it would not ask for a “blank cheque” on S&D, but vowed to exercise its rights in agriculture and financial services, in particular.
All told, two-thirds of WTO members claim the right to S&D. But the real problem is that S&D has morphed into something that goes well beyond the provisions themselves. It has become a narrative that has few referents in any texts. S&D thus gets in the way of negotiations, and undermines confidence in litigation when these provisions don’t work according to plan. Just ask Argentina and Brazil.
Enter RCEP. The text is a mixed bag. It doesn’t cover a number of…
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