China renounces special and differential treatment as a developing country in the WTO

Last week, China announced that it will no longer invoke the special benefits linked to its developing-country status in the World Trade Organization, WTO. But what does this actually mean?

Hannes Lenk, Trade Policy Adviser

In the WTO, developing-country status grants access to so-called “special and differential treatment” (SDT). This includes longer transition periods to implement agreements, reduced commitments in negotiations and access to capacity-building support. Developing countries can invoke this status to lessen their burden under WTO rules. As WTO agreements contain no legal definition of a developing country, members are free to self-declare their status.

China will no longer be able to demand less stringent obligations in new agreements.

When China joined the WTO, it declared itself a developing country and could therefore benefit from these privileges. In practice, Beijing had to accept far stricter terms than most other developing countries – the so-called “WTO-plus” commitments – as part of their terms of accession. Nevertheless, China has at times invoked SDT to demand flexibility in new negotiations, for example, in areas such as agriculture, climate and fisheries subsidies.

China is not formally relinquishing its developing-country status, but is renouncing the right to invoke SDT. Existing WTO commitments and previously negotiated transition periods are not affected.

This means China will no longer be able to demand less stringent obligations in new agreements. In practice, this translates into stricter requirements for Chinese agriculture, industry and services in upcoming negotiations. For China, this entails the loss of a tactical advantage in WTO negotiations.

China can still identify with developing members while presenting itself as a constructive actor willing to assume greater responsibility.

Why is China changing course now?

• Status. China has long straddled the line between developing and developed economy, making it difficult to clearly position itself on the global stage. In the WTO, it has often sided with developing countries that view Beijing as an important ally. By renouncing SDT benefits while formally retaining its status, China can still identify with developing members while presenting itself as a constructive actor willing to assume greater responsibility. In his UN General Assembly address, Premier Li Qiang stressed that China pursues common development while taking on greater global responsibility. By keeping its developing-country status, Beijing also reduces the risk that other developing economies will feel isolated.
  
  
• WTO reform and diplomatic capital. China’s developing-country status has long drawn criticism from the EU and US, given its position as the world’s second-largest economy. Yet with low GDP per capita and sharp distributional inequalities, Beijing has defended the label. By renouncing SDT, China can ease Western criticism, improve the WTO’s negotiating climate and present itself as a constructive actor at a time when the organisation faces paralysis and Western economies turn elsewhere. Vice Minister Li Chenggang described the move as a constructive step in light of the WTO’s crisis and reform needs.

The hope is that China’s announcement will inject new energy into negotiations on issues such as subsidies, fisheries and climate-related trade rules. Since the decision primarily applies to future and ongoing negotiations, it may take time before the effects become visible, not least because WTO negotiations have long been notoriously sluggish. It is also contested to what extent the invocation of SDT has actually influenced negotiation outcomes in the past.

In the short term, it is the political signal that stands out. China’s move shows that countries with relatively high income can no longer hide behind developing-country status. In the long run, this might encourage other higher income developing countries to step up and assume greater responsibilities.

Whether this paves the way for a new, more responsible, China in the WTO, or is merely a diplomatic gesture to deflect criticism of its industrial policy, remains to be seen.

Hannes Lenk
Trade Policy Adviser