World Trade Law – Lecture 5

Evolution of
Special and Differential Treatment
(S&D)

Serafino Marchese
“Virtual” Visiting Professor, Foreign Trade University, Hanoi
Former WTO staff member
Outline
• Evolution of S&D treatment under the GATT

• S&D in the WTO Agreements

• Progress on S&D under the Doha Development Agenda

• S&D in the WTO Trade Facilitation Agreement

• Systemic issues – what next?

Developing countries at the start of the GATT era
• In 1947, GATT had no formal recognition of a category
of “developing countries”

• 23 original GATT contracting parties (CPs): Australia,

Belgium, Brazil, Burma, Canada, Ceylon, Chile, China,
Cuba, Czechoslovakia, France, India, Lebanon,
Luxembourg, Netherlands, New Zealand, Norway,
Pakistan, Southern Rhodesia, Syria, South Africa,
United Kingdom and the United States.

• How are Members classified as developing countries in

the WTO today ?
S&D in the GATT
• No developing country category in GATT, all contracting
parties were equal

• Uniform application of rights and obligations

• GATT Review Session held during 1954-1955

• Revision of GATT Article XVIII - introduction of S&D
GATT Article XVIII
• A contracting party, whose economy “can only support low
standards of living and is in the early stages of development,
shall be free to deviate temporarily from the provisions of
this Agreement, as provided in Sections A, B and C”

• XVIII A: modify or withdraw scheduled tariff concessions to

promote the establishment of a particular industry
• XVIII B: apply temporary quantitative restrictions for
balance-of-payments purposes
• XVIII C: apply import restrictions to promote the
establishment of a particular industry
Part IV of GATT
• A chapter on Trade and Development (Part IV of GATT)
was added in 1964
• Article XXXVI - Principles and Objectives
• Article XXXVII - Commitments
• Article XXXVIII - Joint Action

• Principle of non-reciprocity was embedded in GATT

• Recognition for favourable market access conditions for
primary products
• Recognition of the interrelationships between trade and
financial assistance to development
Enabling Clause
• UNCTAD Conference in 1968 led to the adoption of the
“Generalized System of Preferences” (GSP) for developing
countries
• During the Tokyo Round (1973-1979) there was recognition
for differential and favourable treatment to developing
countries
• The Enabling Clause adopted in 1979 as part of the results of
the Tokyo Round.
• Provided a legal basis for the derogation from the MFN principle and
legal cover for GSP
• Allows developed countries to grant differential and more favourable
treatment to developing countries and to least-developed countries;
• It also permitted developing countries to enter into regional trade
agreements among themselves.
Outline
• Evolution of special and differential treatment under
the GATT

• S&D in the WTO Agreements

• Progress on S&D under the Doha Development Agenda

• S&D in the WTO Trade Facilitation Agreement

• Systemic issues – what next?

S&D in the Uruguay Round
• Before the Uruguay Round, flexibility hinged on “infant
industry” arguments and non-reciprocity in trade
liberalization
• The Uruguay Round (1986-1994) mainstreamed S&D
provisions in WTO Agreements
• S&D provisions are an integral part of WTO Agreements
• Underlying objectives of S&D provisions:
• Integration of developing countries into global economy
• Ensuring level playing field
• Appropriate/adequate flexibility in undertaking
commitments and in implementing WTO rules and
disciplines
Broad types of S&D in the Uruguay Round
Agreements
Typology of S&D provsions:
1. Provisions aimed at increasing the trade
opportunities of developing countries
2. Provisions under which WTO Members should
safeguard the interests of developing countries
3. Flexibilities regarding commitments, actions and use
of policy instruments
4. Transitional time-periods
5. Technical assistance
6. Special provisions for LDCs
 S&D provisions by type and agreement
Number of S&D provisions: 155 (no double-counting) = 145 (below) + 10 (TFA)
Increasing Transitional Special
trade Safeguardin Flexibil time Technical provisions
Agreement opportunities g interests ities periods assistance for LDCs Total
GATT 1994 8 13 4 25/25
BoP Understanding 1 1 2/2
Agriculture A. 1 9 1 3 14/13
SPS Agreement 2 2 2 6/6
TBT Agreement 3 10 2 1 9 3 28/25
TRIMs Agreement 1 2 1 4/3
Anti-dumping A. 1 1/1
Customs Valuation A. 1 2 4 1 8/8
Import Licensing A. 3 1 4/4
SCM Agreement 2 10 7 19/16
Safeguards A. 1 1 2/2
GATS 3 4 4 2 2 15/13
TRIPS Agreement 2 1 3 6/6
DSU 7 1 1 2 11/11
GPA 3 6 1 2 12/10
Total 15 47 41 20 18 16 157/145

Source: Secretariat Note WT/COMTD/W/239

Provisions aimed at increasing trade opportunities
of developing countries

• These provisions encourage developed Members

to adopt positive measures which would result in
increased trade opportunities for developing countries

• Article XXXVII of the GATT 1994 states as follows:

• “…the developed …[Members] shall to the fullest extent
possible … accord high priority to the reduction and
elimination of barriers to products currently or potentially of
particular export interest to … [developing countries].”

• Is this provision legally enforceable, or is it in the

nature of best endeavour?
Provisions aimed at safeguarding the interests of
developing countries

• These provisions require developed Members to take

into account the special situation of developing
countries before imposing any measures which might
affect their trade interests

• Article 10(1) of the SPS Agreement states that "In the

preparation and application of SPS measures, Members
shall take account of the special needs of developing
county Members, and in particular of the least-
developed country Members."
Provisions aimed at safeguarding the interests of
developing countries

Article 15 of the Anti-Dumping Agreement

• “It is recognized that special regard must be given by
developed country Members to the special situation of
developing country Members when considering the
application of anti-dumping duties.

• Possibilities of constructive remedies provided for by

this Agreement shall be explored before applying anti-
dumping duties where they would affect the essential
interests of developing country Members."
Provisions providing flexibility w.r.t. commitments,
actions and use of policy instruments

• In Agriculture, for example, developing countries were

asked to assume lesser obligations than their developed
counterparts.

• Developed countries to reduce their tariffs by 36 per cent

over a six-year period, while developing countries by 24
per cent over a ten-year period

• Minimum tariff reduction on each tariff line: Developed

countries -15 per cent, while developing countries 10 per
cent
Provisions relating to transitional time-periods
• With the exception of Anti-Dumping Agreement and
Pre-Shipment Inspection Agreement, almost all the
agreements contain longer transitional periods for
developing countries
• Agriculture: Developed countries were given six years to
implement their obligations, while developing countries
were given ten years.
• TRIPS: developing countries were given 5 years to
comply with their obligations.
• Provisions relating to transitional periods are legally
enforceable
Provisions relating to technical assistance

• Art. 9 of the SPS Agreement, for example:

• “Members agree to facilitate the provision of technical
assistance to other Members, especially developing
country Members, either bilaterally or through the
appropriate international organizations”

• “Where substantial investments are required in order for

an exporting developing country Member to fulfil the
sanitary or phytosanitary requirements of an importing
Member, the latter shall consider providing such technical
assistance “
Nature of S&D provisions
• Concerns have been expressed regarding the nature
and operation of S&D provisions.
• Many of these provisions are "best endeavour" in
nature, and lacks "enforceability". Example: Article 9 of
SPS Agreement (Members agree to facilitate the
provisions of technical assistance to other Members,
especially developing country Members, ….).
• Some S&D provisions are couched in a language which
weakens the intent of those provisions (i.e. "design
fault"). Example: Article 66.2 of TRIPS Agreement (…
Members shall provide incentives to enterprises and
institutions…)
Nature of S&D provisions

• Some S&D provisions do grant specific rights,

but difficult to recourse to those provisions.
Example: GATT Article XVIII

• Some S&D provisions apparently look mandatory, yet

de-facto non-binding. Example: Article 10.1 of SPS
Agreement (…Members shall take account of the
special needs of developing members in preparation
and application of new SPS measures)
Outline
• Evolution of special and differential treatment under
the GATT

• S&D in the WTO Agreements

• Progress on S&D under the Doha Development Agenda

• S&D in the WTO Trade Facilitation Agreement

• Systemic issues – what next?

The Doha Declaration – S&D
• Paragraph 44 of Doha Declaration
• noted concerns regarding the operation of S&D provisions
• agreed that all S&D provisions shall be reviewed to
strengthen them and to make them more precise,
effective and operational
• endorsed work programme on S&D
• Negotiations on S&D carried out in Committee on Trade
and Development Special Session (CTD SS)
• In 2002, Members agreed to establish a Monitoring
Mechanism (MM) to monitor the implementation of
S&D provision
• CTD SS was tasked to negotiate terms of reference for MM
Progress on S&D: 2001-2005
• In 2003, developing countries and LDCs had tabled a
total of 88 Agreement-specific proposals in the CTD, SS
• In 2003, at Cancún Ministerial Conference, there was in-
principle agreement on 28 proposals – but those were
never formally adopted (practically off the table)
• Developed Members raised a number of systemic issues
including those related to principles and objectives of
SDT, definition, graduation, and differentiation amongst
developing countries.
• In 2005, at Hong Kong Ministerial Conference, Members
adopted five agreement-specific proposals in favour of
LDCs
S&D for LDCs in Annex F of Hong Kong Declaration
• Waivers: positive consideration for waiver requests by LDCs
and a decision taken within 60 days
• DFQF: Provisions for Duty-Free-Quota-Free access in
developed country Members as well as developing country
Members in a position to do so
• TRIMS: new transition period of seven years to maintain
existing measures. LDCs are allowed to introduce new
measures for a duration of five years
• Decision on measures in favour of LDCs: It is reaffirmed
that LDCs will be required to undertake commitments and
concessions to the extent consistent with their individual
development, financial or trade needs, or their
administrative and institutional capacities
Progress on S&D: 2006-2013
• During 2006-2011, there was considerable progress on
6 Agreement-specific proposals (relating to SPS, TBT and
Import Licensing Agreement). However, agreement
could not be closed on these proposals
• In 2011, Ministers agreed to expedite work towards
finalizing the Monitoring Mechanism for S&D
• In 2013, at the Bali Ministerial Conference, Members
adopted a Monitoring Mechanism on S&D treatment
provisions marking an important step in the multilateral
trading system
The Aid-for-Trade Initiative
• The Aid-for-Trade Initiative was launched in 2005 at the
Hong Kong Ministerial Conference

• Mandate from the Hong Kong Ministerial Declaration:

• “Aid for Trade should aim to help developing countries,
particularly LDCs, to build the supply-side capacity and
trade-related infrastructure that they need to assist them
to implement and benefit from WTO Agreements and
more broadly to expand their trade.”

• The Nairobi Declaration recognized the importance as

well as continuing need for this initiative
Scope of Aid for Trade – four broad categories
Official Development Assistance targeted at:
• Trade policies and regulations
• Trade policy & administrative management, trade
facilitation, regional and multilateral trade negotiations
• Economic infrastructure
• Transport and storage, communications, energy generation
and supply
• Building productive capacity
• Agriculture, forestry, fishing, mineral resources and mining,
industry, business services, banking services, tourism
• Trade-related adjustment.
• Support to measures that help developing countries to
benefit from trade liberalization and deal with transition
costs
Financing and operationalizing Aid for Trade
• Recommendations by Task Force on Aid for Trade in 2006
(WT/AFT/1)

• Financing to be additional, predictable, sustainable and

effective financing

• Operationalizing Aid for Trade

• Stengthening the “demand” side
• Strengthening the donor “response”
• Strengthening the bridge between “demand” and “response”
• Strengthening monitoring and evaluation
Aid for Trade: Role of the WTO
• Awareness, analysis and debate – putting a spotlight on
Aid for Trade
• Mobilization of additional aid for trade flows
• Mainstreaming of aid for trade into development
strategies by developing countries
• Help development partners understand the trade needs of
developing countries

• Monitoring and evaluation

• Joint M&E Exercise with OECD
• Global Reviews of Aid for Trade

• Aid for Trade Work Programme (CTD)

Aid for Trade: Results
• Increased resources for Aid for Trade
• Improvement in the coherence of trade and
development policies
• Improvement in trade mainstreaming
• Increase assistance to regional trade integration
• Increased private sector involvement
• Evidence of impact
Measurement of Aid-for-Trade flows (1)
• Official Development Assistance (ODA)
• Grants and loans provided by the official sector
• Objective is to promote economic development
• Concessional: grant element of at least 25%

• Aid for Trade is subset of ODA – four categories:

• Trade policy & regulations; economic infrastructure;
building productive capacity; trade-related adjustment
• AFT accounts for more than a third of ODA (36%)

• Other official flows (OOF): transactions by the official

sector not meeting ODA criteria
Measurement of Aid-for-Trade flows (2)
• Aid-for-Trade flows are tracked in the OECD Creditor
Reporting System (CRS)
• Recognized source for ODA and OOF flows

• QWIDS: http://stats.oecd.org/qwids/

• OECD Stat: http://stats.oecd.org/

• Does not include information on South-South

development cooperation
 AFT commitments by category in US$ million
(const. 2014 prices)
Aid-for-Trade Category 02-05 avg. 06-08 avg. 09-11 avg. 2012 2013 2014
Trade Policy & Regulations 798 1,118 1,449 1,462 1,583 983
Trade Policy&Admin. Management 617 719 689 526 632 546
Trade Facilitation 74 190 436 654 613 362
Regional Trade Agreements 80 130 266 238 305 48
Multilateral Trade Negotiations 16 44 20 11 12 9
Trade Education/Training 11 35 37 33 21 18
Economic Infrastructure 12,923 17,438 23,614 30,236 34,205 31,293
Transport and Storage 6,795 9,944 12,917 15,520 18,446 13,772
Communications 641 513 674 768 1,052 882
Energy Generation and Supply 5,486 6,981 10,024 13,948 14,707 16,640
Building Productive Capacity 11,200 14,179 17,909 21,096 20,079 22,523
Business And Other Services 1,407 2,090 2,055 1,272 1,819 2,526
Banking & Financial Services 1,812 2,627 3,447 5,091 5,126 6,303
Agriculture 4,265 6,128 8,366 10,001 9,238 9,469
Forestry 557 645 753 881 651 946
Fishing 272 363 469 303 443 371
Industry 1,926 1,712 2,155 2,603 2,239 2,190
Mineral Resources and Mining 857 399 479 868 412 567
Tourism 104 216 186 77 152 150
Trade-related Adjustment 3 23 0 4 3
Total Aid for Trade 24,920 32,738 42,996 52,794 55,870 54,803

Source: OECD Creditor Reporting System

Disbursements by region and income group
(2012-14 average)
1%
7%

Share in overall Aid-for-Trade 12% Africa

disbursements 37% America
Asia
Europe
Oceania
LDCs 34% Unspecified
14%
9%
26%
Other low-income

Lower middle-
22%
income
3%
Upper middle-
income

35% Non-country
specific
Source: OECD Creditor Reporting System
Disbursements since 2006: top recipients
Top 10 recipients received 41% of overall disbursements

USD billion, 2014

const. prices 0.0 2.0 4.0 6.0 8.0 10. 12. 14. 16. 18.
Vie 16.0
15.6
T 13.8
Afghan... 12.3
Ira 8.5
8.4
Mo 7.6
Indo... 6.5
Eth 6.1
Tan 6.0
Source: OECD Creditor Reporting System
Outline
• Evolution of special and differential treatment under
the GATT

• S&D in the WTO Agreements

• Progress on S&D under the Doha Development Agenda

• S&D in the WTO Trade Facilitation Agreement

• Systemic issues – what next?

S&D in the WTO Trade Facilitation Agreement
• Adopted in Bali in 2013, entered into force in 2017
• Dedicated Section II on S&D
• Developing Members and LDCs can classify provision of
the TFA into three categories A, B, C

Implementation with entry into force of TFA

A
Implementation after a definitive transition period
B
Implementation after an indicative transition period
C conditional on the acquisition of implementation capacity
through technical assistance
S&D in the WTO: Trade Facilitation Agreement

• Basic S&D type: Transitional time-periods for

implementation of the TFA
• Differentiation among Members based on self-determination
• Flexibility to self-determine timing of implementation

• Disaggregated approach regarding implementation

• Transition periods are specific for each provision

• Linkage between requirement and capacity to implement

• Focus on building capacity as opposed to carve-outs
Outline
• Evolution of special and differential treatment under
the GATT

• S&D in the WTO Agreements

• Progress on S&D under the Doha Development Agenda

• S&D in the WTO Trade Facilitation Agreement

• Systemic issues – what next?

United Nations: From MDGs to SDGs
MDGs SDGs
8 goals 17 goals
18 targets 169 targets
48 indicators 230 indicators

2000 2015 2030

People

Planet

Prosperity

Peace

Partnerships
2030 Agenda - Main features

New agenda is:

• Political – result of inter-governmental negotiations
• Universal – recognizes role of all countries and actors
• Indivisible and integrated – incorporates economic, social and
environmental aspects
• Transformative – requires a break with “business as usual”
The WTO’s view on trade and the SDGs
• Trade should be recognized as a development policy instrument
• Trade can be an important source of finance to both the private
sector and the public sector
• Trade growth enhances a country’s income generating capacity
• Trade can also serve as an effective means to facilitate the
diffusion of technologies, including green technologies
• WTO and its rules proved their worth in the MDGs, as an enabling
environment for economic growth and as a buttress to trade
protectionism.
• WTO negotiations can support the delivery of the SDGs
• The SDGs should promote policy coherence at the global level
Trade in the 2030 Agenda for Sustainable Development
Trade is a “means of implementation” of sustainable development
Par. 68 of 2030 Agenda:
“International trade is an engine for inclusive economic growth and
poverty reduction, and contributes to the promotion of sustainable
development. We will continue to promote a universal, rules-based,
open, transparent, predictable, inclusive, non-discriminatory and
equitable multilateral trading system under the WTO, as well as
meaningful trade liberalization. We call upon all members of the World
Trade Organization to redouble their efforts to promptly conclude the
negotiations on the Doha Development Agenda. We attach great
importance to providing trade-related capacity-building for developing
countries, including African countries, least developed countries,
landlocked developing countries, small island developing States and
middle-income countries, including for the promotion of regional
economic integration and interconnectivity.”
Goal 17. Strengthen the means of implementation and
revitalize the global partnership for sustainable
development
Trade
17.10 Promote a universal, rules-based, open, non-discriminatory
and equitable multilateral trading system under the WTO, including
through the conclusion of negotiations under its Doha Development
Agenda
17.11 Significantly increase the exports of developing countries, in
particular with a view to doubling the LDCs’ share of global exports
by 2020
17.12 Realize timely implementation of duty-free and quota-free
market access on a lasting basis for all LDCs, consistent with WTO
decisions, including by ensuring that preferential rules of origin
applicable to imports from LDCs are transparent and simple, and
contribute to facilitating market access
Goal 17. Strengthen the means of implementation and
revitalize the global partnership for sustainable
development

Target Indicator
17.10 Promote a universal, 17.10.1 Worldwide
rules-based, open, non- weighted tariff-average
discriminatory and equitable
multilateral trading system
under the WTO, including
through the conclusion of
negotiations under its Doha
Development Agenda
Measuring progress

Import tariffs applied under the multilateral system and preferential

agreements
12.0%

10.0%

2005
8.0%
2010
2015
6.0%

4.0%

2.0%

0.0%

Source: ITC/UNCTAD/WTO
Goal 17. Strengthen the means of
implementation and revitalize the global
partnership for sustainable development

Target Indicator
17.11 Significantly 17.11.1 Developing
increase the exports of countries’ and LDCs’ share
developing countries, in of global exports
particular with a view to
doubling the LDCs’ share
of global exports by 2020
Measuring progress

Source: ITC/UNCTAD/WTO
Measuring progress

Source: ITC/UNCTAD/WTO
Goal 17. Strengthen the means of
implementation and revitalize the global
partnership for sustainable development

Target Indicator
17.12 Realize timely 17.12.1 Average
implementation of duty-free and tariffs faced by
quota-free market access on a developing
lasting basis for all LDCs, countries, LDCs
consistent with WTO decisions, and small island
including by ensuring that developing States
preferential rules of origin
applicable to imports from LDCs
are transparent and simple, and
contribute to facilitating market
access
Measuring progress

Average tariffs levied by developed countries

Developing countries-MFN Developing countries-Preferential LDCs-MFN LDCs-Preferential

8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4
199 19 9 19 9 19 9 20 0 20 0 20 0 20 0 20 0 20 0 200 20 0 200 20 0 201 20 1 201 201 201

Source: ITC/UNCTAD/WTO
Measuring progress

Average tariffs levied by developed countries to imports from…

...LDCs
6.7% 6.7% 6.7% 6.5% 6.5%

agr
clo
3.2% 3.1% 3.1% 3.2% 3.2% tex

1.0% 0.9% 0.9% 0.9% 0.9%

2011 2012 2013 2014 2015

...developing countries
8.0% 8.0%7.7%
7.9% 7.7%7.9% 7.6%7.6% 7.7%
7.2%

agr
4.9% 4.9% 4.6% 5.0%
4.5% clo
tex

2011 2012 2013 2014 2015

Source: ITC/UNCTAD/WTO
Goal 2. End hunger, achieve food security and
improved nutrition and promote sustainable
agriculture

Target Indicator
2.B Correct and prevent trade 2.b.1 Agricultural
restrictions and distortions in export subsidies
world agricultural markets,
including through the parallel
elimination of all forms of
agricultural export subsidies and
all export measures with
equivalent effect, in accordance
with the mandate of the Doha
Development Round
Measuring progress

Source: WTO
Goal 3. Ensure healthy lives and promote well-being
for all at all ages

Target Indicator
Support the research and development 3.b.1 Proportion of
of vaccines and medicines for the
communicable and non-communicable the population with
diseases that primarily affect access to affordable
developing countries, provide access to medicines and
affordable essential medicines and
vaccines, in accordance with the Doha vaccines on a
Declaration on the TRIPS Agreement sustainable basis
and Public Health, which affirms the
right of developing countries to use to 3.b.2 Total net
the full the provisions in the official development
Agreement on TRIPS regarding
flexibilities to protect public health,
assistance to medical
and, in particular, provide access to research and basic
medicines for all health sectors
Goal 8. Promote sustained, inclusive and sustainable
economic growth, full and productive employment
and decent work for all

Target Indicator
8.a Increase Aid for Trade support 8.a.1 Aid for Trade
for developing countries, in commitments and
particular LDCs, including through disbursements
the Enhanced Integrated
Framework for Trade-Related
Technical Assistance to LDCs
Measuring progress

Aid for trade – Commitments

60
US$, bill. (const. 2014) 55.9 54.8
52.8
50 Trade-related
43.0 Adjustment
40
Trade Policy &
32.7 Regulations
30
24.9
Building Productive
20 Capacity

10 Economic
Infrastructure
0
02-05 06-08 09-11 2012 2013 2014
avg. avg. avg.

Source: OECD-CRS
Measuring progress

Aid for trade – Disbursements

(USD million, 2014 prices)

45 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: OECD-CRS
Goal 10. Reduce inequality within and among countries

Target
10.a Implement the
principle of special and
differential treatment for
developing countries, in
particular LDCs, in
accordance with WTO
agreements
Indicator
10.a.1 Proportion of tariff
lines applied to imports
from LDCs and developing
countries with zero-tariff
Measuring progress

Proportion of tariff lines applied to imports from least developed countries and developing
70%
countries with zero-tariff

60%

50%

40%

30%

20%

10%

0%
2005 2010 2015

All Developing countries Least developed countries

Source: WTO
Goal 14. Conserve and sustainably use the
oceans, seas and marine resources for
sustainable development

Target Indicator
14.6 By 2020, prohibit certain forms of 14.6.1 Progress by
fisheries subsidies which contribute to countries in the
overcapacity and overfishing,
eliminate subsidies that contribute to
degree of
illegal, unreported and unregulated implementation of
fishing and refrain from introducing international
new such subsidies, recognizing that instruments aiming
appropriate and effective special and to combat illegal,
differential treatment for developing
and least developed countries should
unreported and
be an integral part of the WTO unregulated fishing
fisheries subsidies negotiation*

*Taking into account ongoing World Trade Organization negotiations, the Doha Development
Agenda and the Hong Kong ministerial mandate.
 S&D: What next ?

• Objectives of S&D:
• integration into MTS, or flexibilities that help development?

• Compliance with obligations: Transition periods or waiver?

• Definition of developing country:

• Self-determination or quantifiable objective criteria?

• Differentiation
• Same treatment for all Developing Countries or differentiation?

• Graduation: Should S&D be permanent or temporary?