Special and Differential Treatment (SDT) for Developing Countries

Special and Differential Treatment (SDT) is the term used for the way in which developing countries are treated differently to developed countries within the WTO system. The principle of SDT is that international trade rules should be adapted to the particular economic situation of developing countries. It is important to recognise is that developing countries are not a homogenous group and will be affected differently by agricultural trade liberalisation depending on their net trade status, the commodity composition of their trade, etc.

Within the WTO, SDT treatment has taken two main forms:

• With respect to market access commitments, SDT treatment has taken the form of allowing non-reciprocal trade preferences designed to provide preferential access for developing country exports to the markets to developed countries.
• With respect to trade rules and disciplines, STD treatment means that developing countries can be exempted from the need to implement multilaterally agreed rules or might be asked to accept less onerous obligations. In the Uruguay Round, SDT treatment also meant offering developing countries longer implementation periods and possibly technical assistance to help them meet multilaterally agreed commitments.

SDT Treatment in the WTO Agreement on Agriculture

The WTO Agreement on Agriculture provided SDT treatment to developing countries in various ways.

Developing countries could opt to establish their initial bound tariff levels using ceiling bindings at whatever level they chose, rather than being required to convert their existing border protection measures into tariffs. They had lower reduction percentages and longer implementation periods for their tariff reduction, export subsidy reduction and domestic support reduction commitments (and least developed countries were not required to make any reduction commitments). Greater flexibility was provided in the use of certain policy instruments such as investment subsidies or export subsidies. Special provisions for net food-importing developing countries and the least developed countries were included in the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food Imports Developing Countries.

For these reasons, WTO disciplines are rarely binding on developing countries. For example, tariffs applied by a broad sample of 32 developing countries average 20% even though their bound tariff levels (the maximum levels they can apply) average 84%. Few countries are near their limit on permitted trade-distorting domestic support, and fewer still would be in a position to offer export subsidies even if they had this right.

Developing countries are also concerned that their freedom to take action in response to import surges or low world market prices or to regulate their domestic markets to ensure food security might be put at risk in the Doha Round negotations unless the rules are sufficiently adapted to their needs.

Nonetheless, many developing countries believe that the existing flexibility in the Agreement on Agriculture does not go far enough. Despite the previous generalisation, there are cases for particular countries and for particular commodities where their freedom of action is now constrained by the commitments they accepted under the Agreement on Agriculture. They argue that they must retain the ability to provide protection and support to domestic food production for food security, livelihood security and rural development reasons, as well as to protect producers and consumers against volatile world prices and import surges.

They also argue that there is an asymmetry about the current Agreement; the disciplines applied to developing countries ironically are often stricter than those applied to developing countries. For example, because few developing countries offer domestic subsidies to their farmers, they are limited by the Agreement to de minimis amounts of trade-distorting support in the future. Developed countries, on the other hand, under the terms of the Agreement can provide their farmers with trade-distorting support well beyond de minimis levels. Net food-importing countries complain that the Marrakesh Decision was not followed up by concrete actions.

SDT Treatment in the Doha Round Negotiations

The Doha Declaration confirms that “special and differential treatment shall be an integral part of all elements of the negotiations on agriculture… so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development.”

What this will mean in practice will be determined by the decisions reached in a number of negotiating areas, including:

• Tariff reductions
• Special products
• Special Safeguard Mechanism
• Domestic Subsidies
• Preference Erosion

Which countries should be eligible for SDT?

SDT treatment is available to all developing countries in the WTO. But qualifying as a developing country is simply a matter of self-declaration. Thus the developing country category covers countries as different in their competitive capacity and economic potential as Singapore and South Korea, on the one hand, and Benin and Malawi on the other. Developed countries argue that greater differentiation among developing countries is required if they are to make more generous SDT treatment offers, and that the level of SDT treatment should be graduated according to a country’s ability to accept WTO disciplines. So far, developing countries have rejected any suggestion that there should be greater differentiation.

Resources:

IPC, Beyond Special and Differential Treatment (PDF), 2003
A critical look at the arguments for special and differential treatment for developing countries in the Agreement on Agriculture, arguing that the primary goal for developing countries in the Doha Round negotiations should not be to create exemptions for themselves, but to use their political capital to get the most ambitious deal possible from the developed countries.

IPC, New Approaches to Special and Differential Treatment (PDF), 2004
Paper advocates differentiating developing countries into three categories: Least Developed, Lower Middle Income Developing and Upper Middle Income Developing Countries for international trade. Each group of countries should undertake commitments in market access, domestic support and export competition according to their capability.

Matthews, A., Special and Differential Treatment in the WTO Agricultural Negotiations (PDF), 2005
This paper examines the case for SDT for developing countries within the WTO Agreement on Agriculture and the particular instruments or exemptions it should cover.

FAO, Special and differential treatment in agriculture (PDF), Trade Policy Brief No. 10, 2006
Reviews the case for SDT in the agricultural negotiations and how it might be implemented.