Various Flexibilities under WTO’s Provisions:

Trade Facilitation Agreement as a Potential Model for Progress in Future Negotiations

Bhelinda Ramadhani

Introduction
The developing country status in the WTO membership has long been a debatable
topic. The ongoing talks for WTO reform also raised the concern, among other issues like
consensus-based undertaking and dispute settlement mechanism. 1 With developing status,
countries are entitled to more favourably special rights and treatment under the Special and
Differential Treatment (abbreviated as S&D or SDT) provisions.
Such ‘room to move’ or flexibilities to WTO’s rules and obligations provoke criticism
when some members argue that some particular members are ‘developed’ enough and
should not entitled the treatment. Not only claimed as unfair, this debates also drag distrust
on WTO’s capabilities in future negotiations. During Doha negotiations, members agreed
that the SDT provisions should be reviewed with a view to strengthening them and making it
more precise.
Weakness in the institutional capacity in many developing countries became the main
reason why these provisions shall be maintained. However, a case-by-case approach to SDT
could ensure the goal to help the poorest while also addressing the concerns of
unfairnesses. An effective ‘graduation’ system will also help balancing the multilateral
trading system, once the country become a higher income developing countries. In the
Agreement on Trade Facilitation (TFA) countries can self-determine the timeline of
commitments, while providing measures to boost the efficiency of cross-border trade
procedures and reducing cost.
This paper will evaluate the range, value and relevance for developing countries in the
WTO flexibilities under ‘special and differential treatment’ provisions and explore the
potential of TFA as a model for progress in future negotiations. It is indeed negatively
impacting multilateral trading system for a country to self-assess their development status
in the WTO. A new case-by-case approach and a ‘graduation’ system should be considered
in determining SDT provisions. To assess the development levels, all economic indicator
should also be taken into account, not just international organization membership and trade
figures.

Background
The basic criticism to the current WTO’s regime is that it tends to be more on ‘seeking
exemptions’ instead of enabling developing countries to meet their obligations. The poorest

1
In 19 July 2019’s meeting, the WTO’s Director-General Roberto Azevedo reported the discussions of WTO
reform focused on three areas: addressing issues in the Dispute Settlement System (including impasse in
appointments to the Appellate Body); strengthening the work of the WTO’s regular bodies; and improving the
WTO’s negotiating work (WTO 2019).

1
countries are being worse, while those countries that are ‘in the middle levels’ are
economically better off, since they can benefit the SDT provisions (Bacchus & Manak 2020).
At this rate, even Least Developed Countries (L DCs) cannot access SDT provisions for
granted, they need to convince other members of their ‘LDCs’ entitlements. Although not
impossible, it is unlikely to succeed to agree on a formal categorization of developing
countries. Meanwhile, to have a consensus on a specific set of criteria when developing
members have SDT is ineffective and lagging negotiations. Future negotiations should be
focused on the development challenges to conclude the negotiations, not the categorization
of members (Humphrey 2019).
At least in the recent years, many members have raised concern to this specific issue.
In 28 June 2018 the European Commission raised a challenge to the SDT provisions in its
WTO modernisation’s proposal, beside other issues like level playing field, compliance, and
barriers to services and investment. (European Commission 2018). On October 2019, the
United States under Trump’s administration has also challenged the ‘Developing-Country
Status’ under WTO framework, and proposed to reform the SDT. The proposal was focused
on three key issues. First, the ‘passé’ dichotomy between developed and developing
countries, as it creates weaker commitments and unfair trade in international trade. They
specifically mention China to illustrate this point, and challenge China’s stand for developing
status. Second, the WTO approach to flexibilities associated with developing-country status,
in regard to self-declaring are not precisely defined or justified by appropriate economic and
other indicators. Third, the self-declaration process is problematic and creates a lag in trade
negotiations. (The White House 2019)2. There is not only risk of being abused, but self-
assessing approach to determine a country’s status also harming the poorer economies that
truly needs the special treatments.
On the other hand, China, India, South Africa, Venezuela, Lao, Bolivia, Kenya, Cuba,
Central African Republic and Pakistan submitted a proposal in a rebuttal to the EU and the
US’s proposal.3 They argue that a wide range of indicators such as GDP per capita, poverty
levels, receipt from IPR, share of trade in GVCs, R&D capacity, institutional and capacity
constraints, and other indicators must be taken into account when assessing a member’s
development level.
Being a member-driven organization, it is crucial for the WTO to weigh the importance
of SDT provisions, focus the support on the most vulnerable countries, and find the best
possible solution. To improve implementation capacities, such revolutionary SDT provisions
as in the WTO TFA could be an option. In line with the WTO reform, this is a great
momentum to review the provisions and foresees the possibility of potential model of SDT
provisions in the WTO TFA.

The range and value of the flexibilities

Aimed to facilitate compliance with WTO rules in regard to the limited capacities of
some members, SDT provisions consist of longer period to implementation, increasing

2
The US administration also ‘paralysed’ the WTO’s dispute settlement system by blocking naming new
members to the appellate panel and hamstringing the core function of the WTO (Johnson 2019). The US also
‘threatens’ the international trade community by declaring their unwillingness on greater commitments if
there is no substantial progress made toward achieving the changes.
3
For the US’ proposal, see WT/DT/W/764, for the developing countries’ proposal, see WT/DT/W/765, China
proposal see WT/GC/W/773, para2.4.1.

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trading opportunities, preferential tariff schemes, safeguard the trade interests of
developing countries and technical support for developing countries.
According to the updated compilation made by the WTO Secretariat 4, there are 155
SDT provisions in WTO Agreements, classified into six categories as follows:
a) Provisions aimed at increasing the trade opportunities of developing country
members;
b) Provisions under which WTO members should safeguard the interests of
developing country members;
c) Flexibility of commitments, of action, and use of policy instruments;
d) Transitional time periods;
e) Technical assistance; and
f) Provisions relating to Least Developed Countries (LDCs) members.
The fact that to be able to ‘enjoy’ the SDT provisions, developing countries are also
bound by specific obligations, and their policies also inspected closely and thoroughly in the
trade policy review mechanism (TPRM). This mechanism could serve as a foundation of a
‘graduation’ concept, and a careful case-by-case method instead of self-assessing approach. 5
The SDT does not determine the difference between levels of development and
therefore inherent unfairness. But leaving prestigious membership and trade figures as the
main indicator for development certainly not fair.

Table 1
Specific provisions in the WTO Agreements
Rules/Agreement/Decision Specific provisions
1. Non-reciprocity concept - The When developed countries grant trade concessions to developing
General Agreement on Tariffs countries, they should not expect the developing countries to make
and Trade (GATT) matching offers in return (Part 4 on Trade and Development)
2. Understanding on the Balance A member may apply import restrictions for balance-of-payments
of Payments Provisions – reasons (Article XII, XVIII: B).
General Agreement on Tariff
and Trade (GATT) 1994 (BoP
Understanding)
2. Export/domestic support – 1. Least developed countries (LDCs) and net food importing
Agreement on Agriculture developing countries may provide certain export subsidies until
(AoA) 2030 (Article 9.4 of the AoA, Ministerial Decision of 19
December 2015 (WT/MIN(15)/45-WT/L/980, G/AG/5/Rev.10)
2. Longer repayment periods for export financing support
(WT/MIN(15)/45-WT/L/980)
3. Less frequent notification to WTO regarding domestic support
(biennially instead of annually) (G/AG/2).
3. Technical assistance – Sanitary 1. Prioritized for technical assistance (Article 9.1) as targeted in the
and Phytosanitary (SPS) Standard and Trade Development Facility (STDF) to allocate at
Measures least 40% of their total project financing to LDCs or other low-
income countries (OLICs)6.
4
Note by the WTO Secretariat, ‘Special and Differential Treatment Provisions in WTO Agreements and
Decisions, WT/COMD/W/239.
5
Countries like Singapore, although they self-assessed as a developing country, decided that they will not take
advantage of the SDT provisions’ flexibilities (Chan 2019). On the other hand, Taiwan declares that they are
not claiming the differential treatment and longer benefit the developing status in the WTO, despite the
mainland China stands their developing status. (Ihara 2018).
6
The STDF is a global partnership of Food and Agriculture Organization of the United Nations (FAO), the World
Organization for Animal Health (OIE), the World Bank, the World Health Organization (WHO) and the WTO.

3

4. Exemption of export support – LDCs and other countries with Gross National Income (GNI) per
Agreement on Subsidies and
Countervailing Measures
5. Longer period – Trade
Facilitation Agreement (TFA)
6. Exemption and waiver – Trade- 1. Exemption from applying substance TRIPS standards until 2021
Related Aspects of Intellectual
Property Rights (TRIPS)
7. Special procedures – Dispute
Settlement Understanding
(DSU)
8. Technical Assistance and
longer period– Trade Policy
Review Mechanism
9. Deviation from obligations –
Trade-Related Investment
Measures
2. Lower co-financing requirement for technical assistance. 7
capita below $1,000 (in constant 1990 dollars) are exempted from
the prohibition of export subsidies (article 27.2 and Annex VII of the
Agreement and paragraph 10.1 of the Doha Ministerial Decision on
Implementation-Related Issues and Concerns (WT/MIN(01)/17)).
1. Longer notification time frames: 2020 for category B measures,
2021 for indicative dates and definitive dates, and 2022 for
category C measures (article 15 and 16)
2. Longer deadlines under the early warning mechanism for
difficulties in implementing categories B and C measures (article
17)
3. Longer time frame (4 years than 18 months) for new
implementation dates for measures shifted from category B to
category C before approval from the Trade Facilitation
Committee is required (article 19).
4. Longer grace period from dispute settlement (until 2023 for
Category A measures, and 8 years from the date of
implementation of category B or C measures).
(article 66.1, latest extension IP/C/64)
2. Exemption from providing protection for pharmaceutical
patents, from providing the possibility of filing mailbox
applications and from granting exclusive marketing rights until
2033 (IP/C/73 and WT/L/971)
3. Waiver from notification requirements for issuing compulsory
licenses for exports of pharmaceutical products to LDCs or other
countries with insufficient manufacturing capacities in the
pharmaceutical sector (article 31 bis)
4. Promotion of technology transfer by enterprises and institutions
in developed countries (article 66.2)
1. Developing countries may request longer consultation period;
one panellist from a developing country member (Article 8 and
12)
2. The DSB shall take into account not only the trade coverage of
the measures but also the impact on the economy of developing
member concerned (Article 21).
3. Special procedures require members exercise “due restraint”
when launching disputes against LDCs (Article 24)
4. The WTO secretariat is mandated to provide legal advice and
assistance in respect of dispute settlement to developing
country members, with priority attention to LDCs (Article 27.2).
Developing countries can request technical assistance to the
Secretariat, and LDCs may have a longer period between trade
policy reviews (Annex 3 of the Uruguay Round Agreements).
1. In this LDCs Agreement-specific proposals, LDCs allowed to
maintain on temporary basis, existing measures that deviated
from their obligations under the TRIMS agreement.
2. LDCs also were also allowed to introduce new measures that
deviated from their obligations under the TRIMs agreement
under certain conditions (Annex F of the Declaration of the Sixth
WTO Ministerial Conference).

The program provides grants for developing countries to overcome constraints and enhancing their capacity to
meet SPS standards (LDC Portal, United Nations 2019).
7
Based on STDF, beneficiaries contribution to a project is at least 60% for upper-middle income countries, 20%
for lower-middle-income countries, and 10% for LDCs and OLICs.

4
Source: LDC Portal, United Nations Conference on Trade and Development (UNCTAD).
The Relevancy of the Flexibilities
Regarding to the dichotomy, there is no strict definition in the WTO, and members are
self-assessing whether they are “developed” or “developing” countries. However, this is not
automatically accepted in all WTO bodies and other members can challenge the decision of
a member to make use of provisions available to developing countries.
Even in the WTO, there is no official documents listing the developing countries
members. According to the WTO’s website, currently there are 164 members of the WTO
and two-third of them are developing countries. However, the WTO recognizes 36 members
out of the total 47 LDCs which have been designated as such by the United Nations. 8 Based
on economic indicators, a country can be ‘identified’ as a developed country once they are
on a certain indicator like GNI per capita 9, poverty level, etc. There’s also Human
Development Index (HDI)10 to be considered in the determination (United Nations 2020).
According to the US’ proposal, they challenged four criteria of the developing
members of the WTO: a member of the OECD, a member of G20, classified as a “high
income” country by the World Bank, and account for no less than 0.5 % of global
merchandise trade.
There is no single variable gives a whole picture when it comes to development. It
encompasses many factors, not just economic but also other important factors such as
environment, social, education, and institutional constraint. Nevertheless, Gross National
Income (GNI) is a good measure to take into account, to describe the residents of an
economy’s well-being (World Bank 2020).
Determining the development level of a country solely from its membership on
international organization or trade figures will only show an uncomplete picture. Several
social development parameters and important indicators should be included as well. Some
of the followings are indicated on the table below:

Table 2
Distinct Development Level of the WTO’s Members
Country Membe Membe High Share (%) in GNI per HDI Poverty Population
(current r of r of G20 Incom global capita ran Rate (%) (in
status: OECD e merchandis in US$ k of total thousand) of
developing e trade (most population year 2019
) (2017 recent 2015
annual years)
average)
China  3.23 10,410 85 0.7 1,397,715.00
Hong Kong    2.88 50,840 4 n/a 7,507.40
South   2.37 33,720 22 0.3 51,709.10
Korea

8
According to the United Nations, development defined as a multidimensional undertaking to achieve a higher
quality of life for all people. Economic development, social development, and environmental protection are
interdependent and mutually reinforcing components of sustainable development. See A/RES/51/240, UN
Resolution, Annex Agenda for Development, para 1. (UN 1997).
9
GNI is the sum of value-added total income received by the country from its residents and businesses
regardless of whether they are located in the country or abroad, while GDP is the total market value of all
finished goods and services produced within a country in a set time period (World Bank 2020).
10
HDI indicates measure of average achievement in key dimensions of human development: a long and
healthy life, being knowledgeable and have a decent standard of living as indicators: life expectancy at birth,
education dimension (years of schooling), and GNI per capita (UNDP 2020).

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 Mexico  2.00 9,4430 76 3.3 127,575.53
India  1.95 2,130 129 13.4 1,366,417.75
Singapore  1.69 59,590 9 n/a 5,703.57
United 1.27 43,470 35 n/a 9,770.53
Arab
Emirates
Thailand 1.13 7,260 77 0.0 69,625.58
Malaysia 1.09 11,200 61 0.0 31,949.78
Vietnam   1.07 2,540 118 2.3 96,462.11
Turkey  1.06 9,610 59 0.3 83,429.62
Brazil   1.04 9,130 79 3.4 211,049.53
Saudi  0.89 22,850 36 n/a 34,268.53
Arabia
Indonesia  0.54 4,050 111 7.2 270,625.57
South   0.39 6,040 113 18.9 58,558.27
Africa
Israel   0.37 43,290 22 0.5 9,053.30
0
Chile   0.35 15,010 42 1.3 18,952.04
Argentina  0.29 11,200 48 0.6 44,938.71
Qatar  0.25 63,410 41 n/a 2,832.07
Kuwait  0.25 34,290 57 n/a 4,207.08
Colombia  0.17 6,510 79 4.5 50,339.44
Oman  0.10 15,330 47 n/a 4,974.99
Panama  0.08 14,950 67 2.0 4,246.44
Bahrain  0.07 22,110 45 n/a 1,641.17
Costa Rica  0.05 11,700 68 1.5 5,047.56
Trinidad  0.05 16,890 63 0.6 1,394.97
and Tobago
Uruguay  0.03 16,230 57 0.1 3,461.73
Macao  0.03 78,640 n/a n/a n/a
Brunei  0.01 32,230 43 n/a 433.29
Darussalam
Barbados  0.00 17,380 56 n/a 287.02
Antigua  0.00 16,660 74 n/a 97.12
and
Barbuda
Saint Kitts  0.00 19,030 73 n/a 52.82
and Nevis
Source: World Bank; OECD; UNDP.

According to the table above, a high income country like China ranked 85 for the HDI
and 0.7% of the total population live in poverty. With China being the most populous
country in the world (1,3 billion in 2015), it means around 9 million people lives in poverty in
China. Other countries like India and Indonesia although listed as a high income countries
or member of G20, both ranked above 100 for the HDI, and have a high poverty rate as well.

Even the gap of the rich and the poor in the members are high

Flexibilities in the WTO TFA

As the first multilateral agreement negotiation to reach a consensus since the creation
in 1995, the TFA bring a new hope to the WTO. Despite the debate on burden of substantial
cost to implement, the TFA claimed as the major success in terms of furthering the

6
development agenda (Eliason 2015). Not just addressing the regulatory concern, the WTO
TFA also includes a revolutionary SDT mechanism, which empower developing countries and
LDCs to set their own pace for implementation period and creates their own lists in the
technical assistance and capacity building needs. As mentioned in the TFA Section II (Article
13 to 22), the trade facilitation measures divided into category A commitments, category B
commitments, and category C commitments.
To summarize, there are four new approach to SDT in the TFA, as follows:
1. Country-by-country vs groups of countries by level of development.
2. Measure-by-measure depending on the wording of each obligation (“shall”;
“shall endeavour”; “where appropriate”).
3. Link between existing implementation capacities and the need for technical
assistance and capacity building.
4. Members set their own timeline of implementation.
There are two processes that makes the TFA different from any other WTO
agreements. The first one is the establishment of Expert Group to examine the situation
when a developing country member is unable to implement provisions under Category B
and Category C. Second, the mechanism to developed countries to provide capacity-building
aid to developing countries. If implemented successfully, the WTO TFA may become a model
for future agreements (Eliason 2015).

Conclusion
Historically speaking, it is tremendously difficult to reach an approach to fully resolved
to the satisfaction of all the WTO members, including in the flexibility to its obligations.
it is indeed problematic to leave the various flexibilities in the WTO provisions without
any limitation or boundaries but leaving no preferences for the weaker countries will also
create a negative impact. Likewise, SDT provisions has to be approached in a careful
manner.
The fundamental objective of the multilateral trading system is the development, to
improve the trading prospects of developing countries.
A combination of a revolutionary mechanism like the TFA with an accurate
development indicator will create a stable and predictable trading system.

a reasonably neat and agreed by all case-by-case method in the WTO TFA.

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