From UPSC perspective, the following things are important :
Prelims level : Nothing much
Mains level : WTO : US. Problem of developing countries
U.S. President threatened to pull the U.S. out of the WTO if it fails to treat the U.S. fairly. He blamed it for allowing too many countries to claim the status of a “developing country”.
- In a memo to the U.S. Trade Representative, it was pointed out that nearly two-thirds of the 164 WTO members classified themselves as developing countries and many rich economies claiming to be “growing” rather than “grown” economies.
- India and China were targeted in particular for “taking advantage” of the U.S. by classifying themselves as “developing countries” at the WTO.
- The status of a developing country allows countries to seek partial exemptions from the WTO’s rules for free and fair trade between countries.
- It allows countries like China and India to impose higher tariffs on imports from other countries and also offer more subsidies to local producers in order to protect their domestic interests.
- Developed countries find this to be unfair on their producers who are put at a relative disadvantage.
- Countries like China have argued that their developing country status is justified given their low per capita income.
- The “developing country” status that gives substantial benefits to countries that want to protect their domestic interests has skewed global trade over the years in favor of certain countries.
- The US is using this pretext to justify further trade barriers against China and other countries.
- This is also used to justify retaliatory tariffs against these countries to boost the “America First” approach.