United States: Trump Administration Aims To Reform WTO's Developing-Country Status

Ronald Oleynik is a partner, Farid Hekmat is an Associate and Sophie Jin is an Attorney in our Washington D.C. office.

Highlights

  • The Trump Administration is pushing the World Trade Organization (WTO) to prevent advanced economies such as China from self-declaring as developing countries.
  • If there is no progress with the WTO, the United States said it would unilaterally stop treating such advanced economies as developing countries for WTO purposes.
  • The Office of the U.S. Trade Representative (USTR) also would publish a list of countries that are inappropriately seeking WTO benefits as developing countries.

President Donald Trump signed the "Memorandum on Reforming Developing-Country Status in the World Trade Organization" (Presidential Memorandum) on July 26, 2019, directing the Office of the U.S. Trade Representative (USTR) to stop treating advanced economies such as China as developing countries under the rules of the World Trade Organization (WTO).

On the same day, President Trump tweeted that "The WTO is BROKEN when the world's RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment." USTR Robert Lighthizer applauded President Trump's directive and stated, "For far too long, wealthy countries have abused the WTO by exempting themselves from its rules through the use of special and differential treatment."

The Presidential Memorandum pointed out that many of the wealthiest economies in the world are designated as developing countries, including Brunei, Hong Kong, Kuwait, Macao, Qatar, Singapore, the United Arab Emirates, Mexico, South Korea and Turkey. But special emphasis was placed on China, the second-largest economy and the largest exporter of goods in the world. According to the Presidential Memorandum, such countries have been taken "unfair advantage" of the special treatment and weaker commitments under WTO rules as developing countries, including longer timeframes for the imposition of safeguards, generous transition periods, softer tariff cuts, procedural advantages in WTO disputes and the ability to utilize certain export subsidies.

President Trump called on the WTO to reform and recognize the economic development of these countries and directed the USTR to "use all available means" to secure changes at the WTO that would prevent these countries from seeking the benefits and flexibilities in WTO rules and negotiations. If the WTO fails to make a substantial progress within 90 days of the Presidential Memorandum, President Trump requested the USTR to:

  • stop treating advanced economies as developing countries for the purposes of the WTO
  • stop supporting any such country's membership in the OECD
  • publish a list of self-declared developing countries that the USTR believes are inappropriately seeking the benefit of developing-country flexibilities in WTO rules and negotiations

President Trump's message was released before the resumption of trade talks between the United States and China, raising suspicions that it was part of the Trump Administration's negotiation tactic to pressure China to purchase more U.S. products. On July 31, Lighthizer and Treasury Secretary Steven Mnuchin led another round of face-to-face trade meetings in Shanghai, where both countries' willingness to reach an agreement was shown, but no deal was made at the end of the meeting.

Conclusion and Considerations

Under international trade law, major reforms to the WTO rules require consensus (in effect unanimity) among its members. Therefore, the WTO probably will not be able to make substantial progress toward changing the status of certain developing countries within the Trump Administration's 90-day deadline. As a result, the Trump Administration seems likely to stop treating these countries as developing countries under the WTO framework.

The Trump Administration's international trade policy remains fast moving and subject to sudden changes in direction, exposing both U.S. imports and exports to significant uncertainty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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