Special and Differential Treatment (SDT) consists of measures to compensate developing countries for the structural asymmetries existing between them and developed countries. These are expressed mainly in reduced access to technology and finance and deficiencies in human resources and infrastructure and result in the low systemic competitiveness of these countries. SDT compensates for such asymmetries so as to ensure more equitable participation in international trade.

In fact, SDT treatment has been transformed into statements of good intentions with little concrete content, as shown by the most of the 145 SDT measures in the WTO Treaty.

Several arguments have been advanced against SDT. First, it is argued that the heterogeneity of developing countries makes the concept meaningless in practical terms. Many developing countries have reached the stage of “take-off” while others have achieved a sufficiently high level of economic sophistication for the internal generation of investment and technological innovation necessary to achieve self-sustained growth. A second argument is that SDT is part of the baggage that was dismantled with the liberalization and globalisation processes. Thirdly, SDT is said to be an unnecessary “crutch” which protects inefficiency and hinders adjustment to the requirements of global competitiveness. A fourth argument is that SDT is trade-distorting and has encouraged the use of unsustainable subsidies.

The heterogeneity argument is partly valid in the sense that there is a wide variety of “developing countries” and the category is barely functional from the trade negotiations perspective. Nevertheless, several countries, for example those of South East Asia, have reached the take-off stage under conditions different from those sanctioned by the WTO, by using policies of protection and strong state support for industry.

The downgrading of Special and Differential Treatment that resulted from the Uruguay Round negotiations was far more a product of the realities of power and the assumption that free trade by itself generates development, than of the fact that asymmetries among countries had disappeared or diminished. SDT was introduced in international trade for the purpose of: 1) introducing equity and fair competition when structural conditions are different and 2) avoiding distortions brought about by the negotiating power of industrialized countries in the multilateral trade system. Both motives continue to be valid.  

The idea that markets by themselves will unleash forces to eradicate the systemic weakness of a lack of competitiveness lacks a strong foundation. On the contrary, facing inequalities in markets without any compensatory mechanisms would worsen inequity by strengthening the economic, political and market power that distorts competition. This intensifies marginalisation and poverty and renders national development even more onerous. Special and Differential Treatment, therefore, continues to be a necessary and valid component of international trade arrangements.

Miguel Ceara, a former Director in the ACS Secretariat, is now Adviser to the Minister of Foreign Relations and Foreign Trade of the Dominican Republic. Feedback can be sent to mail@acs-aec.org.

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February 1, 2002