Using A Trade Vulnerability Index to Determine Eligibility for Developing-Country Status At The WTO (co-authored with Jason Cotton and Alicia Nicholls)

Barbados - 1 September 2019

This working paper provides a response to the current debate taking place at the World Trade Organization (WTO) regarding which countries should be accorded developing country-status, and therefore be eligible for special and differential treatment (S&DT). It is our position that S&DT, which provides special rights, flexibilities and privileges to developing-country Members of the WTO, must remain available to those countries whose characteristics make them vulnerable to the vagaries of the global financial and trading system and to economic and environmental shocks. Ensuring that these countries are eligible for S&DT can be achieved by proposing S&DT eligibility criteria that take into account trade vulnerability as a basis for S&DT.
 
The paper is divided into two main parts. In the first section, we outline, and critique, the proposals on eligibility for S&DT that some WTO Members have put forward in the context of current WTO reform discussions. In particular, we highlight a US proposal that includes a country’s GNI per capita as one criterion for determining eligibility for S&DT. If accepted, that criterion would exclude a number of currently self-defined developing countries, including certain Caribbean states from S&DT eligibility.
 
In the second part, we propose an alternative framework which utilizes trade vulnerability as the basis for determining eligibility for S&DT at the WTO. We explain the conceptual framework and methodology for our proposed “Trade Vulnerability Index”, and on that basis, engage in a preliminary “mapping” exercise that ties specific proxies for vulnerability to S&DT provisions.
 
Our work differs from previous work conducted at the WTO with respect to Small Vulnerable Economies (SVEs) in important respects. Using the TVI, a country’s vulnerability – and therefore, its access to S&DT – could be determined based on its overall score using the TVI proxies. Therefore, the TVI will guide which countries could benefit from S&DT and does not create an a priori sub-category of developing countries. While it is contemplated that the majority of countries which will fall under the ‘vulnerable’ category would be small economies, it does not automatically preclude some similarly larger economies from being classified as vulnerable.
 
At the outset, we point out certain limitations of the paper. We are concerned here with the issue of eligibility for S&DT, and do not seek to explore the extent to which current S&DT provisions are effective, could be made more effective, and/or are currently being utilized. Moreover, as the paper is conceptual, it does not delve into an empirical analysis at this stage but rather recommends the TVI framework for consideration and possible future study.
 
 

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