Context:

• China’s announcement at the UN General Assembly that it will no longer seek Special and Differential Treatment (SDT) in future WTO negotiations marks a significant shift in global trade dynamics.
• This decision comes amid US tariff pressures and criticisms of SDT exploitation.
• The development has direct implications for India, which continues to rely heavily on SDT flexibilities to safeguard its agricultural and social welfare priorities.

SDT and China’s Tactical Retreat:

• What is SDT?
  • SDT refers to provisions within World Trade Organisation (WTO) agreements that grant developing countries and Least-Developed Countries (LDCs) special rights and more favorable treatment.
  • These include longer implementation periods, preferential access to markets, and support for capacity building to help them participate in global trade and economic development.
  • The aim is to recognise the differing economic capacities between developed and developing nations and create a more equitable trading system.
• China’s retreat:
  • China’s decision, while preserving its self-declared developing country status and all existing perks (such as lenient subsidy caps), is a tactical retreat amid long-standing US objections to the practice.
  • While the WTO lauded it as a breakthrough for reform, sceptics see it as symbolic window-dressing, allowing China to deflect criticism without dismantling its agricultural and industrial advantages.

Implications for India:

• Rising external pressure:
  • President Donald Trump has announced a fresh salvo of 100% tariffs on branded and patented pharmaceutical products and also announced broader tariffs on furniture, kitchen cabinets, and trucks.
  • Growing calls for India to shed its developing country status as its economy expands.
• India’s dependence on SDT:
  • SDT, which is rooted in the GATT legacy, offers flexibilities such as higher tariffs and longer compliance periods.
  • These concessions are crucial for protecting vulnerable populations in a country where per capita income ranks 136th globally.

Agriculture at the Core of the Debate:

• Agriculture employs around half of India’s workforce and underpins the food security of 1.4 billion people.
• Under the WTO’s Agreement on Agriculture (AoA), the trade-distorting Amber Box caps subsidies at 10% of production value for developing countries (versus 5% for developed ones).
• India leverages Article 6.2 exemptions for input subsidies to low-income farmers, channeling over $40 billion annually through mechanisms like Minimum Support Prices (MSP) for staples such as rice and wheat.
• These support the Public Distribution System (PDS), distributing subsidised grains to 800 million beneficiaries.

Hypocrisy of Developed Nations:

• The 1986-88 reference prices: Inflate India’s reported Aggregate Measurement of Support (AMS), often exceeding the 10% threshold — drawing fire from the US and the Cairns Group for alleged market distortion.
• Double standards of developed nations: They provided $850 billion in global farm subsidies in 2023 (as per OECD estimates), protecting their own programmes through Green Box loopholes for research and environmental aid.

Risks of Forced Graduation from SDT:

• Phased AMS reductions could slash subsidies by 20-30% over a decade, leading to a 10-15% drop in rural incomes and heightened food price volatility.
• Malnutrition, affecting 35% of children under five, might worsen, undermining the National Food Security Act.
• Recent WTO disputes, like the 2023 sugar subsidy panel, underscore these vulnerabilities.

Strategic Options for India:

• Agriculture:
  • India should strive to lead the G33 coalition to extend the 2013 Bali Ministerial’s interim “peace clause” on public stockholding beyond 2023, shielding MSP and PDS from WTO disputes until 2030.
  • Transition input subsidies to Green Box measures (research, climate-resilient crops).
  • It can also advocate for updating AoA reference prices to reflect current market realities.
• E-Commerce:
  • India should join plurilateral e-commerce talks, offering commitments on consumer protection and cross-border data flows in exchange for tariff-free access to developed markets.
  • Expand the Open Network for Digital Commerce (ONDC) to empower MSMEs in global e-commerce, and reduce reliance on SDT tariff protections.
  • India should propose tiered data regulations in WTO talks, allowing developing nations longer transition periods to comply with global standards, preserving India’s Personal Data Protection Act.
• Selective SDT phase-out:
  • Reduce protections in non-core sectors for better market access.
  • Retain exemptions for agriculture and vulnerable sectors.
  • Use Green Box funds for cold storage and processing to boost exports.
• Intellectual property:
  • India must maintain compulsory licensing and patent opposition provisions under TRIPS Article 31, citing public health needs for 1.4 billion people (as affirmed in the Doha Declaration, 2001).
  • India should offer phased alignment with stricter IP rules in non-critical sectors to secure concessions in other areas of strength.
  • India should increase Green Box-style funding for biotech innovation, reducing dependence on generic exports while preserving access for low-income populations.
• Reforming SDT framework: India should propose a tiered SDT framework based on per capita GDP or sectoral competitiveness, allowing India to retain agricultural protections.

Conclusion:

• India faces mounting pressure to reduce dependence on SDT, but its demographic, agrarian, and developmental constraints make abrupt withdrawal risky.
• India’s services dominance (55% of GDP) offers leverage, and reforms like DBT (covering 90% of fertiliser subsidies) can also help.
• A calibrated strategy can safeguard food security while boosting global competitiveness.
• Rather than resisting inevitable change, India must proactively shape WTO reforms, positioning itself as a middle power that bridges growth and equity in global trade governance.