Trade Policy at Work

Special and Differential Treatment in the Context of the Digital Era

This paper explores how different development concerns raised in response to the e-commerce discussions at the WTO could be addressed through special and differential treatment (SDT). After developing a framework with the key features of existing SDT models under the WTO Agreements, this paper applies the framework to different e-commerce topics that are under discussion, and suggests which SDT model(s) would be best suited to address different development concerns. It finds that there is no one-size-fits all, and that a future e-commerce agreement would likely feature a combination of different approaches.

The Fourth Industrial Revolution, characterized by rapid digitization and the densification of services- enabled global value chains, is radically changing societies. It is forcing us to rethink approaches to economic growth and development. On the one hand, it has brought about great promise: it has lowered the barriers for Small and Medium Enterprises (SMEs) in developing and least- developed countries to access an international consumer market. On the other hand, it has presented new challenges, especially for developing and least-developed countries (LDCs) with poor infrastructure, and SMEs: with most digital growth happening in the industrial world, e-commerce risks widening the digital divide.

Disagreement about the impact of the digital economy on development is reflected in the ongoing discussions regarding the design of an effective e-commerce framework at the World Trade Organizations (WTO), which would build on the Joint Statement on Electronic Commerce signed in December 2017: while most industrialized countries – supported by a number developing and least developed countries – are pushing for a framework with strong provisions to liberalize digital transactions, other developing and least-developed countries would prefer softer discipline. Yet another group of developing and least-developed countries is calling the discussions premature. They fear that disciplines to facilitate e-commerce would hurt their ability to build competitive domestic industries in areas related to the digital economy.

The ongoing WTO e-commerce discussions are stuck at a political and ideological level, with different groups supporting different theories of WTO, “Special and Differential Treatment”. [online].

development. As long as talks remain at high levels of abstraction, it is difficult, if not impossible, to reach consensus. Rather, for progress to be made, the discussion must become more concrete. Distinctions must be made between the development implication of different types of provisions. And countries must go beyond ideology and translate their positions into interests. For instance, developing and least- developed countries must start distinguishing the types of disciplines that would have positive development effects from those that would cause concerns. With regards to the latter, they must get concrete about how these concerns can be addressed.

One concrete way to reflect development concerns in international frameworks is through the use of special and differential treatment (SDT), i.e., provisions that give developing countries special rights and allow members to treat them more favorably than other members.1 While countries are increasingly polarized about the nature and role of SDT within the multilateral framework, the notion that flexibility should exist to account for different levels of development remains central in the ongoing trade talks.

In this context, this paper explores different types of SDT provisions that could be considered to address the development dimension of e- commerce. Specifically, it will do so in four steps: first, in terms of background, this paper provides a quick overview of the development implications of the digital economy, focusing on both the benefits and challenges. Second, it will trace the origins and evolution of SDT. Third, it will create a framework of the features of different types of existing SDT models under the WTO; and fourth, it will apply this framework to the different e- commerce disciplines that are under discussion, and suggest which types of SDT provisions would be best suited to address development concerns.

The paper concludes by providing a number of recommendations.