How Special and Differential Treatment Is (Un)Able to Prevent Marginalisation of Low Income Economies

Abstract

Mega-Regional Trade Agreements include large shares of global trade and are likely to cover regulatory cooperation and alignment in selected export industries. They are generally attributed with trade diversion for third countries as a consequence of their discriminatory nature, and with substantial economic spill-over effects for third countries that align with regulatory cooperation emanating from Mega-Regional Trade Agreements.Low income economies are, however, likely to suffer from both trade diversion and from an inability to benefit from economic spill-over effects of Mega-Regionals. This may increase their marginalisation in the global market.This paper discusses to what extent WTO law as the regulatory basis of international trade regulation may provide for legal instruments to address the challenges for low income economies emanating from Mega-Regional Trade Agreements. It demonstrates that pre-existing Preferential Trade Agreements of low income economies with individual members of Mega-Regional Trade Agreements could be used to ease trade diversion as a result of discrimination in trade in services and investment. Furthermore, the paper looks at Special and Differential Treatment provisions in WTO law and assesses their capability of dealing with the risk of increasing marginalisation of low income economies. While some Special and Differential Treatment provisions are designed to increase trade opportunities for low income economies through diversification of exports, it may nevertheless require a major effort of all WTO members to render Special and Differential Treatment effective in time to prevent further marginalisation of low income economies as a side-effect of Mega-Regional Trade Agreements.