·       In a significant development for global trade, China announced at the United Nations General Assembly that it will no longer seek Special and Differential Treatment (SDT) in future negotiations at the World Trade Organization (WTO). This declaration marks a strategic shift in global trade dynamics and occurs amid escalating pressure from the United States, including new tariff impositions and persistent accusations that China has been exploiting the SDT framework to maintain competitive advantages.

·       This move holds particular significance for India, a country that continues to rely extensively on SDT provisions to protect its agricultural interests and ensure social welfare outcomes. India’s continued dependence on these flexibilities underscores the complexities of global trade reform, especially for developing economies navigating structural inequalities.

Understanding SDT and China’s Calculated Move:

·       Special and Differential Treatment (SDT) within WTO agreements refers to a set of provisions that afford developing countries and Least-Developed Countries (LDCs) preferential treatment. These measures include extended implementation timelines, preferential market access, and capacity-building support designed to integrate these nations more equitably into the global trading system. The rationale behind SDT lies in acknowledging the disparate economic capacities between developed and developing countries, thereby aiming to create a more balanced trading framework.

·       China’s recent move, while seemingly progressive, is better viewed as a tactical retreat. Although Beijing has renounced future SDT claims, it retains its self-designation as a developing country and continues to benefit from all existing advantages, such as relaxed subsidy limits. The WTO welcomed the decision as a breakthrough in institutional reform. However, critics argue that the gesture is largely symbolic, serving more to appease geopolitical adversaries than to effect meaningful change in China’s economic posture. By preserving its core benefits while reducing external scrutiny, China may have effectively sidestepped substantive reform.

Implications for India:

·       India now faces intensified external pressures. Under the Trump administration, the United States imposed a fresh round of 100% tariffs on a range of Indian exports, including branded and patented pharmaceuticals, and expanded duties on furniture, kitchen cabinets, and trucks. Simultaneously, there are growing international demands for India to forgo its developing country status, reflecting perceptions that its expanding economy no longer justifies its current SDT entitlements.

·       Yet India’s reliance on SDT is deep-rooted and critical. Originating from the legacy of the General Agreement on Tariffs and Trade (GATT), SDT provisions enable India to maintain higher tariffs and longer compliance timelines, vital for protecting its vulnerable population. With a global ranking of 136th in per capita income, India still faces significant developmental hurdles that SDT helps to address.

Agriculture at the Heart of the Debate:

·       Agriculture remains central to India’s economy and social stability, employing approximately half of the nation’s workforce and forming the bedrock of food security for 1.4 billion citizens. Under the WTO’s Agreement on Agriculture (AoA), developing nations face a cap of 10% of production value for trade-distorting subsidies—compared to a 5% limit for developed countries. India leverages Article 6.2 exemptions to provide input subsidies to small and marginal farmers, disbursing more than $40 billion annually through instruments such as Minimum Support Prices (MSP) for rice and wheat.

·       This subsidy regime underpins the Public Distribution System (PDS), which delivers subsidised food grains to approximately 800 million beneficiaries. However, India’s use of outdated 1986–88 reference prices inflates its Aggregate Measurement of Support (AMS), often pushing it above the permitted threshold and inviting criticism from the US and Cairns Group members for allegedly distorting markets.

·       This critique, however, reveals a stark double standard. Developed countries, according to OECD estimates, collectively dispensed $850 billion in farm subsidies in 2023 alone, often cloaked under Green Box provisions for research and environmental protection. These practices allow them to shield their own programmes from scrutiny while targeting developing nations for similar actions.

Risks Associated with Forced Graduation from SDT:

If India is compelled to relinquish SDT benefits, the repercussions could be severe. A phased reduction in AMS could result in subsidy cuts of 20–30% over a decade, potentially triggering a 10–15% decline in rural incomes and increasing volatility in food prices. Such developments could worsen malnutrition, which already affects 35% of Indian children under five, and undermine legislative guarantees under the National Food Security Act. Recent WTO rulings, such as the 2023 panel on Indian sugar subsidies, have exposed India’s vulnerability in this evolving trade landscape.

Strategic Options Available to India:

India must craft a multi-pronged strategy to navigate this complex scenario.

·       In agriculture, India should take a leadership role within the G33 coalition to push for an extension of the 2013 Bali Ministerial’s “peace clause” on public stockholding, aiming to secure protections for MSP and PDS mechanisms through 2030. Simultaneously, it can gradually shift certain input subsidies into Green Box categories, such as investments in agricultural research or climate-resilient crop development. Updating the AoA reference prices to align with present market realities should also be a priority.

·       In the digital sphere, India should engage in plurilateral e-commerce negotiations, making strategic offers on consumer protection and cross-border data flow in exchange for tariff-free access to developed markets. Expansion of the Open Network for Digital Commerce (ONDC) can empower Micro, Small and Medium Enterprises (MSMEs) to access global platforms, reducing dependency on traditional SDT tariff protections. Furthermore, India could propose a system of tiered data regulation at the WTO level, advocating for longer compliance timelines for developing nations. This would help protect India’s Personal Data Protection Act while encouraging global integration.

·       On the broader SDT front, India should consider a selective phase-out of concessions in non-core sectors to enhance global market access, while preserving critical exemptions for agriculture and other vulnerable domains. Green Box funding could be deployed to expand cold storage infrastructure and food processing capabilities, thereby bolstering export potential.

·       In the area of intellectual property rights, India must retain crucial flexibilities under the TRIPS Agreement—especially compulsory licensing and opposition to excessive patents—citing the healthcare needs of its 1.4 billion citizens, a position supported by the Doha Declaration of 2001. For non-essential sectors, India can offer phased alignment with stricter IP regimes to extract concessions in strategically important areas. At the same time, India should enhance public funding for biotechnology innovation, reducing its over-reliance on generic drug exports while preserving affordable access for low-income populations.

·       India should also spearhead efforts to reform the global SDT framework itself. Proposals for a tiered system based on per capita GDP or sectoral competitiveness could allow India to retain critical protections in agriculture while participating more fully in other areas of trade liberalisation.

Conclusion:

·       As international pressure mounts for India to reduce its dependence on SDT, the country must carefully balance external expectations with its internal developmental realities. An abrupt withdrawal from SDT benefits would be economically and socially destabilising. Despite its growing economic stature, India’s structural challenges—agrarian dependence, widespread poverty, and nutritional insecurity—necessitate a calibrated transition.

·       India’s dominance in services, which contributes 55% of GDP, offers it strategic leverage in trade negotiations. Domestic policy innovations such as Direct Benefit Transfers (DBT), which now cover 90% of fertiliser subsidies, signal a willingness to reform without compromising core priorities.

·       Ultimately, India must not merely resist the changing global trade architecture but work to shape it. By positioning itself as a responsible middle power that champions both growth and equity, India can help craft a WTO reform agenda that is inclusive, fair, and sustainable.