In a move that has implications for the corridors of global trade, China has announced during a UN General Assembly event that it will no longer seek Special and Differential Treatment (SDT) in future WTO negotiations. This concession, while preserving China’s self-declared developing country status and all existing perks such as lenient subsidy caps and phased implementation of agreements, is a tactical retreat amid escalating US tariff pressures and 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.
For India, this development is a harbinger of intensified scrutiny. President Donald Trump has just announced a fresh salvo of 100 per cent tariffs on branded and patented pharmaceutical products and also announced broader tariffs on furniture, kitchen cabinets, and trucks. As one of the largest economies in the world, there already are demands for India to shed its developing nation armour. India’s trajectory toward becoming an even larger economy will only amplify this pressure.
Yet, this ascent clashes with India’s reliance on SDT, a cornerstone since its 1995 WTO accession. Rooted in the GATT legacy, SDT grants flexibilities like higher tariffs and extended compliance periods, essential for shielding vulnerable populations in a nation where per capita income ranks 136th globally.
At the heart of the debate lies agriculture, employing around half of India’s workforce and underpinning the food security of 1.4 billion people. Under the WTO’s Agreement on Agriculture (AoA), subsidies are boxed: The trade-distorting Amber Box is capped at 10 per cent of production value for developing countries, versus 5 per cent for developed ones. India leverages Article 6.2 exemptions for input subsidies to low-income farmers, channelling 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. However, the 1986-88 reference prices, critics argue, inflate India’s reported Aggregate Measurement of Support (AMS), often exceeding the 10 per cent threshold — drawing fire from the US and the Cairns Group for alleged market distortion.
Developed nations, doling out $850 billion in global farm subsidies in 2023 (per OECD estimates), hypocritically target India’s programmes while protecting their own through Green Box loopholes for research and environmental aid.
If India faces coerced graduation from developing status, the implications are dire. Phased AMS reductions could slash subsidies by 20-30 per cent over a decade, per AoA timelines, leading to a 10-15 per cent drop in rural incomes and heightened food price volatility. Malnutrition, affecting 35 per cent of children under five, might worsen, undermining the National Food Security Act. Recent WTO disputes, like the 2023 sugar subsidy panel, underscore these points; India averted penalties via SDT, but future plurilaterals may demand reciprocity.
India’s services dominance — 55 per cent of GDP — offers leverage. Domestically, reforms like DBT (covering 90 per cent of fertiliser subsidies) can also help. Specifically, the following can help India balance its priorities and ensure a pragmatic pivot.
One, 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. This can be tied to demands for developed nations to eliminate export subsidies, as pledged in 2005 at Hong Kong. It can look to transition input subsidies (for example, fertilisers via direct benefit transfers) to Green Box measures like research, extension services, and climate-resilient crops. This aligns with WTO rules, as Green Box subsidies are exempt from caps, and supports India’s 2040 net-zero goals. It can also advocate for updating AoA reference prices to reflect current market realities, reducing reported AMS breaches. A 2024 ICRIER study suggests this could halve India’s notified subsidy distortions.
Two, e-commerce. India should join plurilateral e-commerce talks, offering commitments on consumer protection and cross-border data flows (with carve-outs for national security) in exchange for tariff-free access to developed markets It should build domestic capacity, expand the Open Network for Digital Commerce (ONDC) to empower MSMEs in global e-commerce, and reduce reliance on SDT tariff protections. India must also negotiate data localisation flexibilities. It 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.
Three: India should phase out non-essential SDT in sectors that are non-core and gradually reduce tariff protections over a decade, to gain market access across geographies or in areas where Indian exports face duties. It must also secure SDT exemptions for vulnerable segments It should use Green Box funds to enhance processing and cold storage, boosting export competitiveness in select sectors without breaching WTO caps.
Four, 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 2001 Doha Declaration. It should offer phased alignment with stricter IP rules in non-critical sectors to secure concessions in other areas of strength. Alongside this, it should increase Green Box-style funding for biotech innovation, reducing dependence on generic exports while preserving access for low-income populations.
Lastly, India should also propose a tiered SDT framework based on per capita GDP or sectoral competitiveness, allowing India to retain agricultural protections.
Unlike China’s state-driven economy, India’s democratic constraints limit rapid SDT abandonment. By prioritising food security, leveraging e-commerce strengths, and trading non-core SDT, India can move forward while protecting vulnerable sectors. Proactive steps and advocacy will position India as a middle power, shaping a WTO that balances growth with equity. Moreover,
isn’t it better to change before you are compelled to?
The writer is Group Chief Economist, L&T. Views are personal
