A contract theory approach to special and differential treatment and the WTO

• DOI: https://doi.org/10.1108/JITLP-10-2017-0034
• Pages: 126-140
• Date: 18 September 2017
• Published date: 18 September 2017
• Author: Stephanie Switzer
• Subject Matter: Strategy,International business,International business law,Economics,International economics,International trade

A contract theory approach to

special and dif‌ferential treatment

and the WTO

Stephanie Switzer

Faculty of Humanities and Social Sciences, University of Strathclyde, Glasgow, UK

Abstract

Purpose –This paper is prompted by the dissatisfaction of developing countries regarding the grant of

special and differentialtreatment (SDT) under the legal framework of the World Trade Organisation(WTO).

As a result of such dissatisfaction, theDoha Round of multilateral trade negotiations explicitly called fora

review of such treatment with a view to makingit more precise, effective and operational. This mandate has

not yet been met to the satisfaction of manydeveloping countries. This paper aims to provide an alternative

way of examiningand evaluating the contestation whichexists regarding SDT in the WTO.

Design/methodology/approach –This paper uses the conceptualframework provided by the economic

contract theory and in particular, the conceptof the incomplete contract to provide a scaffold for analysing

SDT. This approachis intended to offer insights beyond those elucidated so far in the literature on the topic.

Findings –This paper, by usingan economic contract theory approach, f‌inds that SDT is constructedas an

incomplete contract. Furthermore, the suboptimal outcomes associated with incomplete contracts are

apparent in the constitution of SDT. This f‌inding is useful in both an evaluative andprogrammatic sense,

providing us with an alternative entry point to explain some of the shortcomings with SDT, as well as

garneringus with a useful conceptual tool to think upon how SDT can be improved.

Originality/value –The paper contributes to the literature on SDT within the WTO in particular and

differential treatment in international law in general. Drawing on literature on the WTO as an incomplete

contract, the paper provides an original framefor analyzing SDT and draws attention, in particular, to the

utility of the economic contract theory as a programmatic and evaluative frame for SDT and differential

treatmentmore generally.

Keywords Developing countries, WTO, SDT, Differential treatment

Paper type Research paper

Introduction

International law has long grappled with how to structure legal obligations in a way that

takes account of developing country needs and circumstances (Rajamani, 2006). Within

the context of the climate change regime for example, the issue of whether equal

obligations are appropriate given developing countries’different historical contributions

to climate change has been much contested (McGee and Steffek, 2016, p. 51). Similarly, in

the multilateral trade regime, while developing countries were initially subject to the

same rules as their developed counterparts, a shift away from such obligational equality

occurred in the early years of the general agreement on tariffs and trade (GATT). This

was in part a response to equity-related concerns (Lamp, 2015). The practice of p roviding

for a differential legal regime in favour of developing countries continued into the World

The author thanks Prof. Joe McMahon, Prof. Michael Cardwell, Prof. Barry Rodger, Prof. Elizabeth

Kirk, Prof. Elisa Morgera and Dr Gregory Messenger for comments on a previous draft. Any errors

are the author’s own.

JITLP

16,3

126

Received13 October 2017

Revised13 October 2017

Accepted24 October 2017

Journalof International Trade

Lawand Policy

Vol.16 No. 3, 2017

pp. 126-140

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-10-2017-0034

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