- Development — Developing countries — Most-favoured-nation treatment (MFN) — Procedural equality — Foreign relations law
Published under the auspices of the Max Planck Foundation for International Peace and the Rule of Law under the direction of Rüdiger Wolfrum.
1 The vast gaps between developing and developed countries are of utmost importance for the international community. Following the end of the Cold War (1947–91), the division between developing and developed countries marks the deepest rift in the contemporary international system. This division often polarizes the normative positions of countries belonging to these distinctive groups, and it constitutes a source of numerous frictions regarding the structure and content of international law (see also Developing Country Approach to International Law; Development, International Law of; Development, Right to, International Protection). Consequently, the profound gaps between developing and developed countries inhibit co-operation in various spheres that are of long-term importance for both groups.
2 The group of developing countries emerged as a separate category in multilateral treaties at the end of World War II, and development, in the transitive sense, became a distinct field of specialization in social sciences.
B. Measurement and Classification
3 There is no single indicator to classify countries as developing or developed. Development is measured across a range of parameters, among them economic, social, health, educational, political, and trade factors. Consequently, different international institutions employ different criteria to measure development. The most prominent parameter for measuring a country’s level of development is Gross National Income (‘GNI’) per capita, though General Domestic Product (‘GDP’) per capita is also widely employed by specialists. The International Bank for Reconstruction and Development (IBRD) (see also World Bank Group), for instance, uses GNI per capita to classify countries as low-income ($1,025 or less), lower-middle income ($1,026–$4,035), upper-middle income ($4,036–$12,475), and high-income ($12,476 or more) (2015 data). The World Bank conventionally refers to low-income and middle-income countries as developing countries, and to high-income countries as developed countries.
4 Certain deficiencies of purely economic indicators—such as GNI/GDP per capita—led to the development of the Human Development Index (‘HDI’). Since 1993 it has been used by the United Nations Development Programme (UNDP). The HDI measures a country’s achievements in three principal dimensions: health and longevity, measured by life expectancy; education, measured by the percentage of expected and mean years of schooling; and standard of living, measured by GNI per capita.
5 Among developing countries, the sub-category of least-developed countries (‘LDCs’) is clearly recognized in international practice. The United Nations, Economic and Social Council (ECOSOC) designates a list of LDCs which is updated every three years. As of 2017, 47 countries are included in this category. The three criteria employed for the identification of LDCs are low income (under $1,035 GNP per capita in 2015), low level of ‘human assets’ (based on indicators of child mortality, nutrition, maternal mortality, school enrolment, and adult literacy), and economic vulnerability (based on population size, geographical location, merchandise export concentration, share of agriculture in GDP, share of population in low coastal zones, instability of export, victims of natural resources, and instability of agricultural production). Countries with populations exceeding 75 million are not included in the list.
6 Many other international institutions apply a somewhat similar classification. There are no rigid definitions of developed or developing countries in World Trade Organization (WTO) law. Some provisions of WTO agreements provide a vague definition of the term developing countries. Thus, for instance, Art. XVIII (1) General Agreement on Tariffs and Trade [1947 and 1994]) defines developing countries as those ‘economies which can only support low standards of living and are in the early stage of development’. In practice, the self-selection principle is widely employed by the WTO system. In accordance with the self-selection principle, the WTO members unilaterally announce whether they are developed or developing countries on an ad hoc basis. Such an announcement, may, however, be challenged by other WTO members. Though such unilateral declarations have largely defined the status of WTO members, recent developments indicate that at least some developed countries are not prepared to accept what they perceive as abusive invocation of the self-selection principle. Such disagreements do not arise with regard to the status of LDCs, and the WTO recognizes the above-mentioned list prepared by ECOSOC.
7 International environmental treaties (see also Environment, Multilateral Agreements) occasionally adopt different classification criteria. Article 5 Montreal Protocol on Substances that Deplete the Ozone Layer (‘Montreal Protocol’; see also Ozone Layer, International Protection) applies certain rules to any party ‘that is a developing country and whose annual calculated level of consumption of the controlled substances…is less than 0.3 kilograms per capita’.
C. Theories of Development
8 The most fundamental debate in development literature concerns the causes of under-development and methods of attaining development. Various development theories offer different answers to these essential questions, and those explanations influence legal responses to under-development, including the scope and content of differential legal rules in favour of developing countries, which are discussed below. This section briefly addresses the six principal perspectives on development.
1. Modernization Theory
9 This perspective was developed by sociologists and economic historians and gained prominence during the 1950s and 1960s. Development is perceived by the proponents of this approach (eg WW Rostow) as an evolutionary process that follows certain general laws. It is a structural change whereby traditional and backward countries develop from the most primitive stage towards more advanced and complex patterns of social and political organization. This perspective explains global inequality in terms of different levels of technological development among societies. It argues that not every society is eager to seek and employ new technology. Some forward-looking societies eagerly embrace technological innovation while other, more traditional societies, oppose it.
10 Under this concept, traditional society or culture is, in effect, synonymous with under-development and modernization theory identifies tradition as an impediment to economic development. Societies that revere the past and cherish strong family networks are less likely to undergo a successful industrialization process. Thus, developing countries are urged to follow the same pattern of changes undergone earlier by developed countries and imitate certain structural features of Western countries, including intensive division of labour, secularization, greater rationality and innovation, bureaucracy, democratic government, and equality before the law. Culturally, people are encouraged to value individual action and choice, objectivity, future orientation, and achievement over ascription.
11 Modernization theory assigns a key role to developed countries in the global process of economic development. Rich countries serve as a model for other countries and they are expected to assist developing countries in various ways (see also Cooperation, International Law of; Economic Assistance). Developed countries are expected, inter alia, to export high-tech farming methods to raise agricultural yields, export technology and advance the social status of women, transfer industrial and information technology, and provide financial aid to developing countries.
12 Modernization theory was criticized by numerous scholars. Among other things, it was criticized for its implicit assumption that contemporary developing countries should undergo the same stages and processes that developed countries underwent in the past. Generally, it seems erroneous to treat under-development as an universal original situation and it is argued that modernization theory turned an abstract, generalized history of European development into a general logic. According to critics, the process of modernization and industrialization is not inevitable and it has not occurred in many of the world’s poor societies. Modernization theory locates the causes of under-development almost entirely in poor societies and some critics see this analysis as blaming the victims for their own plight.
2. Dependency Theory
13 Dependency theory arose in Latin American social science in the late 1960s, and became influential in developing countries and some international institutions during the 1960s and 1970s. Dependency theorists (eg Wallerstein) do not view under-development as a stage in the evolutionary process but rather as a functional position within the world economy. Economic positions of rich and poor countries are linked. Poor countries are not lagging behind rich ones on a linear path of progress, and the prosperity of developed countries comes largely at the expense of developing countries. Thus, under-development stems from the exploitation of poor countries by wealthy ones.
14 Under dependency theory, the exploitation began with colonialism, when European countries dominated vast areas in Africa, America, and Asia for their own profit. Stronger countries often conquered weaker ones to procure the raw materials needed for their industries, and to secure markets for the products manufactured in their factories. Once overt colonialism largely ended following World War II, covert forms of exploitation continued. Rich countries maintain economic relationships that reproduce patterns of exploitation. Neo-colonialism is promoted by the capitalist world economy that imposes a new state of dependency on poor countries. New patterns of exploitation are maintained by powerful countries, and transnational corporations (see also Corporations in International Law) based in these countries that use cheap labour and raw materials to minimize production costs without government interference. The low prices set for labour and raw materials preclude developing countries from accumulating the capital needed to develop their industries. Developed countries form alliances with traditional elites in developing countries and these oligarchies—of wealthy landowners, army officers, corrupt state officials—oppose industrialism’s spread in their countries because their power and wealth are based on pre-capitalist exploitation and domination.
15 Dependency theory was also criticized by numerous scholars. The approach assumes that countries with strong ties with developed countries are and will remain poor. In reality, some poor countries, such as Ethiopia, have had relatively little contact with rich countries. While others with strong ties with developed countries, including the presence of multinational corporations (Multinational Enterprises), have become affluent, such as Hong Kong and Singapore. Against the argument that the wealth of developed countries resulted from exploitation of developing countries, it is clear that in many cases wealth is not a zero-sum resource by which some gain occurs only at the expense of others. Dependency theory focuses on external actors and places the responsibility for under-development on developed countries. This perspective underestimates internal factors within developing countries that may contribute to under-development, such as widespread corruption (Corruption, Fight against) and expensive military campaigns.
3. Developmental State
16 The State-led development model was the focus of a significant part of the development research from the 1950s until the end of 1970s. The intellectual foundations of the developmental State approach are principally located in the work of John Maynard Keynes (1883–1946). Keynes suggested that the principles of classical economics—emphasizing the role of the market—apply in numerous situations but not during economic depressions, which are characterized by widespread unemployment. During such economic downturns, labour prices do not drop, as expected, and employers do not hire more workers. Consequently, during recessions, high employment may persist for a long period. Keynes suggested that governments should intervene in such situations, increase spending, and initiate public works to cope with recession. Public works, such as building roads, are expected to increase employment and demand for products and services, which are, in turn, expected to increase output and lead factories to hire more workers. This chain of events is expected to generate an upward economic spiral. Thus, Keynes called upon governments to channel more money into the economy and borrow, if necessary, during recessions.
17 Following Keynes’s writings, the proponents of the developmental State approach argue that the ordinary principles of classical economics do not apply to developing countries. Developing countries, for instance, have low rates of savings and do not have sufficient capital to industrialize. The risks involved in investment and industrialization in developing countries are often prohibitive for private entrepreneurs, and the prospective profit rates in the first stage of industrialization are likely to be considerably below the prevailing average in developed countries.
18 In light of the structural problems of developing countries, governments are urged to play an active role and facilitate industrialization. State-managed development requires that State resources, including bureaucracy and capital, serve both as a central planning and allocation mechanism and as an engine of growth and development. The international community should also play a role in the development process. Developed countries should provide massive foreign aid and other forms of financial assistance as well as technical assistance. These countries and international institutions ought to extend non-reciprocal trade preference to products manufactured in developing countries.
4. Neo-Classical Theory
19 Neo-classical ideas date back to the writings of Adam Smith and David Ricardo. This approach to economic development re-emerged during the 1970s and is still influential in current developmental practice. Neo-classical economists argue that economics is a universal science, equally applicable to all countries, including the economies of developing countries. The assumptions of neo-classical economists include the beliefs that individuals behave as rational utility maximizers who know their preferences and the best strategy to attain them. The most productive economy is the one that allow individuals the greatest freedom to engage in economic activities, enter into contracts as they choose, and reap the benefits of their activities. Thus, if individuals are allowed to pursue their individual interests, society benefits.
20 The central tenet of neo-classical economics is that free competition and market mechanisms generate a more efficient allocation of resources than planned economy mechanisms. The proponents of this approach admit that there are market failures and that these are more prevalent in many developing countries than in developed ones. Still, they do not accept that wholly different strategies are required for promoting economic growth in developing countries. Impacts of market failures are less significant than the undesirable consequence of government intervention, which is the most serious problem of developing countries. Thus, the principal source of under-development is government failure rather than market failure. Government failures are caused, inter alia, by self-seeking politicians and other actors who aim at influencing allocation of resources in accordance with their own interests, the corrupt behaviour of politicians and government officials, and general lack of knowledge about the private sector and its functioning.
21 Neo-classical strategies suggest that developing countries reduce the size of the public sector through privatization and deregulation, relinquish numerous tasks to private actors, abolish distorting interventions in pricing mechanisms, adopt fiscal disciplines, and liberalize foreign trade and investment.
5. Institutional Theory
22 Theories emphasizing the significance of the quality of domestic institutions for economic development have gained much prominence in recent decades. According to Douglass North, the 1993 Nobel laureate in economics, the New Institutional Economics (‘NIE’) approach does not aim to replace the widely-held classical theory; it rather builds on, modifies, and extends it so as to better address a new range of issues. The point of departure for the NIE is that major assumptions of the neo-classical theory prevail only in rare cases. Typically, transactions are not costless; individuals act on incomplete and asymmetric information; they have limited mental capacity to process information; and markets are imperfect. Problems of information and enforcement underscore the need for appropriate institutions for the efficient functioning of markets as well as organizations, both public and private.
23 From the institutional perspective, effective, independent, and uncorrupted institutions that constrain the activities of public and private actors constitute important mechanisms that promote long-term economic development. Thus, a wide variety of legal and informal rules of behaviour, as well as high-quality institutions that are involved in the enforcement of property, contractual, and other rights are crucial for economic development. Myrdal coined the term ‘soft states’ to describe countries in which rulers are unwilling to impose obligations on the governed, and the corresponding unwillingness of the latter to obey rules laid down even by democratic procedures. Many developing countries lack the capability to perform vital institutional tasks (such as coordinating functions in the private sector).
24 The rise of the new institutional approach has narrowed the gap between state-led development approaches and the neo-liberal approach. Recent advances in development studies underline that markets and institutions are closely intertwined, and that markets do not exist in a vacuum but rather require an institutional framework.
6. Geographical Factors
25 Some prominent experts argue that geographical conditions significantly influence the prospects of economic development. Thus, for example, Jeffrey Sachs argues that slower growth in Africa is significantly explained by the adverse geographical conditions prevailing in many countries in this continent. Countries’ trade capacity is affected by transportation costs, and the latter are influenced by producers’ geographical location. Landlocked countries and industries located in mountainous areas or far from navigable rivers or adequate port facilities face considerably higher transport costs.
26 Climatic conditions influence agricultural productivity, the tourism industry, and the burden of disease. Thus, for example, numerous countries that are trapped in arid conditions are more vulnerable to prolonged droughts and more likely to suffer from lower agricultural production. And some tropical countries have ecological conditions that favour diseases like malaria. On the other hand, possession of ample natural resources (such as oil, gas, or minerals) is likely to enhance the prospects of economic growth.
27 It is noteworthy that adverse geographical conditions are not fatal for economic development. Such geographical obstacles may be overcome, for example, through increased investment in infrastructure and good institutional capacity.
D. Differential Rules in Favour of Developing Countries
28 Based on the well-established principle of sovereign equality of States, most rules of international law apply uniformly to all countries (States, Sovereign Equality). Some multilateral treaties, however, include special rules in favour of developing countries. Though contemporary international law does not bind countries and international institutions to establish such rules, it seems that differential rules are increasingly employed in multilateral treaties. Differential treatment is a central component of the international law of development, and this technique is particularly prominent in international trade and environmental treaties.
1. International Trade Law
29 The WTO agreements contain numerous provisions that accord special and differential treatment to developing countries and LDCs. Thus, for example, the enabling clause, which is an integral part of GATT, allows developed countries to deviate from the basic most-favoured-nation obligation (Art. I General Agreement on Tariffs and Trade; see also Most-Favoured-Nation Clause) and reduce import barriers to products manufactured only in developing countries. This clause forms the legal basis for the General System of Preferences (‘GSP’), under which certain developed countries unilaterally offer non-reciprocal preferential treatment—eg lower tariffs—to developing countries’ products. This clause also applies more lenient conditions to the formation of regional trade agreements among developing countries, compared to the more stringent conditions included in Art. XXIV General Agreement on Tariffs and Trade. The WTO agreements also assign reduced commitments to developing countries in several spheres, such as lower obligations regarding the reduction of domestic agricultural subsidies (Art. 6 Agreement on Agriculture) and exemption for LDCs from the ban on export subsidies (Art. 27 Agreement on Subsidies and Countervailing Measures). Other WTO agreements provide longer transitional periods for implementing the agreements’ obligations (Art. 66 Agreement on Trade-Related Aspects of Intellectual Property Rights  [‘TRIPS’]). Certain WTO provisions allow developing countries to impose higher restrictions on some imported products and services (eg Art. XII General Agreement on Trade in Services  [‘GATS’]).
30 Some WTO rules on differential treatment are vague—eg Part IV GATT—and their practical value is not significant. In addition, the WTO agreements apply relatively high tariffs and non-tariff barriers (see also Technical Barriers to Trade) to certain products that are of major importance for developing countries, mainly labour-intensive goods like agricultural and textile products. One of the key demands of developing countries participating in the current Doha Development Round, launched in November 2001, was enhancing access of their products to the markets of developed countries. The ongoing negotiations have the potential to contribute significantly to making the global trading system more receptive to the needs of developing countries. In the Doha Ministerial Declaration, the WTO members pledged to place the needs and interest of developing countries at the heart of the negotiations and ‘that all special and differential treatment provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational’ (Art. 44 Doha Ministerial Declaration).
2. International Environmental Law
31 Differential rules in favour of developing countries are prevalent in recent multilateral environmental treaties. Non-uniform obligations are more widespread in general framework conventions, the details of which are typically elaborated in sequential protocols. The principle of common but differentiated responsibilities (‘CDR’) characterizes recent global environmental treaties. This principle means that while the burden involved in global environmental protection is common to developing and developed countries alike, developed countries bear a greater share of the burden. This CDR principle was included in Declaration of the United Nations Conference on the Human Environment signed in 1972 in Stockholm, and although not explicitly, the Rio Declaration on Environment and Development (‘Rio Declaration’; Stockholm Declaration  and Rio Declaration ), and Art. 3 (1) of the past Kyoto Protocol to the United Nations Framework Convention on Climate Change. Art. 2 (2) Paris Agreement  states that the ‘[a]greement will be implemented to reflect equity and the principle of common but differentiated responsibilities and respective capabilities, in the light of different national circumstances’.
32 Certain multilateral environmental treaties assign more lenient substantive obligations to developing countries. Thus, for example, Art. 4 (4) Paris Agreement provides that while developed countries ‘should continue taking the lead by undertaking economy-wide absolute emission reduction targets’, developing countries ‘should continue enhancing their mitigation efforts, and are encouraged to move over time towards economy-wide emission reduction or limitation targets in the light of different national circumstances’. Some environmental agreements grant developing parties longer transitional periods for implementing the agreements’ commitments (eg Art. 5 Montreal Protocol on Substances that Deplete the Ozone Layer).
33 Certain environmental treaties require developed parties to provide financial assistance to developing countries. Thus, for instance, Art. 10 Montreal Protocol on Substances that Deplete the Ozone Layer established the Multilateral Fund, financed by developed countries and aims to ‘meet all agreed incremental costs of such [developing] Parties in order to enable their compliance with the control measure of the Protocol’. In the sphere of climate change, developed countries committed in Art. 8 of the Copenhagen Accord  to a goal of jointly mobilizing 100 billion US dollars annually by 2020 to address the needs of developing countries (with this funding coming from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance). The Paris Agreement  is more modest in that regard, and under Art. 9 Paris Agreement, developed countries shall provide financial resources to assist developing countries with respect to both mitigation and adaptation. According to Art. 9 (3), developed countries should take the lead in mobilizing climate finance from a wide variety of sources, instruments, and channels. Such mobilization of climate finance should represent a progression beyond previous efforts.
E. Justifications for Differential Rules
34 The rationales underlying differential treatment in favour of developing countries are of significance for the interpretation of the above treaty provisions (see also Interpretation of International Law) as well as for the broader discussion on whether such legal arrangements should be expanded in future international regimes. The principal justifications that have been advanced in the literature relate to rational factors, ie promoting efficiency, and moral factors, such as promoting fairness and social justice.
35 The rational justifications address the fact that developing countries often have a different order of priorities regarding accession and implementation of international treaties. This difference often relates to their limited capacities—economic and non-economic—and their hesitation to invest resources in international co-operative regimes that may hinder their development, at least in the short term. This feature is particularly notable with regard to developing countries’ position on environmental treaties and it often impedes international collective action in spheres characterized by intensified interdependence. Consequently, it is rational for developed countries involved in such interdependent and asymmetric settings to offer potential developing contracting parties less stringent obligations and various incentives, such as financial and technological assistance. Such a strategy broadens the participation of developing countries in international treaties and promotes the interests of both developing and developed countries (see also Community Interests).
36 Rational factors may explain not only the provision of certain asymmetric incentives that aim to entice developing countries to join a particular international treaty but may also serve a broader goal of narrowing the gap between developing and developed countries. As countries draw nearer and interdependency increases in the process of globalization, a greater amount of negative impacts generated by lack of development are felt within the territories of developed countries. This process is noticeable in regard to non-economic spillovers, such as increased illegal immigration, trans-boundary environmental damage (see also Hazardous Substances and Waste, Transboundary Impacts; Air Pollution, Transboundary Aspects), and criminal activities that increasingly flow from developing to developed countries (see also Transnational Organized Crime). The growing flow of negative externalities that result from lack of development, and the ensuing damage incurred by developed countries, increase the incentives to narrow economic gaps and decrease the above-mentioned negative flows from developing countries.
37 Moral reasoning may also justify differential rules in favour of developing countries. The vastly unequal resources available to developing and developed countries and the limited capacities of the former parties suggest that equitable legal regimes should not impose the same obligations on rich and poor parties. The limited resources and capacities of developing countries also relate to their increased vulnerability to a broad range of perils, such as health, environmental, and economic crises. Thus, the more limited availability of resources reinforces the moral argument in favour of differential rules that favour developing countries. In some spheres, the moral demand to grant favourable treatment to developing countries is based on the argument that developed countries share a greater responsibility for the creation of global harm. This reasoning is explicitly mentioned in Principle 7 Rio Declaration with regard to environmental problems. In the sphere of international trade law, demands for differential measures are occasionally presented as a remedy for decades of economic stagnation under colonial rule and an international economic system that favoured the interests of developed countries. This justification was particularly associated with the 1970s United Nations General Assembly resolutions on the New International Economic Order (NIEO).
38 Some scholars offer a broader moral argument in justifying the duty to narrow the gap between developing and developed countries. Drawing on Rawls’s Theory of Justice, it is contended that principles of distributive justice also apply in the international community. Thus, it has been argued that behind the veil of ignorance, not knowing the resources of their future communities, parties would agree on a resource distribution principle that would give each society a fair chance to develop an economy capable of satisfying its members’ basic needs and just political institutions. Such arguments are consistent with the more general argument that notions of fairness are increasingly relevant to some spheres of international law and international legal discourse.
F. Concluding Remarks
39 The gulf between developing and developed countries inhibits the development of international law in various spheres and also affects the general level of compliance with existing international legal obligations. Some policy-makers and scholars in developing countries view contemporary international law as a mechanism that legitimizes and sustains the inferior position of their countries in the international system. Under this concept, international legal rules are perceived to serve the interests of developed countries. Parallel literature in international law and international relations underscores the importance of legitimacy as a factor that intensifies or weakens the sense of obligation toward international norms. Developing countries may further develop social detachment and even hostile feelings toward a system that does not rectify their inferior position. Norms that emerge from the international system in such a context are likely to be perceived as less legitimate. Bearing in mind the relationship between legitimacy and compliance, the increasing detachment of developing countries from the international community may imply growing polarization and a decline in the prospects for compliance with international obligations. These and other undesirable consequences of the polarization of the first and third worlds emphasize that the enormous task of narrowing the gaps between developing and developed countries poses a challenge to policy-makers and legal scholars everywhere.
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