Is this the end of MFN as we know it? The EU submission on WTO reform and the meaning of development

With the release of the EU submission on WTO reform, it has become clear that the MFN principle’s central role within the WTO architecture is under challenge. As a keystone, it risks the entire bridge falling. Even if the foundations are retained but deemed outdated or unusable, and a new structure is built on top, the result may not be a stable bridge – or house, in this case.

What would a world with conditional MFN look like for the entire WTO membership and for the people and businesses operating in markets across the world? To impose conditions on MFN, we need to understand the ends and means of development, which in turn requires considering whether WTO members need a new theory of development in today’s context.

In 2019, China, India, South Africa, and Venezuela cited Amartya Sen’s work in a communication that critiqued the ‘development divide’ and the capacity constraints of developing Members in the WTO. They reflected on Sen’s efforts to broaden the measurement of development beyond economic needs to encompass individual freedoms, emphasising an individual’s ‘capabilities’ and translating this into capacity constraints for developing country Members.

Two years later, Inu Manak and Jim Bacchus picked up on this discussion, noting the reference to Sen as a lost opportunity to reimagine S&DT. Of course, that and the fact that they observed China did not reflect on Sen’s position concerning political or social freedom. They argued the WTO could adopt a 'broader view of development' for the assessment of S&DT, centred on the development of human capabilities, acknowledging Sen's approach.

Sen’s Development as Freedom introduces the basic idea that enhancing human freedom is both an end and the primary means of development (see p. 59). To Sen, we can measure development by the actual freedoms people enjoy; individual capabilities depend on economic, social, and political arrangements. Both government and society have pivotal roles in designing, sustaining, and strengthening institutions for the multiple, interconnected instruments of freedom, including social opportunities, transparency guarantees, protective security, and economic facilities. In a nutshell, in Sen’s words: ‘The ends and means of development call for placing the perspective of freedom at the center of the stage.’ (60). And, most vitally, Sen observed the need for ‘taking a broad and many-sided approach to development.’ (121). Sen’s ideas influenced the comprehensive development framework introduced by James Wolfensohn at the World Bank.

Sen himself contrasted India and China to consider the central role of individual freedoms in development (49). While China made use of the market economy and developed good schools by placing education as a high priority, Sen cited ‘real handicaps’ in China’s lack of democratic freedoms (51). Sen added that these handicaps were most obvious when studying economic policies and the ‘responsiveness of public action to social crisis and unforeseen disasters’ (51).

We cannot condition economic relationships without a solid understanding of the ends and means of development. I’m not proposing that we transplant Sen’s work into a discussion of conditional MFN. But it’s clear that our global economy is evolving with digital innovation and advanced technologies, which test our respective roles in the development process. Sen’s work may indeed be a valuable starting point for breaking from modernist, universal prescriptions and expanding the conventional framework. What are the central challenges of development? What is the basis of evaluation? What kind of information will Members need to assess? Would we consider reforms to rules that account for individual freedoms and political, social, and economic processes that shape development at the WTO?

The EU has invited renewed debate on theories of development, which would significantly affect how development is measured. The EU proposed setting limits on S&DT, with temporal boundaries and targets based on demonstrated needs. In a system shaped by conditional MFN, what does this mean for existing references to strictly economic needs tests, as we see, for example, in Article XVI of the GATS? The WTO Secretariat has, since 2001, updated notes on the economic needs test, demonstrating significant variability across Members in the criteria of the test and in the meaning of ‘economic needs’ (considering it is undefined in the rules). If we analogise this to potential new conditions on MFN, drawing upon new thinking of the conception of development today, would Members consider equal opportunities for like products in competitive positions, as well as other freedoms? How would Members incorporate assessments that may consider civil rights, an uncensored press, education, and health care? Would Members consider cybersecurity? Would they consider other connections between human capabilities or between artificial intelligence and nature?

Is this the end of MFN liberalisation? It's difficult to tell. The immediate future may involve a series of (presumably) objective criteria to exclude certain products from MFN tariff treatment; more expansive, looser rules on safeguards; looser subsidies rules; tariff preference programmes for selected partners based not on development, financial and trade needs but (presumably) on objective, reasonable, so-called economic security needs (widening the idea of development); specifying sufficiently clear types of measures or limitations in a Member’s schedule, or, well, eliminating reciprocity with selected partners for a set number of years to prevent them from benefiting from their inconsistent (or even aggressive, coercive) practices.