Two Dozen Countries Receive Status Changes

Developing nations finally become developed nations, at least on paper.

Brazil is just one of many countries to lose its status as a developing nation.

On February 10, the United States unilaterally reclassified the economic status of two dozen countries as “developed” for trade purposes. Initially, these countries—including India, Brazil, Thailand, Indonesia and Vietnam—were considered as developing and were thereby able to receive a host of trade benefits and duty-free access for exports to the US.

The reclassification applied to countries that satisfied any of these conditions: 1) World Trade Organization members with a per capita gross national income (GNI) above $12,375 as per World Bank data; 2) WTO members that account for no less than 0.5% of the global trade share; 3) Organization for Economic Co-operation and Development (OECD) membership or pending application for membership, EU membership and G20 membership.

Thus, Brazil, India and Indonesia, with a trade share of more than 0.5% and G20 membership, and Thailand and Vietnam, with a trade share of more than 0.5%, were classified as developed countries.

That said, many countries stripped of their developing status would suffer, says Vijaya Katti, dean of Administration at the Indian Institute of Foreign Trade. “As the US eliminated its special preferences to these countries, development progress in some countries may get stalled. Many of the countries on the list still require special preferences for some time.”

In the short term, Indian exports will take a hit, argues Katti. “Strong leadership, continuing reform and untiring efforts of Indian exporters may help the country sustain the loss. However, removal of India from the developing-nation list for trade benefits is going to have an adverse impact on India in immediate future.”

A few developing countries, including Brazil, Singapore and South Korea, “have agreed to relinquish their developing country rights, and this may push India to speed up its reforms,” Katti says.