Legally-possible Suggestion

The concurrent assistance, mainly the loans, by South Korea could still partially or wholly be justified. In fact, the WTO and multilateral trading system traditionally admits the fact that there needs some assistance and exceptional treatment towards the developing and least-developed member countries (hereinafter referred to as the LDCs). Generalized Special Preference and Aid for Trade by UNCTAD²⁹⁶ are some typical examples.

Regarding the special treatment in the subsidy, in Part VIII of the SCM Agreement, it specifically states in Article 27 that:

PART VIII: DEVELOPING COUNTRY MEMBERS Article 27

Special and Differential Treatment of Developing Country Members

27.1 Members recognize that subsidies may play an important role in economic development programmes of developing country Members.²⁹⁷

Further, more specifically about the specialty of actionable subsidies – highly linkable to the inter-Korean trade and cooperation – it is stated in Article 27.9 that:

27.9 Regarding actionable subsidies granted or maintained by a developing country Member other than those referred to in paragraph 1 of Article 6, action may not be authorized or taken under Article 7 unless nullification or impairment of tariff concessions or other

(Vol. 23, No.4), p. 158. (In Korean)

296 UNCTAD = United Nations Conference on Trade and Development

297 World Trade Organization, The Legal Texts, p. 261.

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obligations under GATT 1994 is found to exist as a result of such a subsidy, in such a way as to displace or impede imports of a like product of another Member into the market of the subsidizing developing country Member or unless injury to a domestic industry in the market of an importing Member occurs.²⁹⁸

In short, though still very strictly monitored and restricted, developing countries and LDCs – both givers and receivers – are more favorable in the WTO system.²⁹⁹ South Korea internationally is yet to be a developed country.

It was known that they were reluctant to be a developed Member upon the WTO accession because of the issues like the opening of their rice markets and its grace period.³⁰⁰ If the position as a developing member is still firm, then it is also very significant to officially recognize North Korea as a developing country or even LDC to make them as a legitimate recipient of subsidy and beneficiary.

298 Ibid., p. 262.

299 Also, in Annex VII of the SCM Agreement provide explanations on developing country members.

The original text is as follows:

ANNEX VII

DEVELOPING COUNTRY MEMBERS REFERRED TO IN PARAGRAPH 2(a) OF ARTICLE 27 The developing country Members not subject to the provisions of paragraph 1(a) of Article 3 under the terms of paragraph 2(a) of Article 27 are:

(a) Least-developed countries designated as such by the United Nations which are Members of the WTO

(b) Each of the following developing countries which are Members of the WTO shall be subject to the provisions which are applicable to other developing country Members according to paragraph 2(b) of Article 27 when GNP per capita has reached $1,000 per annum*: Bolivia, Cameroon, Congo, Côte d’Ivoire, Dominican Republic, Egypt, Ghana, Guatemala, Guyana, India, Indonesia, Kenya, Morocco, Nicaragua, Nigeria, Pakistan, Philippines, Senegal, Sri Lanka and Zimbabwe.

*The inception of developing Members in the list in paragraph (b) is based on the most recent data from the World Bank on GNP per capita.

300 Ahn, Dukgeun and Jeongjoon James Park (2014) “A Study on Internal Trade between South/North Korea in the WTO System and Gaesung Industrial Complex,” Review on International and Area Studies (Vol. 23, No.4), p. 155. (In Korean)

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In regards to the scope of LDCs under the WTO, the official website says that “the WTO recognizes as least-developed countries (LDCs) those countries which have been designated as such by the United Nations. There are currently 48 least-developed countries on the UN list, 34 of which to date have become WTO members.”³⁰¹ (See Figure 31)

As witnessed in Figure 31, surprisingly the 48 LDCs under UNCTAD do not include North Korea somehow. The reason why UNCTAD has not recognized North Korea as a LDC is needed to be clarified. Yet, according to UN recognition of LDCs is as follows:

The list of LDCs is reviewed every three years by the United Nations

301 http://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm. Regarding the scope of

‘developing countries and their advantages under the WTO,’ the official website (http://www.wto.org/english/tratop_e/devel_e/d1who_e.htm) states as follows:

Definition of a “developing country” in the WTO […]

How is the selection made?

There are no WTO definitions of “developed” and “developing” countries. Members announce for themselves whether they are “developed” or “developing” countries. However, other members can challenge the decision of a member to make use of provisions available to developing countries.

What are the advantages of “developing country” status?

Developing country status in the WTO brings certain rights. There are for example provisions in some WTO Agreements which provide developing countries with longer transition periods before they are required to fully implement the agreement and developing countries can receive technical assistance.

That a WTO member announces itself as a developing country does not automatically mean that it will benefit from the unilateral preference schemes of some of the developed country members such as the Generalized System of Preferences (GSP). In practice, it is the preference giving country which decides the list of developing countries that will benefit from the preferences. For more information about the GSP, see the United Nations Conference on Trade and Development (UNCTAD)’s website.

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Economic and Social Council, in the light of recommendations by the Committee for Development Policy (CDP).

The following three criteria are used by the CDP to determine LDC status:

 Per capita income (gross national income per capita)

 Human assets (indicators of nutrition, health, school enrolment and literacy)

 Economic vulnerability (indicators of natural and trade- related shocks, physical and economic exposure to shocks, and smallness and remoteness).³⁰²

North Korea first needs to be a WTO member and this issue about their accession is to be further discussed in Chapter IV. Anyway, if North Korea could ever obtain the status as a LDC authorized by UNCTAD and spontaneously by the WTO, both actionable and even prohibited subsidies by South Korea – if there is found to be any – can be justified under the SCM Agreement by the WTO for a certain number of years.³⁰³ And there seems to be no reason observable for North Korea not being able to legitimately qualify and obtain the LDC status according to the UN criteria as long as they are open to accept such global attention.

302 United Nations Conference on Trade and Development, “UN recognition of Least Developed Countries (LDC),” http://unctad.org/en/Pages/ALDC/Least%20Developed%20Countries/UN- recognition-of-LDCs.aspx (accessed on November 3, 2014)

303 Although it varies and depends on cases of subsidies, but the Agreement permits subsidies as much as for a period of five years for developing country Members and eight years for LDC Members, for instance, according to Article 27.3 of the SCM Agreement.

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Chapter IV: The WTO Accession and North Korea