On July 26, U.S. President Donald Trump asked his Trade Representative Robert Lighthizer to increase pressure on the World Trade Organization (WTO) to change how it designates developing members including China.

In a memorandum, he threatened if there was no "substantial progress" toward changing the special and differential treatment for developing members within 90 days, the U.S. would take unilateral action, including no longer regarding some members as developing economies and not supporting their joining the Organisation for Economic Co-operation and Development (OECD).

Trump also took a shot at seven of the 10 wealthiest economies in the world as measured by GDP per capita on a purchasing power parity basis—Brunei, Hong Kong Special Administrative Region (SAR) of China, Kuwait, Macao SAR of China, Qatar, Singapore and the United Arab Emirates—all of which have developing member status under WTO rules.

In addition, he lashed out at Group of 20 (G20) members like Mexico, the Republic of Korea (ROK) and Turkey too on their developing member status.

This time, Trump has targeted not only some specific economies, but also the WTO's definition of developing members. His complaint is that the WTO's special and differential treatment for developing members has damaged the global trade system and the trade body urgently needs reform. He has repeatedly threatened that the U.S. would withdraw from the WTO if the reform doesn't come through.

The question now is, what exactly is a developing economy?

What the others say

As a matter of fact, there is no fixed definition that is universally recognized.

Going by the UN's list of Sustainable Development Goals, developing countries are those between developed and less economically developed countries, with their industrialization and human development index (HDI) lying between the two groups.

Besides, while assessing factors like livelihood, the GDP and per-capita income, developing countries are supposed to have high growth potential. However, compared with developed nations, they have a lot to improve, such as access to clean water, sanitation, health, poverty alleviation, education, energy security, and sustainable consumption and production. On this list, 136 UN members fall in the category of developing countries.

According to the UN Development Programme's Human Development Report, all countries and regions that fail to live up to the criteria for developed nations can be classified as developing countries. As this concept is too extensive, it is further divided into categories like new industrialized countries, emerging markets, frontier markets and least developed countries.

According to the International Monetary Fund's World Economic Outlook database, by October 2018, there were 154 developing countries and regions with 13 shedding the title in 2015.

Among the 154 developing countries and regions, new industrialized economies (Brazil, China, India, Malaysia, Mexico, the Philippines, South Africa, Thailand and Turkey) and BRICS members (Brazil, Russia, India, China and South Africa) are separately listed, defined as countries that have yet to reach the criteria for developed economies but far exceed the average level of developing economies.

The WTO has used a mixed version of all these concepts. Besides, countries like Cuba and the Democratic People's Republic of Korea, which are not on the IMF and World Bank's lists of developing economies due to non-membership in the IMF, are also classified as developing members.

What's worth mentioning is that China is on the lists of developing economies of all these international organizations and their reports; only, it is placed among new industrialized economies or sometimes among major developing economies.

Developing economy criteria

Investopedia, a U.S. website of financial news and insights, and Canada's Bank of Montreal recently put forward a set of widely recognized thresholds to measure the status of developed economies.

First, their GDP per capita should be at least $12,000 (raised to $25,000 in sparsely populated countries), calculated on purchasing power parity. Second, HDI should be not lower than 0.8. Conventional developed countries have their HDI at 0.85 or even higher than 0.9. Third, there should be a high level of industrialization, with an average lifespan higher than 70 or even 80, an infant mortality rate much lower than 10 per 1,000, a relatively high ratio of female employment and senior female officials in organizations, energy consumption that is higher than the world average and relatively high personal debt levels.

Measured by these indexes, some self-declared developing economies are actually developed ones, and vice versa. For example, Chile is listed among developing economies by many international organizations, with its GDP per capita standing at $22,145, average life expectancy at 75, infant mortality rate at 7 per 1,000, and HDI at 0.82. Its industrialization, female employment and education popularization all reach high levels. It actually can be designated a developed economy.

The ROK is a similar case, and the IMF has already placed it on the list of developed economies.

At the same time, several developed economies designated by some organizations, nations or themselves do not live up to the status, like Russia, Mexico, Qatar, Malaysia, Brazil, Argentina and Israel.

How about China? China's aggregate GDP ranks second in the world, with its total energy use jumping to the first, average life expectancy reaching 75 years and infant mortality rate dropping to 9 per 1,000. However, the GDP per capita stood at $9,844 in 2016, a large number of people still live in poverty, and technological innovation is still at a relatively low level. Thus, China can be classified only as a developing country, at least for the time being.

Despite rapid progress, China's HDI stands at 0.72, not only much lower than those of major industrialized countries like the U.S. (0.92), Japan (0.903) and Germany (0.926), but also lower than many developing countries' like Mexico (0.78), Turkey (0.76) and Malaysia (0.78).

Although the HDI is a controversial index, it reflects the fact that despite its impressive achievements in the past years, China still has a long way to go before it can be designated a developed or industrialized country. It still has many barriers to surmount before it can really be called the world's richest or second richest country.

Whichever criteria are followed, China is a developing economy. China does not stick to this identity because it wants to take advantage of the WTO's special and differential treatment for developing members, but it is how the country is recognized by the vast majority of the people on this planet. The U.S. demand that China be given developed nation status is unfounded.

A protracted attempt

The fact is that even before Trump, since the time of his predecessor Barack Obama, there were efforts to compel China to call itself a developed or industrialized member in a string of international economic and trade bodies like the WTO. There were even baits that the new designation would ensure China's entry in the Group of Eight and the OECD.

Why is the U.S. rushing to designate China a developed nation? As Chad P. Brown, a senior fellow at the U.S. Peterson Institute for International Economics, said, by doing so, the U.S. and particularly Trump, hope to strip China of a series of preferential treatment policies granted to developing members under the WTO framework.

The World Bank, which is known to be dominated by the U.S., canceled the concepts of developing and developed members in the 2016 edition of the World Development Indicators report. Based on per-capita GDP, it classified economies into low income, lower middle income, upper middle income and high income groups, labeling China an upper middle income economy.

However, this classification is controversial and not widely recognized because it fails to comprehensively measure the overall development level of an economy. It leads to Brunei and Qatar being considered more developed than the UK and Germany.

Early this year, Trump gave a proposal to the WTO, saying OECD members, G20 members or any economy whose share of global trade exceeds 0.5 percent, should be excluded from the list of developing economies. However, it was rejected by the WTO.

Critics said it was an arbitrary proposal that would shake the foundations of the global trade system based on consensus and voluntary willingness of all WTO members.

In July, the Appellate Body of the WTO announced in a report that the revised countervailing measures imposed by the U.S. on certain imports from China were inconsistent with WTO rules, which could allow China to impose additional tariffs on U.S. commodities. The Trump administration is especially unhappy about this and some U.S. analysts said the effort to strip China of its developing nation status this time may be related to that.

Also, as some media outlets like 24 heures of Switzerland have pointed out, the Trump administration's action, though mainly targeting China, has also offended many other WTO members.

In the past, by means varying from coercion to temptation, the U.S. successfully tricked developing countries like Mexico and Chile into joining the OECD. However, when trying to ensnare Brazil in the same way, it was strongly resisted by the business community and the public of the country and Brazilian President Jair Bolsonaro, who was interested in the prospect, was pressured to abandon it.

Forcing the vast majority of developing members into accepting treaties unilaterally favorable to the U.S. by deliberately damaging the WTO's functions will ultimately turn out to be a waste of time and energy.

This is an edited excerpt from an article written by Tao Duanfang, a columnist based in Canada, published on the WeChat page of Liaowang Institute, a Beijing-based think tank

Copyedited by Sudeshna Sarkar

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