Developing Countries and the GATT:

With out of  the original signatories, the developing  countries were members of the GATT  from the very beginning. They,  however,  played  a very little  role  as  two  of the sectors of  greatest interest  to  developing countries,  namely  agriculture  and  textiles,  were excluded  from  the negotiations.  Furthermore,  these countries had adopted a policy of  import substituting  industrialisation and  so were not interested in reducing tariffs.

Moreover,  apart from the high  tariffs developing countries maintained  they were allowed  to maintain high protection levels QRs  through two clauses.  First, was the balance of payments clause. A country with  a balance of payments deficit, and this had  to be  certified by  the IMF,  could institute quantitative restrictions (QRs), which were otherwise banned. At  this stage the IMF was quite  liberal  in  certifying  that a country had a balance  of  payments problem and  most  developing countries did have BOP deficits. Second, developing countries were allowed to use QRs for development purposes.

In more recent times, the belief is  that BOP deficits  have to be tackled through exchange rate policy and not QRs. So the IMF is much less willing to certify that a country has a BOP  problem and  the members of the WTO  are also unwilling to countenance QRs.  Also opinion has moved against the use of trade restrictions for development. So there is much  less accommodation for the adoption of  restrictive trade policies by developing  countries. 

To reiterate, the developing  countries  did not engage  in reciprocal liberalisation as sectors of interest  to them were excluded  from  the negotiations and because of  their import substitution policies.  But  since they constantly faced BOP problems,  so they sought preferential access to markets of  the  developed countries.  They also wished  to grant each other preferential access without necessarily moving to free trade as required under GATT rules. These two exceptions to  the MFN  rule were  legitimised  under  the  enabling clause negotiated during the Tokyo Round. The  developled  countries  did grant preferential access  to exports  from developing  countries  under the Generalised System of Preferences (GSP).  But  there were  many  restrictions on  the working of the GSP so benefits  to  developing countries were limited. Preferential trading schemes among developing countries have been usually unsuccessful.