Effect of S&D Flexibilities in WTO Rules on the Least Developed Countries' Participation in Global Value Chains

A few studies have examined the trade effects of special and differential treatment (S&D) flexibilities contained in the World Trade Organization (WTO) rules. This article contributes to the extant literature by examining the effect of S&D flexibilities in favor of the least developed countries (LDCs) on LDCs' participation in global value chains (GVCs). The analysis uses the entropy balancing approach—an impact analysis technique—and establishes that LDC‐related S&D flexibilities are associated with a greater backward GVC participation by LDC Article XII Members (these are LDCs that undertook extensive trade liberalization commitments when joining the WTO) but, at best, exert no significant effect on the backward GVC participation by LDC founding Members (LDCs that were Members of the predecessor of the WTO and joined the WTO through simple procedures). In the meantime, these flexibilities tend to promote the forward GVC participation by LDC founding Members, but at best, exert no significant effect on the forward GVC participation by LDC Article XII Members. Overall, the analysis has shown that LDC‐related S&D flexibilities do influence LDCs' participation in GVCs, with a differentiated effect on LDCs depending on whether or not they undertook stronger trade liberalization commitments when joining the WTO.