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Flashcards in Policy space Deck (14)
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Chang, (2002); Wade, (2003)

the rules of the WTO create severe obstacles to development by making illegal many of the policies used by past industrialisers to catch-up to the lead economies of their time – specifically, the protection of infant industries, the regulation of foreign investment, and the appropriation of technology through weak protection of intellectual property rights


Weiss (2005)

argues that the policies permitted under the WTO, such as subsidies for R&D and technology-intensive industries, provide room for only technologically advanced types of industrial policies. However, these are unsuited for most developing countries and therefore provide little opportunity for ‘catch-up’.


Held et. al. (2000)

go as far as to claim that the only policies still viable for developing countries are those that promote human capital formation. Therefore, they argue, the rules of the WTO effectively lock developing countries in to subordinate economic positions in the international hierarchy.


Amsden & Hikino, (2000)

they emphasize that some of the policies permitted under the WTO, such as subsidies for R&D and technology-intensive industries, as well as antidumping duties and safeguards, provide considerable opportunities to promote domestic industries as in the past


Shadlen (2005)

argues that the WTO permits significant flexibilities for developing countries to continue to implement trade-related industrial policies. However, many of these flexibilities, he argues, are effectively removed for developing countries under the rules contained in regional and bilateral trade agreements (RBTAs). In exchange for greater market access in developed countries many developing countries agree to restrict their policy choices beyond the level promised in WTO agreements. For example, they accept tighter restrictions on their use of tariffs, greater penalties on the use of investment regulation, and fewer flexibilities in their protection of IPRs


Mortensen (2012)

In the case of the WTO, the rules are enforced less as a set of mandatory principals and more as a type of social contract. Unlike, for example, criminal law which is actively enforced by institutions of the state, such as the police and judiciary, the law of the WTO requires members to enforce the rules on one another, by bringing each other to the dispute settlement mechanism. Thus, even though a policy may be illegal, if no country is willing to enforce the rule, it becomes de facto legal


DiCaprio and Gallagher (2006)

The study focused on four types of industrial policies in a set of seven developing countries, and measured the frequency of their use before and after the establishment of the WTO.They found that many of these policy instruments were removed after the WTO’s establishment, often following significant ‘prodding’ including consultations and dispute settlement hearings at the WTO. However, they do note that some prohibited policies actually remained. They therefore concluded that a significant reduction in policy space has in fact occurred, as the frequency of these specific policy instruments had drastically reduced


Milner (2013)

investigates whether the level of import protection has increased in developing countries by focusing on the frequency and intensity oftheuse of three policy instruments. The instruments include tariffs, antidumping duties and RBTAs, which he argues act as protection by eroding the equal treatment of trading partners under the WTO’s ‘ most favoured nation’principal. He notes rises in all of these, which, he claims, demonstrates an overall increase in protectionism in developing countries.


Melo (2007)

focuses on a set of ‘open-economy’ industrial policies – those compatible with open competitive markets, such as tax incentives and credit subsidies. By noting that a number of countries in Latin America and the Caribbean adopted these types of industrial policies in the three year period from 1994-1996, he argues that countries have adapted to the WTO era by resorting to industrial policies that do not restrict the flow of trade


Mayer (2009)

1. to be meaningful and pro-development, 1. the context for policy space must extend beyond trade policy and include the many non-trade (particularly macroeconomic and exchange-rate) policies that will achieve developmental goals more effectively; 2. policy space depends not only on international rules; rather, in a globalised world it also depends on the impact of international market conditions and policy decisions taken in other countries on the effectiveness of national policy instruments; 3. international integration affects policy space through several factors that pull in opposite directions; whether it increases or reduces policy space differs by country and type of integration; 4. policy-makers who choose to pursue more proactive policies and broad development objectives which privilege real economic variables (for example, real output and income growth) require instruments that allow (a) correcting for market and government failures, (b) managing boom-bust cycles, and (c) dealing effectively with external shocks; and 5. while the UR agreements have introduced restrictions, most of the policy space required to pursue proactive development policies is available and could be further enlarged by tightening disciplines in international monetary and financial relationships.


Gallagher (2008)

Developing countries took a respite from the negotiations because the potential gains of the market access deal on the table were relatively small and the cumulative costs in terms of losses of policy space in the UR and the DDR combined were relatively large. Before the current round of negotiations began the WTO system provided policy space in the following areas by allowing nations to: • use average tariffs to sequence certain industries into world markets; • restrict the liberalization of certain service industries and ‘limit’ the liberalization of other industries to steer liberalization toward development; • issue compulsory licenses under the TRIPs; and • require foreign firms to transfer technology, form joint ventures and perform R&D in the host country. The DDR proposals through September of 2007 could have put much of these openings in jeopardy, with little benefits in return.


Chang (2004)

During their early stages of development, now-developed countries systematically discriminated against foreign investors. They have used a range of instruments to build up national industry, including: limits on ownership; performance requirements on exports, technology transfer or local procurement; insistence on joint ventures with local firms; and barriers to ‘brownfield investments’ through mergers and acquisitions. We argue that, only when domestic industry has reached a certain level of sophistication, complexity, and competitiveness do the benefits of non-discrimination and liberalisation of foreign investment appear to outweigh the costs.


TRIPS limits to policy space


USTR push