[OPE-L] The WTO and the Shrinking of Development Space

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From: GDAE Announce
Sent: Monday, March 26, 2007 11:21 AM
Subject: New study documents the closing of policy space


The WTO and the Shrinking of Development Space-How Big is the Bite?

Alisa DiCaprio and Kevin P. Gallagher

Journal of World Investment and Trade, Volume 7, no. 5, October 2006

A new study from Tufts University finds that developing country
governments have indeed found it more difficult to pursue proven
development strategies under world trade rules. More striking, researchers
find that developed countries have made extensive use of the WTO's dispute
mechanism to litigate developing country efforts to employ such policies.
The study is also summarized and expanded upon for policy-makers and
advocates in "Measuring the Cost of Lost Policy Space at the WTO," a new
policy brief by the International Relations Center's Americas Program.

For example, Indonesia was forced to curb its local content standards on
foreign auto firms, South Korea had to stop subsidizing its shipbuilding
industry, and India's loose intellectual property regime for
pharmaceuticals had to be revamped. Each of these instruments had been
shown to be successful in fostering industrial development in strategic
sectors.

The authors examine the extent to which the core development policies
employed by late-industrializing nations in the second half of the 20th
Century are permissible under the current World Trade Organization (WTO)
regime. It is well established that WTO rules constrain development space,
but here the authors examine the extent to which WTO rules have resulted
in actual policy change.  They assess whether the WTO is constraining
"development space" in three ways.

  a.. First, building on previous literature, they examine the extent to
which WTO rules restrict the ability to establish certain development
policies that have previously proven effective.
  b.. Second, they measure unilateral compliance with WTO rules as
reported in Trade Policy Reviews-reports that WTO Members are required
to file on their trade policies.
  c.. Third, they examine WTO case law related to the core policies to
evaluate the use of the dispute mechanism to encouraged compliance with
WTO rules.
Contrary to claims that nations can circumvent the WTO to promote
development, the authors find that not only do many of the rules
negotiated in the Uruguay Round constrict the ability of nations to put in
place aggressive development policies, but these rules have been strictly
enforced by WTO dispute panels.  Indeed, more than 25 percent of all the
WTO cases between 1995 and 2005 have focused on dismantling policy space
in developing countries.  These findings imply that developing nations
should take great caution in negotiating measures in the Doha Round that
further restrict policy space, especially given the small gains projected
to arise from a likely deal.

Link to policy report:
<http://www.ase.tufts.edu/gdae/policy_research/AmerProgWTOMar07.pdf>

Link to Journal, with full text accessible only to subscribers:
<http://www.wernerpubl.com/frame_inves.htm>

Full citation: DiCaprio, Alisa, and Kevin P. Gallagher. "The WTO and the
Shrinking of Development Space-How Big is the Bite?"  Journal of World
Investment and Trade, Volume 7, no. 5, October 2006

For more on GDAE's Globalization and Sustainable Development Program:
<http://www.ase.tufts.edu/gdae/policy_research/globalization.html>