What strategies are viable for developing countries today? The World Trade Organization and the shrinking of ‘development space’

TLDR

International agreements such as TRIMS, GATS, and TRIPS increasingly constrain developing countries’ industrial policy options, effectively locking them into a position that favors Western dominance. The paper argues that these agreements represent a contemporary form of List’s “kicking away the ladder” and calls for a rethinking of development strategies and the role of multilateral institutions. It concludes that while the prospects for meaningful reform are limited, they are not impossible.

Abstract

The world is currently experiencing a surge of international regulations aimed at limiting the development policy options of developing country governments. Of the three big agreements coming out of the Uruguay Round – on investment measures (TRIMS), trade in services (GATS), and intellectual property rights (TRIPS) – the first two limit the authority of developing country governments to constrain the choices of companies operating in their territory, while the third requires the governments to enforce rigorous property rights of foreign (generally Western) firms. Together the agreements make comprehensively illegal many of the industrial policy instruments used in the successful East Asian developers to nurture their own industrial and technological capacities and are likely to lock in the position of Western countries at the top of the world hierarchy of wealth. The paper describes how the three agreements constitute a modern version of Friedrich List’s ‘kicking away the ladder’. It then outlines some needed changes in the way we think about development and in the role of multilateral organizations. It concludes that the practical prospects for change along these lines are slender, but not negligible.