Expanding national policy space for development: why the Multilateral Trading System must change

The paper demonstrates how developing countries’ national policy space is affected by agreements comprising the Multilateral Trading System (MTS) under the World Trade Organization (WTO). Focus is given to examining the narrowing range of policy options permissible under international trade and finance agreements, and the adverse effects this can have on countries in earlier stages of economic development. These effects are reviewed with the finding that the playing field resulting from international trade agreements that have ostensibly equivalent rules for all contracting parties, may provide a much smaller policy space for developing than developed countries because of differences in initial conditions and national policy implementation capacities.

After assessing the scope of policy space accessible to developing countries, the paper suggests what can be done at national and international levels to ensure that available policy space is effectively utilised, and when existing space is insufficient to advance national development objectives, it examines ways to expand policy space in a manner that is consistent with developing countries’ existing WTO commitments. It is argued that special and differential treatment (S&DT) for developing countries under the MTS needs to be enhanced and made more actionable and effective in order to provide developing countries with essential national policy space for development. Finally, general areas where improved S&DT is needed, and should be pursued by developing countries in the ongoing Doha Round of WTO negotiations, are summarised. [adapted from author]