Wednesday, April 4, 2012

Domestic policy space in the WTO - Examples of Brazil and Mexico

The multilateral trade regime has always brought to the fore conflicting interests of domestic policy space vis a vis international obligations. Questions about national sovereignty being compromised or surrendered to the WTO are often heard in domestic policy debates during times of crisis.To what extent the WTO infringes on domestic policy space is a debatable issue. There is a very thin line between domestic policy space, protectionism and violation of one;s obligations under the WTO. Does the WTO restrict domestic policy decision making?

Alvaro Santos has addressed some of these questions in his brilliant article in the Virginia Journal of International Law titled " Carving Out Policy Autonomy for Developing Countries in the World Trade Organization: The Experience of Brazil and Mexico" wherein he argues, by taking the specific examples of Brazil's and Mexico's experiences, that domestic policy space can be retained within the multilateral rules by effectively engaging in the interpretation of WTO rules.

Making an extensive study of the dispute settlement process, Santos has essentially argued that the legal interpretation of WTO rules leaves sufficient policy space to countries to put forth their domestic interests. Comparing Brazil's and Mexico's paths in the WTO, he has argued that the WTO system provides space for a country to actively engage with the interpretation of rules to protect one;s legitimate interests. Hence it would be naive to presume that acceding to the WTO is, ipso facto, a surrender of one;s national sovereignty.

He concludes:

"Despite the presence of restrictions, there is still flexibility in the system for countries to carve out regulatory space for themselves. That countries can expand their policy autonomy shows that governments of developing countries have more agency and responsibility than development scholars typically admit. At the same time, however, the asymmetry of power and resources between countries does affect their experience in the system and thus influences the outcomes to a greater extent than liberal trade scholars usually acknowledge.

This Article provided an account of how countries are creating policy space in a way that is currently underappreciated in existing academic literature. This space relies on the ability of countries, as RPs, to make use of textual open-endedness in legal obligations, to seek out favorable rule interpretation, and to actively participate in the WTO system through strategic lawyering and litigation. To pursue this strategy, countries invest in “developmental legal capacity,” through which governments recognize the need to make gains in policy autonomy in order to pursue economic policy goals that may be in tension with the WTO’s free trade objectives.

 To say that we should turn our attention to the domestic economic policies is not to say, however, that the international legal framework is unimportant. Rather, it is to say that despite the international constraints, countries can expand their policy space — if they deem it desirable — and find room for policies they want to advance. The Article recognizes that there are limits to what countries can do. Not all rules are ambiguous and subject to favorable interpretation. Not all strategic lawyering will turn to an advantage either. Moreover, carving out policy space requires significant resources — material, human, political — that not all countries may easily muster in order to become RPs. Poorer countries may therefore experience greater limits — real or apparent — imposed by the international trade regime. However, to show that countries subjected to similar international obligations can pursue divergent trade and development policies is to make clear that there is policy space and that this space can be put to different uses with divergent outcomes. This Article has sought to challenge the argument, commonly made by developing countries’ governing elites, to wit that their country’s legal obligations “tie their hands” and command them to act in a specific way. Instead, the Article calls attention to the agency of developing countries’ governments. While recognizing that there are important limits set by the architecture of the WTO and the asymmetry of power between its members, the Article argued that there is flexibility within the system to expand developing countries’ regulatory autonomy beyond what is currently recognized. Developing countries’ governments should bear responsibility — and their citizens should hold them accountable — for the kind of developing strategy they pursue, or refrain from pursuing, within the international trade regime.
Essentially, this article makes the point that there is sufficient policy space within the WTO rules for a country to pursue its economic policies, to the extent possible. However, this can be achieved by actively engaging in the Dispute settlement process defending one's position against constant onslaught. This would involve strategic lawyering, an understanding of the complex quagmire of WTO rules, strengthening domestic legal capacity to engage in the mutlilateral dispute settlement process, and an effective interdisciplinary team domestically to handle this strategy. However, there is another nagging question. Are domestic policy choices made within WTO rules always in the interest of the country considering the diverse interests of producers, workers, traders as well as consumers? While the argument would be that the democratically elected state has the prerogative to decide on its legitimate domestic policy choice, diverse and often contradictory local interests makes the debate more interesting. I am sure another academic would have dwelt on this aspect. As for this piece, a brilliant article overall - addressed many of my questions regarding domestic policy space and WTO obligations! I particularly liked the Venn diagram explaining domestic policy space with three circle - Development strategy, legal capacity and rule and doctrinal flexibility. The intersection of these three circles is the "policy autonomy" space.

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