Wednesday, April 16, 2014

Domestic policy space, GVCs and some questions

I have often written on  the issue of domestic policy space and international trade law obligations in this blog piece. The issue essentially is whether countries, especially developing and least developed countries,  have sufficient domestic policy space (flexibility) to undertake industrial or other policies and still not fall foul of the international trade regime? Do trade rules restrict countries sovereign right to undertake certain policies that they see as essential to promote national socio-economic development? Is there a uniform prescription for development or do trade rules provide for that space to couner the "one-size-fits all" answer.

To find this debate resonate in a piece on Global Value Chains (GVCs) caught my attention. A piece in the VoxEU titled "Industrial Policy and developmental space: The missing piece in the GVCs debate" highlighted the possibility of exercising this domestic policy space in engaging with GVCs. We all know the critique of the narrative of GVCs being good for all and requiring liberalisation of goods and services sectors as a pre-requisite. All countries may not benefit equally from GVCs. This piece touched on what could be an alternative narrative. 
GVCs seem to be seen as a far-reaching analytical tool and as a mandatory topic in the debates that will be held in the different international economic fora in the next years. However, efforts made so far from the southern hemisphere and, in particular, from Latin America, appear to be insufficient to carry out a critical analysis of the contributions that international think tanks and academics are making. 
If we are willing to reject the linear proposal stating that the path to successfully integrate into GVCs depends almost exclusively on trade and investment liberalisation, then we should map the concrete examples of public policies that have been proposed to create the right incentives for national companies to upgrade and determine how accessible these proposals are for developing countries, which usually have budget and normative constraints that limit their room for manoeuvre.
However, is there a clear alternative? Do we have workable models of selective engagement with GVCs as per national needs? How does this play by WTO rules? How can domestic policy space be exercised? What are the limits? Apart from domestic constraints what are the international law constraints?

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