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

The world is 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 or hoping to operate in their territory, while the third requires the governments to enforce rigorous property rights of foreign (generally Western) firms in the face of ‘theft’ by domestic firms. Together the agreements make comprehensively illegal many of the industrial policy instruments used in the successful East Asian developers to nurture their own firms, industries and technological capacities. They 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, in the name of motherhood principles like ‘reciprocity’ and ‘no distortions’, 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.