Exchanging development for market access? Deep integration and industrial policy under multilateral and regional-bilateral trade agreements

Abstract

ABSTRACT This paper analyzes the developmental trade-offs involved in multilateral versus regional-bilateral strategies of integration into the international economy. I contrast the regulations that guide policy in the areas of trade, investment, and intellectual property in the World Trade Organization (WTO) and in regional-bilateral agreements between the US and developing countries. Both strategies of integration feature similar trade-offs, in that developing countries gain increased market access and opportunities for specialization in exchange for diminished space for use of industrial policy instruments to create new productive capacities. However, the trade-offs are intensified in the case of regional-bilateral agreements: countries receive more market access, but in exchange make significantly deeper concessions regarding the management of inward investment and intellectual policy. I argue that countries whose integration into the international economy is guided by their obligations as members of the WTO still have opportunities to implement industrial strategies that are designed to alter comparative advantages and achieve upward mobility in the international economic order, but the obligations under the regional-bilateral strategy greatly circumscribe these options. The paper thus points to the need for new terms of reference in the debate over ‘policy space’ in the international political economy. In analyzing contemporary development strategies, the most useful contrast is not between the alternatives that countries have under the WTO and the alternatives that countries had in the past under the WTO's predecessors, but between a constraining multilateral environment and even more constraining regional and bilateral environments that condition increased market access on the sacrifice of the very tools that countries have historically used to capture the developmental benefits of integration into the international economy.