Domestic Policy Space Research Articles

Enabling free movement but restricting domestic policy space? The price of mutual recognition

AbstractFree movement of goods within the EU is guaranteed via mutual recognition: any product lawfully produced in one member state must also be accepted in all other member states. While unleashing economic benefits from trade without regulatory barriers, mutual recognition potentially limits member states' ability to address societal concerns with regard to production conditions. This hypothesis is addressed via the case of farm animal welfare in Germany, combining a thorough policy analysis with 20 elite interviews. The results demonstrate how the discourse of inner‐European competition has discouraged policymakers to adopt stricter legislation over the past three decades, exemplifying the impeding effect of mutual recognition on member states' policies. Understanding these mechanisms is vital for handling regulatory diversity within integrated markets and offers insights into similar policy areas. This research contributes to the broader issue of national sustainability standards in a globalized world, where collective preferences increasingly collide with economic goals.

Populism, Globalization, and the Prospects for Restoring the WTO

This article sets out to identify a constructionist framework for a new and expanded “embedded liberalism” and WTO reforms in the global trading system. Globalization and populism led the Trump administration to attack the WTO system by introducing unilateral protectionist measures and undermining its rules and norms. US populist trade policies have persisted under President Biden. Necessary steps to restore the WTO system include (a) domestic reforms by WTO members to improve economic adjustment, labor mobility, and social safety nets; (b) WTO reforms to allow for additional domestic policy space, new negotiated rules to address contentious issues, and a relaxation of the consensus rule; and (c) US restoration of its commitment to multilateral trade rules. Renewed global leadership will be required to pursue these steps. If the current WTO agreement proves to be incapable of resolving these issues, countries will turn increasingly to the alternative of regional trade agreements, which may be able to re-create the conditions for a return to a rules-based global trading system. Yet populism, anti-globalization pressures, and geopolitical tensions present the danger of a continued unwillingness to cooperate among major countries.

Financeirização, agências de rating e “policy space”: a experiência brasileira

ABSTRACT This paper analyzes the restrictions imposed by financialization on domestic policy space, especially in emerging economies, in light of the actions of credit rating agencies. The working hypothesis is that these agencies, in their interaction with governments, act to constrain the policy space from their position in the international financial system. Thereby, they operate in favor of the financial markets’ agenda through the issuance of sovereign ratings and at the discursive level. The methodology draws on the case study of Brazil, based on sovereign ratings and reports issued by S&P Global, Moody’s, and Fitch Ratings, which shows that such agencies have a vast repertoire to promote the orthodox neoliberal agenda in the national political and economic process.

The political consequences of dependent financialization: Capital flows, crisis and the authoritarian turn in Turkey

Recent debates on financialization in emerging market economies highlight the terms of unequal exchange that they are embedded in, where international capital flows steered by powerful financial actors and transnationalized banks have a major impact on economic growth performance. As a result, many of the small open economies in the Global South have become increasingly sensitive to international market volatilities, as the post-2008 Global Financial Crisis (GFC) episode has shown. Yet, we know much less about the political implications of these interactions. How do unequal financial relations influence political trajectories in emerging market economies? Using process tracing and based on original evidence from Turkey, we find that when GDP growth is dependent on financial inflows under a credit-led growth model, the constraints on the domestic policy space following an economic crisis allowed the ruling party to instrumentalize monetary and regulatory institutions as financial agents of political repression.

Treaty rigidity and domestic democracy: Functions of and constitutional limits to democratic self-binding

AbstractInternational treaties create a layer of law that is particularly hard to change: While modern treaties entail significant constraints on domestic law-making, amendments require a new consensus of state parties. This creates a conflict with a core aspect of democratic constitutions: the power of new majorities to revise the laws made by their predecessors. In particular, several obligations of international economic law, namely regulatory stability promises in investment protection treaties, but also criminalization requirements under the UN drug control conventions face critique for overly diminishing domestic policy space. How can democratic constitutions deal with those tensions? One approach that is common in some countries accepts a power to legislate in violation of treaty obligations. But denying treaties the quality as real law in the domestic sphere risks to undermine the benefits of the instrument without truly solving the democracy concerns. Instead, democratic constitutions can be read to entail certain standards for engaging in treaties, namely (i) procedure-related duties to include denunciation clauses and political reform mechanisms in the treaty, and (ii) the need to establish a substantive justification for treaty constraints on future domestic law-making by legitimate aims of international constitutionalism or co-operation.

BALANCING INVESTOR PROTECTION WITH A STATE’S REGULATORY AUTONOMY IN THE AMENDED SADC FIP

This article focuses on the 2016 Amended Annex 1 to the Southern African Development Community (SADC) Finance and Investment Protocol (FIP) (the Amended Annex), which entered into force on 22 August 2017. It aims at a comprehensive assessment of the adequacy of the Amended Annex in balancing investor protection with SADC member states’ quest for domestic policy space in the content of the treaty provisions. Prior to the amendment, the 2006 SADC FIP contained clauses that were considered challenging in the old international investment agreements (IIAs) – such as broad definitions of “investor” and “investment”, provision for international arbitration as a recourse, and according foreign investors fair and equitable treatment (FET) and most favoured nation (MFN) treatment. The challenges associated with bilateral investment treaties (BITs) (especially investor-state dispute settlement (ISDS) mechanisms, restrictions on sovereign policy space and regulatory autonomy) necessitated a review by the SADC member states of the 2006 SADC FIP. The purpose of this article is to reflect on the implications of the 2016 Amended Annex 1 to the SADC FIP with a view to finding a balance between protection enjoyed by investors and the host states’ right to regulate. The article adopts a comparative international law approach, which is useful in order better to understand a SADC member country’s approach to foreign investment protection.

Analysing the impact of trade agreements on national food environments: the case of Vanuatu

BackgroundA large body of literature exists on trade liberalisation and the ways in which trade agreements can affect food systems. However, the systematic and objective monitoring of these and their impact on national food environments has been limited. Using a case study, this paper undertakes a systematic analysis of how Vanuatu’s obligations under WTO agreements has impacted its food environment.ResultsData collection was guided by the INFORMAS trade monitoring framework’s minimal approach and seven selected indicators outlined in three domains: trade in goods, trade in services and FDI, and policy space. Strong associations between trade liberalisation and imported foods, especially ultra-processed foods were evident in measured indicators as follows: (i) food trade with 32 WTO countries showing high levels of import volumes; (ii) a marked increase in ‘less healthy’ focus food imports namely fatty and other selected meat products, sugar, savoury snacks, ice-cream and edible ices and energy-dense beverages; (iii) actual and bound tariff rates impacting import trends of ice-cream and edible ices, bakery products and confectionary; and in other instances, a sharp increase in import of crisps, snacks and noodles despite tariff rates remaining unchanged from 2008 to 2019; (iv) policies regulating food marketing, composition, labelling and trade in the domestic space with relatively limited safeguard measures; (v) 49 foreign-owned food-related companies involved in food manufacturing and processing and the production of coffee, bakery products, confectionary, food preservatives, fish, local food products and meat, and the manufacturing, processing and packaging of palm oil, coconut oil, cooking oil, water, cordial juice, flavoured juices, soft drinks and alcoholic beverages. These were largely produced for local consumption; (vi) 32 domestic industries engaged in food and beverage production; and (vii) an assessment of WTO provisions relating to domestic policy space and governance showing that the current legal and regulatory environment for food in Vanuatu remains fragmented.ConclusionsThe analysis presented in this paper suggest that Vanuatu’s commitments to WTO agreements do play an important role in shaping their food environment and the availability, nutritional quality, and accessibility of foods.

Can domestic non-deliverable forwards replace the sale of international reserves? An analysis of the Brazilian experience

In the 2010s, the Brazilian Central Bank (BCB) intervened massively with domestic non-deliverable forwards (DNDFS) to offset the reversal of the global financial cycle. This article aims to investigate why the BCB used these derivatives instead of selling its international reserves, how they affected the markets, and the limits of these interventions. The main benefit of DNDFs is that they preserve the international reserves of the central bank. Since market makers use these DNDFs to hedge their supply of foreign currencies in the foreign exchange markets, the central bank can affect these markets without spending a dollar. We present evidence that DNDFs were associated with an expansion of market makers’ short dollar positions. DNDFs were also used to limit excessive currency volatility. We identified a subset of interventions aimed at offsetting excessive volatility and present evidence that the BCB could stabilize the markets on these occasions. However, DNDFs are not a panacea. If coupled with deregulated foreign exchange markets, frequent interventions may stimulate speculative activity against the domestic currency. Furthermore, they can be costly, and these costs increase the interest-bearing liabilities of the central bank, constraining the domestic policy space of the monetary authority.

The European Commission’s Discourses on Sustainable Development in ‘Trade for All’: An Argumentative Perspective

The Transatlantic Trade and Investment Partnership (TTIP) negotiations triggered unprecedented contestation over the European Union’s (EU’s) domestic policy space for sustainable development. Whilst extant studies reveal the conflicts between norms and institutions of EU trade politics on sustainable development, and highlight the significance of sustainability in countering neoliberalism, they seldom analyse the incremental steps toward sustainable development achieved by the contestation of TTIP. This article addresses that gap by drawing on an analytical framework that regards political discourse as argumentation for action, which is both constrained and enabled by institutional context (I. Fairclough & N. Fairclough, Political Discourse Analysis: A Method for Advanced Students (Routledge, 2012a).). Based on a textual analysis of policy documents on ‘Trade for All’, there are two significant findings: (1) the public contestation on TTIP triggered the European Commission’s (the Commission) practical arguments on sustainable development in ‘Trade for All’ trade strategy; (2) the Commission adapted its original proposal of measures on sustainable development in light of other actors’ criticisms in the implementation of ‘Trade for All’. Taken more broadly, this innovative analytical framework, and my empirical findings, will make a contribution to a research agenda which clarifies obstacles and opportunities for alternative, counter-hegemonic trade policies. European Commission, Sustainable Development, TTIP, Trade, Political Discourse, Practical Argument

The Digital Economic Partnership Agreement: Should Canada Join?

With an increasing share of global commerce taking place in digital form or facilitated by digital platforms, it is becoming increasingly important to update the rules-based framework to accommodate and enable the development of the intangibles-based data-driven economy while reconciling the security, privacy and other regulatory issues associated with the flow of data across borders and the application of the new general-purpose technologies of machine learning and artificial intelligence. The development of norms, standards and operational protocols for e-commerce, digital platforms, cloud services and digital products more generally is proceeding apace in various fora, and the most comprehensive template for a trade agreement tailored for the digitally transformed economy is provided by the Digital Economic Partnership Agreement (DEPA). However, numerous areas remain under-developed and the interface with non-economic issues remains to be articulated. This brief sets out the rationale for Canada to join the existing agreement between Chile, New Zealand and Singapore, and outlines the areas where further development of the agreement is particularly needed. Joining the DEPA at an early stage would give Canada the opportunity to participate in the development of this agreement in a way that meets the needs of the small, open economies as well as help to mitigate the extent to which DEPA could limit future Canadian domestic policy space to adopt new laws and regulations to protect privacy, prevent algorithmic bias, protect critical infrastructure, ensure national security or promote domestic innovation. DEPA can also become a template for a much larger agreement, including possibly for the World Trade Organization itself. This brief sets out the rationale for Canada to join the existing agreement between Chile, New Zealand and Singapore, and outlines the areas where further development of the agreement is particularly needed.

International Investment Agreements and the Escalation of Private Power in the Global Agri-Food System

Using food regime analysis, this paper critically analyzes how corporate actors amass, secure and apply power in the global agrifood system through International Investment Agreements (IIAs). IIAs are a key enabler of increasing corporate power in the agrifood system. We focus on three sets of investment provisions in IIAs: (a) the stringent enforceability mechanism of the investor-state dispute settlement (ISDS) system, (b) the expansion of the concept of expropriation, and (c) limitations or prohibitions on host countries to impose performance requirements on foreign investors. We argue that these provisions compromise fairness in the international economic system. Attracted by promises of technology transfer, economic growth and employment, host states often prioritize policies that favor foreign investors even if such policies compromise domestic policy space. We provide analysis and examples of escalating corporate power at different stages of the industrial and transgenic model of agriculture.

Impact of Global Governance of Extractive Resources on Ethiopian Extractive Resource Policy and Legal Framework

Ethiopia has policies and laws meant to govern the extractive resources and industries. The policies and laws in place share a cohesion compared with the fragile global governance system dominated by bilateral and multilateral treaty arrangements and voluntary standards. A closer scrutiny of the existing legal and policy regime reveal the influence the global forces of the world have on their content as well as structure. Natural resources being of high importance to economic development and the associated political tension raised in benefit sharing, call for a governance regime that responds both to the domestic demands as well as international competition. The continued influence of global actors and globalization on the domestic policy and legal space specifically manifested by liberal thoughts of ‘transparency in resource governance’ can act as a barrier to the resource gain threshold or as a God send in battling resource curse. This paper argues that Ethiopian EIs policy and legal regime is influenced and will continue to be influenced by the global governance structure and there is a need for a contextual approach and further study on governance of extractive industries as a way to escape the fears of globalization while guaranteeing its benefits.

Food for thought: How trade agreements impact the prospects for a national food policy

This article examines the prospect for a national food policy through the lens of trade agreements and the concept of policy space. It traces the shrinking of domestic policy space in recent decades as a result of trade agreements. Advocates such as Food Secure Canada seek a “coherent” food policy that supports a sustainable, more domestically-focused, food system. This article argues that the prospects for such a policy are constrained, based on Canada’s past history, under both Liberal and Conservative governments, as well as recent bilateral and regional agreements. It examines the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the Transpacific Partnership Agreement (TPP) which included the United States, and the subsequent Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) negotiated by the remaining eleven partners after the US departure. Focussing on market access, standards, regulatory harmonization and procurement, I argue that provisions in these agreements, along with what we might expect in future trade negotiations, pose challenges for the development of a national food policy.

When Sharing Isnnt Always Caring: Understanding Telecom Infrastructure Sharing in the Multilateral Context

Telecommunications constitutes a very important aspect of today’s economic framework. However, establishing the necessary telecom infrastructure is capital-intensive for new telecom service providers (TSP) seeking to enter a particular market. In order to facilitate market access for other TSPs, one regulatory approach has been to mandate the incumbent TSPs to share their infrastructure with new entrants. While this regulatory approach can bring positive benefits such as increased teledensity, lower costs for consumers, etc, these benefits are of a short term nature and would outweigh the long-term economic costs such as the establishment of a strong domestic industry if the particular market is yet to obtain maturity. Also, infrastructure sharing is more geared towards the interests of global TSPs by facilitating their entry into new markets. It is no wonder then that efforts are being made at the multilateral trading system for making infrastructure sharing mandatory across all countries. The TPP is the latest in the series of FTAs aimed at making infrastructure sharing mandatory in the telecom sector. Even though the TPP is effectively dead, the topic of infrastructure sharing is gaining traction in the context of ecommerce discussions at the WTO. Given the technical nature of the issue, and the wide ramifications for domestic policy space, especially for developing countries, it is imperative to have a better understanding of the topic. This paper is an attempt in this direction. This paper concludes by stating that the decision to facilitate market access for global TSPs should be driven by domestic imperatives rather than global commercial considerations.

Reconstructing the World Trade Organization for the 21st century: an institutional approach

The institutional shortcomings of the World Trade Organization (WTO) became apparent during the Doha Round of Trade negotiations that began in 2001 and which aimed to improve the success of developing countries' trading by lowering trade barriers and adjusting other trade rules. This development agenda meant different things to rich and poor countries. In addition, many of the circumstances that supported success in General Agreement on Tariffs and Trade (GATT) negotiations of 1947 were no longer present after the WTO was founded in 1995. In Reconstructing the World Trade Organization for the 21st Century, Kent Jones examines the difficulties of the WTO in completing multilateral trade negotiations and possible ways to restore its ability to do so. The problem lies in the institutional structure it inherited from the GATT, which was designed for a more limited scope of trade negotiations among a relatively small number of wealthier, industrialized countries. Jones presents an institutional model of the GATT/WTO system, which describes why such an organization exists and how it is supposed to accomplish its goals. Institutional reforms will be necessary to restore the WTO's ability to complete global trade agreements, including a more flexible application of the consensus rule, a common understanding among all members about the limits of domestic policy space that is subject to negotiation, and clearer rules on reciprocity obligations. The popularity of bilateral and regional trade agreements, which have emerged as the alternative to WTO agreements, presents a threat to the WTO's relevance in trade negotiations, but also an opportunity to multilateralize new and deeper trade integration in future WTO agreements. Aid for trade may also play an instrumental role in bringing more developing countries into WTO disciplines. Above all, WTO members must develop new ways to find common ground in order to negotiate for mutual gains from trade. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/9780199366040/toc.html

Unfair Trade? Preferential Trade Agreements, Human Rights and Inequalities

This article examines the implications for social inclusion, equality and the fulfillment of human rights of the recent proliferation of preferential trade agreements (PTAs). It considers the impact that PTAs have had on small and medium-sized enterprises, smallholder farmers and women. It also considers the limits on domestic policy space mandated by PTAs, and the implications this has for the ability of governments’ to regulate in the public interest.

Investor-State Arbitration and the Public Interest Regulation Theory

When South Africa decided late last year to terminate a number of bilateral investment agreements with European Union countries, it did so at a time when global regulatory governance has come under scrutiny for their disposition to the domestic economic policies of states and the idea of state sovereignty in the regulation of its own economic affairs is fast declining. The prevailing global regulatory governance regime institutionalizes neo-liberalism which has given birth to various economic institutions and rules including bilateral investment treaties (BITs). The policy interest behind BITs is to some extent the suspension of domestic regulation in the governance of foreign investment. With this suspension in place, the regulatory sphere is filled by a supra-national regime that is rigid and restrains state conduct. In this paper, I intend to apply the emerging legal framework of global administrative law (GAL) to investor state arbitration in order to dispel the resistance towards this dispute settlement mechanism found in BITs for its perceived inability to adequately handle disputes that deal with public interest issues that fall outside standard investment protection but are relevant to the resolution of the investment dispute. I propose the application of domestic law concepts in an international sphere and make the argument that a statutory interpretation based on administrative law principles anchors the BIT regime to the domestic policy space of states and builds up the much needed legitimacy for investor state arbitration. The focus of GAL on the procedural elements of administrative law enables the implementation of substantive norms of liberalized trade which also promotes the rule of law, encourage a broader range of social and economic actors to scrutinize decision making and promote a democratic element in global regulatory governance. This democratic element includes public participation, greater transparency as well as an interpretive approach founded on GAL principles.

Monitoring the impacts of trade agreements on food environments

The liberalization of international trade and foreign direct investment through multilateral, regional and bilateral agreements has had profound implications for the structure and nature of food systems, and therefore, for the availability, nutritional quality, accessibility, price and promotion of foods in different locations. Public health attention has only relatively recently turned to the links between trade and investment agreements, diets and health, and there is currently no systematic monitoring of this area. This paper reviews the available evidence on the links between trade agreements, food environments and diets from an obesity and non-communicable disease (NCD) perspective. Based on the key issues identified through the review, the paper outlines an approach for monitoring the potential impact of trade agreements on food environments and obesity/NCD risks. The proposed monitoring approach encompasses a set of guiding principles, recommended procedures for data collection and analysis, and quantifiable 'minimal', 'expanded' and 'optimal' measurement indicators to be tailored to national priorities, capacity and resources. Formal risk assessment processes of existing and evolving trade and investment agreements, which focus on their impacts on food environments will help inform the development of healthy trade policy, strengthen domestic nutrition and health policy space and ultimately protect population nutrition.

Ethiopia’s WTO Accession and Financial Services Liberalization: Striking the Balance between Trade Liberalization and Domestic Policy Space

This article examines some of the main provisions of the General Agreement on Trade in Services (GATS) and the Annex on Financial Services to evaluate its impact on domestic financial regulation and macroeconomic policy. Inparticular, it analyzes whether Ethiopia can – upon accession and within the WTO’s GATS framework – achieve the objective of liberalizing internationaltrade in financial services while maintaining adequate domestic regulatory institutions and the normative framework needed in this regard. The articleinvestigates whether GATS provides a flexible framework for Ethiopia to negotiate liberalization commitments while at the same time preserving asufficient level of domestic regulatory space to achieve financial and economicstability.Key words: WTO accession, GATS, financial liberalization, domestic policy space, trade liberalization, Ethiopia

Renewable Energy Programmes in the European Union, Japan and the United States - Compatibility with WTO Law

RE support programmes are implemented in various forms and with varying strategies across the world. RE, be it wind, solar or other forms of energy, owes a substantial part of its growth worldwide to support from governments. Active involvement of governments in pursuing a conducive policy and regulatory framework, along with direct and indirect support for RE, has led to the growth of the sector across the world. It is in this context that the relevance of the study of the compatibility of RE support programmes with international trade rules becomes crucial. With countries exercising domestic policy space in implementing a wide variety of programmes to encourage RE in their respective jurisdictions, tensions between trading partners are increasing and issues of violation of the rules of international trade contained in various WTO Agreements often become the cause of trade friction. This study comes to the conclusion that several provisions of these programmes are arguably incompatible with provisions of the GATT and the ASCM. The countries implementing the support programmes are in breach of their WTO obligations in varying degrees. While the principles of NT and MFN are violated in many cases, the use of local content requirements is evidently in breach of a country’s obligations in case of others. It is also noticed that many of the support programmes constitute various types of subsidies that can be construed as either prohibited or actionable, in the context of the ASCM.