The Membership in the World Trade Organization and Trade Policy Space in Developing Countries

Abstract

Many scholars and commentators have argued that the membership in the World Trade Organization (WTO) has resulted in the restriction of developing countries’ trade policy space, preventing them from industrializing and promoting development. The present article has tested empirically this assertion, using a sample of 87 developing countries over period 1986–2020. It has shown that the WTO membership genuinely has restricted developing countries’ trade policy space, and countries that had larger trade policy space have experienced larger trade policy space restrictions. However, these outcomes mask different realities across sub-samples, including Least developed countries (LDCs) - that enjoyed more generous flexibilities in WTO rules - versus NonLDCs, and Article XII member states - those that undertook greater trade liberalization commitments – versus NonArticle XII member states. Finally, countries with larger trade policy space tended to secure a greater trade policy space, as they improved their participation in global trade. JEL Classification: F13; F14.

Trade Policy Space, Patent Right Protection and Economic Complexity in Developing Countries

“…The premise of the present study is that despite the domestic, regional, and international constraints that can limit a developing country's trade policy space, the available policy space could still be ingeniously utilized to develop innovative ecosystems, which in turn, can help promote the export of complex products, especially in a regulatory environment that encourages innovation, eventually through stronger patent laws. Gnangnon (2024a) has shown that countries that have made efforts to better participate in global trade have been able to secure a greater of trade policy space (or to use wisely the available trade policy space) despite their commitments at the WTO. Against this backdrop, we develop the following reasoning.…”

“…These short-term trade policy-related factors are referred to as "trade policy space". To obtain the indicator of trade policy space, Gnangnon (2024a) has used a sample of 87 developing countries over the period 1988-2020, and regressed an indicator of trade policy (here, defined as the Measure of Aggregate Trade Restrictions 12 ) on the real per capita income and the population size 13 (considered as the structural factors that affect trade policy design), using the Dynamic Feasible Least Squares (DFLS) approach. The latter combines the Panel Dynamic Least Squares (PDOLS) approach introduced by Mark and Sul (2003) and the Feasible Generalized Least Squares (FGLS) of Zellner (1962).…”

“…The latter combines the Panel Dynamic Least Squares (PDOLS) approach introduced by Mark and Sul (2003) and the Feasible Generalized Least Squares (FGLS) of Zellner (1962). The residual extracted from that equation is considered as the indicator of trade policy space (see Gnangnon, 2024a for further details on the computation of this variable). To limit the endogeneity problem that can arise from the bi-directional causality between trade policy space and economic complexity, we have computed data on the indicator "TPSPACE" over the sub-periods 1991-1995; 1996-2000; 2001-2005; 2006-2010 and 2011-2015. Model (1) is instrumental in testing hypothesis 1 as it includes the interaction between the indicator of trade policy space and an indicator (defined by "INTEG") that captures the level of countries' integration into global trade.…”

“…Van der Ven (2017: p39) has considered 'trade policy space' as 'WTO policy space', that is, "the unrestricted space available to non-Least developed countries under the WTO to implement strategic interventions concerning trade, investment and industrial policy". In the present analysis, we consider "trade policy space" as the room of maneuver that developing countries' policymakers have at their disposal when designing trade policy (see Gnangnon, 2024a).…”