Expanding national policy space for development: Why the Multilateral Trading System must change

With the increasing political and economic integration that accompanies globalisation, a growing number of international agreements now restrict the national ‘policy space’ of developed and developing countries alike. The paper demonstrates how developing countries’ national policy space is affected by agreements comprising the Multilateral Trading System (MTS) under the World Trade Organization (WTO). Focus is given to examining the narrowing range of policy options permissible under international trade and finance agreements, and the adverse effects this can have on countries in earlier stages of economic development. These effects are reviewed with the finding that the playing field resulting from international trade agreements, that have ostensibly equivalent rules for all contracting parties, may provide a much smaller policy space for developing than developed countries because of differences in initial conditions and national policy implementation capacities. It is argued that special and differential treatment (S&DT) for developing countries under the MTS needs to be enhanced and made more actionable and effective in order to provide developing countries with essential national policy space for development. Finally, general areas where improved S&DT is needed, and should be pursued by developing countries in the ongoing Doha Round of WTO negotiations, are summarised.