Carving Out Policy Autonomy for Developing Countries in the World Trade Organization: The Experience of Brazil and Mexico

Abstract

Although liberal trade and development scholars disagree about the merits of the World Trade Organization (WTO), they both assume that WTO legal obligations restrict states’ regulatory autonomy. This article argues for relaxing this shared assumption by showing that, despite the restrictions imposed by international economic law obligations, states retain considerable flexibility to carve out policy autonomy. The article makes three distinct contributions. First, it analyzes how active WTO members can, through litigation and lawyering, influence rule interpretation to advance their interests. Second, the article redefines the concept of “legal capacity” in the WTO context and introduces the term “developmental legal capacity,” which describes how states can use legal tools and institutions not only as a sword to open new markets but also as a shield for heterodox economic policies. Third, the article offers a comparative analysis of two case studies, Brazil and Mexico, and shows that they have pursued different trade and litigation strategies. While subject to the same WTO obligations, these countries have made different use of their policy space according to their own economic objectives. The article concludes that, despite the apparent rigidity of the WTO, countries following a deliberate strategy can expand their regulatory space to advance their own interests.

Keywords: foreign trade, trade policy, regulation, strategic litigation, WTO, regulatory autonomy, Brazil, Mexico, developing countries, legal capacity, policy autonomy, developmental state, trade and development, dispute settlement

JEL Classification: F10, F19, K33, K39