Does the New International Trade Regime Leave Room for Industrialization Policies in the Middle-Income Countries?

Abstract

Since the existence of the World Trade Center (WTO), member governments are limited in choices when conducting domestic industrial policy, which particularly affects mid-technology countries on the verge of industrialization such as the examples of Brazil and the Republic of Korea. The Washington Consensus advocates development through poverty alleviation, free markets, and foreign investment, which compose some of the stringent constraints of the WTO. The paper argues for policies that embrace technological development and industrial diversification, while the WTO insists that these become a natural reality as a result of trade. However, the authors contend that the development of latecomer industrialization countries was not due to the current WTO rules. Therefore potential industrializers should build up their technical capacity in the search of industrialization by circumventing the new barriers imposed by the WTO.

This paper was written as an insight into the work of the World Commission on the Social Dimension of Globalization 2004 that aims to provide a fairer globalization for all.

Keywords: international trade, industrialization, policies, middle-income countries

JEL Classification: F10, L52