The WTO and Development Policy in China and India

Abstract

Standard political economy analysis suggests that, in China and India, as in other countries, domestic producers interested in protection would be able to overcome domestic consumers interested in inexpensive goods without the political intervention of domestic producers interested in promoting exports. The WTO provides an occasion to motivate domestic producers interested in promoting exports to intervene, by providing the possibility for commitments by other states to liberalize access for their exports. This promotes liberalization and the possibility of export-led growth. Yet, the WTO also provides restrictions that are understood by some to limit the scope for industrial policy that can also induce growth. How can WTO rules be structured to limit the scope for protection by developing countries while maximizing the scope for industrial policy that promotes growth? How have WTO rules so far affected the ability of India and China to promote growth in these respects?

This essay examines the constraints that the WTO may impose on China and India as they engage in industrial policy towards development. One of the critical questions about the GATT and the WTO has been the degree to which they have constrained the "right to regulate," in particular the degree to which they have constrained the ability of developing countries to implement development policy.

Keywords: WTO, trade, development, regulation, industrial policy

JEL Classification: F10, F13, F15, K33, O20, O19, O38