Emerging Economies, Developmental Strategies, and Trade Standards: The Search for Alternative Space
Sonia E. Rolland and David M. Trubek
Abstract
Some heralded the emergence of the BRICS and predicted they would work together to transform international trade law. They pointed to the tension between developing country strategies and the demands of the liberal trading order, noted the growing importance of emerging economies in global GDP, and hoped BRICS and other emerging economies would band together to make the trade regime more compatible with state-led growth policies. The paper examines what has happened in this field in the past decade. It shows that hopes for a grand coalition and major legal transformation have not materialized, but change is occurring. Emerging powers are resisting liberalization pressures by ignoring some existing rules, refusing to agree to others, and seeking to create alternative orderings with more flexible standards. To measure the gap between emerging economy development strategies and neoliberal policies, we use the TPP as a heuristic device. While the TPP is on hold and could be dead, the text is a useful tool to measure the distance between the liberal trade ordering and the views of emerging powers which have embraced state-led development. Focusing on Brazil, China and India to illustrate specific policy clashes, we first canvas debates regarding the relationship of trade and development in our case-study countries; then assess the extent to which TPP-like trade regulation clashes with key features of state developmentalism; and finally explore South-led initiatives for forms of economic integration more compatible with state-led development. We find that TPP-like standards clash with industrial policy and the widespread role of SOEs in Brazil, India and China and conclude that compliance with such standards would require a major change in development strategy. We find that provisions on competition policy, IP, investment, and digital economy would create further tensions. Having assessed the degree to which liberal trading rules, whether in effect or proposed, would hamper core development strategies, we look at how emerging economies are dealing with this tension. First, we note that the potential conflict can be mitigated by strategic non-compliance and by non-enforcement, whether because enforcement mechanisms are weak or unavailable, or because of tacit stand-still positions by trade partners. This is already occurring: China successfully plays a game of catch-me-if-you-can using an array of arguably non-compliant macroeconomic and microeconomic policies. Similarly, some of India and Brazil’s industrial policy programs eventually get challenged at the WTO, but by the time the dispute settlement and compliance process plays out, the countries have had a number of years to implement their policies. In addition to this of kind resistance, some countries are exploring alternative modalities for integration including more focused agreements that can be adjusted as each country's needs evolve, positive list approaches, allowance of non-conforming measures for a variety of public interest purposes, topical exceptions, and the creation of alternative regional agreements like RCEP that would not have all of the TPP-like restrictions.