The Case for a Pragmatic Approach to Optimizing Policy Coherence Between Industrial Policy and the WTO Policy Space

This academic paper challenges one of the most persistent arguments in the trade and development literature: that WTO rules have so constrained African countries’ policy space that effective industrialization is no longer possible. Drawing on empirical case studies of three non-least-developed sub-Saharan African countries — Namibia, Ghana, and Kenya — the paper argues that the primary obstacle to African industrialization is not the narrowing of WTO policy space, but rather a fundamental lack of coherence between countries’ stated industrial policy objectives and the trade and investment instruments they actually adopt.

The paper begins by mapping the de jure WTO policy space available to non-LDC developing countries, focusing on performance requirements under the Agreement on Trade-Related Investment Measures (TRIMs) and the General Agreement on Trade in Services (GATS), export and sector-specific subsidies under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), quantity restrictions, and tariff escalation under the General Agreement on Tariffs and Trade (GATT). It finds that, contrary to the claims of a number of prominent scholars, significant flexibility remains within the WTO framework — including the ability to impose export performance requirements, employment and training conditions on foreign investors, indirect tax incentives in Special Economic Zones (SEZs), sector-specific subsidies unlikely to cause actionable adverse effects, and tariff modulation within the gap between bound and applied rates.

Against this backdrop, the case studies reveal a consistent pattern. In Namibia and Ghana, trade and investment policies do not reflect the priority sectors identified in national industrial policy plans, and neither country meaningfully engages with the WTO policy space when designing its regulatory framework. Kenya performs somewhat better — its National Industrial Policy explicitly recognizes trade policy as an instrument of industrial development — but even Kenya has adopted measures that are likely WTO-inconsistent while simultaneously failing to utilize the protective tools the WTO does permit.

The paper attributes this incoherence to a range of structural and institutional factors: fragmented inter-ministerial coordination, insufficient political commitment to industrial policy, the tendency to adopt industrial strategies after trade and investment laws are already in place, inherent tensions between protectionist and liberalization objectives within the same policy documents, and limited domestic capacity to navigate the complexity of WTO rules. It concludes with a call to reorient the trade and development debate away from a largely theoretical discussion about the adequacy of WTO policy space, and toward a more pragmatic focus on building institutional coherence and deploying the flexibility that already exists within the multilateral trading system.