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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 27, No. 3, pp.307-348
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2014
Received 13 Jan 2014 Revised 12 May 2014 Accepted 07 Jul 2014

How Large or Small is the Policy Space? WTO Regime and Industrial Policy

Keun Lee ; Wonkyu Shin ; Hochul Shin
Professor, Department of Economics, Seoul National University, Seoul, Tel: 82-2-880-6367, Fax: 82-2-886-4231 kenneth@snu.ac.kr
Research Associate, Center for International Commerce and Strategy, and Graduate School of International Studies, Seoul National University, Tel: 82-2-880-4040 wkshin@snu.ac.kr
Department of Economics, Seoul National University s2h3c7@gmail.com

JEL Classification: F13, F53, K33, K41, O25

Abstract

The paper identifies the need for improvements in policy space for developing and least developed countries under the current world trading system by examining the use of WTO dispute settlement system with descriptive statistics and case studies. The paper shows an asymmetry in the utilization of the dispute settlement system and the consequence of using the system between developed and developing countries. For instance, the paper demonstrates that the United States and some other developed countries use WTO rules effectively, resulting in the defeat of developing countries in disputes. These developing countries are forced to abandon their industrial policy measures. By contrast, the United States and the other developed countries continue to use WTO-inconsistent industrial policies in need without being much effectively challenged. Based on our findings, we suggest what should be done within the practices of the current rules, what can be done to change the current global rules, and what developing countries can still try under the current rules.

Keywords:

Industrial Policy, WTO Dispute, Policy Space, WTO SCM Agreement, Subsidies

Acknowledgments

For valuable comments and suggestions, we are grateful to Jose Antonio Ocampo, Lu Aiguo, Victor Polterovich, Dukgeun Ahn, Patrick Messerlin, and Walter G. Park. We acknowledge the support provided by the Korean government through the National Research Foundation of Korea, (NRF-2013S1A3A2053312). The second author thanks the grant under the research working paper series of Graduated School of International Studies at Seoul National University

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