Think Piece

Reframing Trade and Development: Building Markets through Legal and Regulatory Reform

November 2015
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As markets around the world become more integrated, trade policy is increasingly looked to as a path for building robust market systems, generating economic growth, and encouraging private entrepreneurship. Throughout the world, trade and development are closely intertwined, as evidenced by the recent launch of both the Tripartite Free Trade Agreement (TFTA) that will unite the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC), and the larger African Continental Free Trade Agreement (CFTA). These landmark trade initiatives are centred on how to use trade policy as a lever for regional integration and economic development, and they will require not only in-depth negotiations, but also ongoing legal and regulatory reform to align rules and strengthen institutions. As this paper will demonstrate, a stronger focus on development-led legal and regulatory reform will be needed to support negotiation and implementation of both trade agreements and World Trade Organization (WTO) disciplines and should be the lens through which trade and development is approached nationally, regionally, and multilaterally.

Within institutions like the WTO, current approaches to trade and development focus primarily on generating and expanding market access to developed country markets, mainly through trade preference programmes, and special and differential (S&D) treatment for developing countries. While these aspects are important, they are not sufficient to achieve long-term economic diversification, improvements in livelihoods, and poverty reduction. Throughout the market, aid for trade (AfT) plays a pivotal role in helping countries and their stakeholders take advantage of the benefits of trade. Yet, assistance provided through AfT initiatives alone cannot fully build national and regional legal systems and regulatory processes. What is needed is a way to effectively assess the development benefits of trade policy for the many stakeholders involved and more widespread, inclusive, and coordinated systems for implementing the legal and regulatory frameworks that form the backbone of trade policy.

Both literature and experience support that development-led legal and regulatory reform could present opportunities for broad-based economic opportunity. Trade policy establishes a sound framework for legal and regulatory change in a number of areas such as trade facilitation, sanitary and phytosanitary (SPS) measures, technical barriers to trade (TBT), and services. While these non-tariff measures have now become more important than tariffs in international markets, there is no clear path for implementing the frameworks to address them in practice, and the development implications of reform in these areas do not always receive sufficient focus. Overall, many countries face challenges as they seek to adopt and implement an expanding range of legal and regulatory disciplines. In many places, legal and regulatory processes themselves are weak, with a number of enterprises and individuals lacking knowledge of how the system works or a trusted channel for participation.

A stronger focus on development-led legal and regulatory reform, as presented in this think piece, could enhance regional and multilateral trade policies and build new pathways for using trade as a tool for both poverty reduction and entrepreneurship. At the market level, it could open up new economic opportunities for enterprises of all sizes across a wide range of sectors. At the institutional level, shifting the trade and development focus to development-led legal and regulatory reform would reinforce the efforts of many countries and regional blocks to negotiate and implement free-trade agreements and WTO commitments, generating new momentum in key areas of market regulation and strengthening the system to reflect the needs of all countries and stakeholders. Ultimately, this approach will rely on identifying development considerations and impact; connecting market opportunities in developing markets with legal and regulatory systems; more openly sharing information and best practices across geographies and sectors; sharpening the technical focus within relevant policy debates; and devising lasting mechanisms for connecting private stakeholders (who hold both the data and the drive to make trade work for development) with public sector legal and regulatory institutions (which have the mandate to make this happen), both in-country, regionally, and at the WTO. With the Tenth WTO Ministerial Conference around the corner in Nairobi, Kenya in December 2015, a development-led approach to trade is both timely and fitting.

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