Attention to industrial policy in both the industrialised and developing world is experiencing a renaissance in the twenty-first century. Taking account of a globalised market with growing inter-linkages between trade, investment, services, technology and global value chains, today’s industrial policy initiatives reflect a more comprehensive perspective on the steps required to build domestic capacities and systems. The emphasis is not only on strengthening the domestic market but also on how to develop better links with international markets to enhance emerging commercial opportunities through trade and investment. Product quality, a quick response to commercial requirements, and linking up with international technological developments become important policy objectives. Thus, new investments primarily focus on building domestic technological capacities and often involve public-private partnerships and innovative sustainable industrial policies.
Despite these many new features and initiatives, little attention has been paid to the link between new industrial policy and the global trade system in the twenty-first century. Although the global trade system already has many rules relating to the use of industrial policies, a review of existing agreements in relation to “new” industrial policies across the entire spectrum of economic activities in manufacturing, agriculture, and services, had not been considered in depth.
The E15 Expert Group on New Industrial Policy and the Trade System has examined the challenges raised and the opportunities availed by the resurgence of industrial policies and their overlap with the global trading system; identified the constraints on industrial policies imposed by existing WTO rules and the evolving disciplines under the mega-regional FTAs and other trade agreements; and proposed options for improving international trade rules, and provided best-practice policy guidelines to support industrial policy objectives that enhance competitiveness and sustainable development.
With this objective in mind, the group has examined the empirical evidence on the types of industrial policies that have been used by countries at different levels of development and resource availability; analysed how to effectively use trade and investment policy together to upgrade and diversify the production and export base of developing economies; assessed whether evolving disciplines in the trade system imposes a binding constraint or provides adequate flexibility on the use of these policies; explored how trade disciplines in mega-regional FTAs are evolving so as to restrict or increase acceptance of certain industrial policies; considered whether there are any important objectives of common multilateral interest (e.g. environmental goals) implemented through industrial policy, which imply a need to expand the flexibility available in the present trade regulatory regimes (and how could this be achieved); and assessed how manufacturing, the “servicification” of manufacturing, and the fragmentation of production through global value chains in the 21st century are likely to affect the structure of relevant industrial policies.