Policy Options Paper

New Industrial Policy and Manufacturing: Options for International Trade Policy

January 2016

Industrial policy is not new yet it has seen a revival in recent years in economies across the income ladder. This revived industrial policy is less about market restrictions, focusing more on the facilitation of R&D, technological innovation, productivity gaps, and competitiveness, as well as systembuilding and coordination-enhancing policies that promote interlinked activities with a horizontal impact. Its objectives can also include addressing larger goals reflecting global concerns. Despite this renewed emphasis, little attention has been paid to the link between new industrial policy and the world trade and investment systems in the 21st century. The present paper seeks to examine the challenges raised and the opportunities availed by the resurgence of industrial policies and their overlap with the global trading system. Based on this examination, a set of policy options are put forward for improving international trade rules to support industrial policy goals that enhance competitiveness and sustainable development. Given the large scope of industrial policy and the major gaps in information as well as technical and institutional capacities that prevail in many developing countries, the paper considers policy initiatives that cover the following areas: (i) providing better and relevant information to individual countries; (ii) improving the capacities of policy-makers and businesses; (iii) identifying legal constraints due to international agreements and addressing those that are most binding; (iv) examining issues for which stronger international legal disciplines may be necessary; (v) identifying non-legal issues to be addressed cooperatively by nations and the private sector to enhance the effectiveness of industrial policy; (vi) preparing the ground for indices to guide policy and help with prioritisation among various policy steps; (vii) suggesting ways of moving from plurilateral to multilateral frameworks; and (viii) initiating regional or international cooperative schemes. One of the pillars of the recommendations is the establishment of Regional Centres of Excellence where policy-makers and business representatives could convene to discuss and address practical policy concerns, and where mechanisms to bridge information gaps and capacity constraints could be developed.

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