   
  
WT/GC/W/868, G/C/W/825  
WT/COMTD/W/270, IP/C/W/695  
WT/WGTTT/W/33  
1 March 2023  
(23-1399) Page: 1/6 
General Council  
Council for Trade in Goods  
Committee on Trade and Development  
Council for Trade -Related Aspects of  
Intellectual Property Rights  
Working Group on Trade and Transfer of Technology  Original: English  
 
POLICY SPACE FOR INDUSTRIAL DEVELOPMENT  - A CASE FOR REBALANCING TRADE 
RULES TO PROMOTE INDUSTRIALIZATION AND TO ADDRESS EMERGING CHALLENGES 
SUCH AS CLIMATE CHANGE, CONCENTRATION OF PRODUCTION AND DIGITAL 
INDUSTRIALIZATION  
COMMUNICATION FROM THE AFRICAN GROUP (ANGOLA; BENIN; BOTSWANA; BURKINA FASO; 
BURUNDI; CABO VERDE; CAMEROON; CENTRAL AFRICAN REPUBLIC; CHAD; CONGO; 
CÔTE  D'IVOIRE; DEMOCRATIC REPUBLIC OF CONGO; DJIBOUTI; EGYPT; ESWATINI; GABON; THE 
GAMBIA; GHANA; GUINEA; GUI NEA-BISSAU; KENYA; LESOTHO; LIBERIA; MADAGASCAR; 
MALAWI; MALI; MAURITANIA; MAURITIUS; MOROCCO; MOZAMBIQUE; NAMIBIA; NIGER; 
NIGERIA; RWANDA; SENEGAL; SEYCHELLES; SIERRA LEONE; SOUTH AFRICA; TANZANIA; TOGO; 
TUNISIA; UGANDA; ZAMBIA AND ZIMBABWE)  
The following  communication, dated 1 March 2023, is being circulated at the request of the African 
Group.  
 
_______________  
 
1  BACKGROUND  
1.  The global economy continues to grapple with the COVID -19 pandemic, food insecurity and slow 
economic growth. Various factors continue  to hamper global economic recovery, including ongoing 
geopolitical instability. These developments have had a profound impact on trade and development. 
As a result, developing countries including least developed countries (LDCs) are faced with a new 
set o f global challenges that threaten to undermine their economic development and the 
achievement of the targets under the UN sustainable development goals (SDGs). They are now also  
exposed to external shocks such as rocketing inflation, and the food and energ y crises, supply -chain 
disruptions, increasing market concentration, increasing rent extraction resulting in "winner -takes -
most markets " characterized  by super -profits, and balance of payment challenges.   
2.  The Multilateral trading system from the early days of the General Agreement on Tariffs and 
Trade (GATT) through to the establishment of the World Trade Organization (WTO) recognized  the 
differences in levels of economic development among its members. The Marrakesh Agreement 
Establishing the WTO further recognizes  the need for positive efforts to be designed to ensure that 
developing countries, and especially the least developed among them, secure a share in the growth 
in international trade commensurate wi th the needs of their economic development. To date, this 
has been dealt with through exceptions to the general rules and disciplines providing for some 
measure of flexibility for developing countries colloquially called "special and differential treatment " 
(SDT). This piecemeal and ad hoc approach has not worked.  
2  AFRICAN CONTEXT  
3.  African economies remain locked in production patterns dominated by extractive sectors with 
their exports concentrated in basic unprocessed commodities with minimal value additio n.  WT/GC/W/868 • G/C/W/825 • WT/COMTD/W/270 • IP/C/W/695 • WT/WGTTT/W/33  
 
- 2 - 
 
  4.  While Africa continues to benefit from several preferential market access mechanisms, including 
special and differential treatment, its global trade footprint remains marginal at less than 3% of 
global trade.  Preferential schemes while they have certai n benefits, at times can also constrain the 
promotion of independent, autonomous, and discretionary determination of African economies ' own 
domestic development policies, as envisaged in the African Union Agenda 2063. Furthermore, these 
preferences are gra nted at the discretion of developed countries and are revocable at will. Often 
noncompliance with political and other demands of developed countries results in suspension of 
preferential access to developed markets. Increasingly non -reciprocal market acces s is being 
replaced by fully reciprocal models.  
5.  For many African states, development remains the core focus at the WTO alongside levelling the 
playing field in international trade. This has informed the African Group 's negotiation strategy and 
positions a t the WTO.  
3  POLICY SPACE FOR INDUSTRIAL DEVELOPMENT   
6.  In an interdependent world a sustainable balance between domestic and global rules revolves 
around States ' policy space: too little can make States incapable of responding to their local needs 
and constr aints, ultimately undermining the effectiveness of and trust in global rules and institutions. 
But national policy space should be tempered with the need for regional and global coordination 
toward sustainable development and other common goods.   
7.  The ultim ate test of successful trade policy at the macro -economic level should be in whether it 
promotes economic diversification, increasing value addition and industrial upgrading without 
deepening inequality domestically and among nations or contributing to env ironmental degradation. 
Trade rules should be a catalyst to accelerating structural transformation, industrial development 
and diversification in developing and least developed countries to enable them to address inequality 
and exclusion. The system must b e tailored to better respond to current global dynamics and 
megatrends, including effectively contributing to the attainment of the UN SDGs.  
8.  Trade rules should provide for producers and nations in the developing world the necessary policy 
space to integra te more meaningfully and qualitatively in global value and supply chains not only as 
suppliers and exporters of primary products but also as producers of intermediate and final goods. 
Such meaningful integration should help developing economies create jobs , develop their industrial, 
agricultural and agroprocessing sectors, as well as the services sectors in an environment of 
expanding and deepening industrial capabilities.  
9.  Furthermore, in an increasingly uncertain global energy supply environment, policy s pace is also 
required to promote green industrialization, as a critical complement to other adaptation and 
mitigation -related actions to build resilience against climate change. The multilateral trading system 
also has a key role to play in ensuring that e conomic and industrial development opportunities 
associated with the green transition contribute to the structural transformation of developing 
countries and their structural position in global production and supply networks. Accordingly, 
developing countr ies should be cautious about premature tariff liberalization on environmental goods 
and services associated with the green transition prior to building their own requisite capacities and 
capabilities in areas of revealed and latent comparative and competit ive advantages.  
10.  Rebalancing trade rules and guaranteeing access to the requisite policy tools will assist 
developing countries and LDCs in developing capacities and capabilities to contain, prevent, respond 
and recover more effectively from acute shocks a nd more chronic crises associated with a changing 
world.  
11.  Whilst World Trade Organization (WTO) rules such as those on border trade measures have 
helped developing countries by providing certainty to trade, more often than not, Members have 
found themselves constrained from pursuing their development and industri alization objectives by 
rules which do not allow them to use the very policy tools that other advanced Members have used 
to industrialize . These rules in many instances foreclose the 'policy space ' to, change the structure 
of these economies and in some ca ses, reindustrialize  strategic sectors. These limitations have 
contributed in entrenching persistent production and trade -related imbalances in the global 
economy. Furthermore, such imbalances are exacerbated by 'special ' privileges that developed 
countrie s enjoy and maintain while developing countries are subjected to punitive measures or WT/GC/W/868 • G/C/W/825 • WT/COMTD/W/270 • IP/C/W/695 • WT/WGTTT/W/33  
 
- 3 - 
 
  graduation models and conditionalities, including those related to the generalized  systems of 
preferences (GSP) and the AGOA that do not compliment their developmental pr iorities and 
requirements.  
12.  Several exceptions or derogations are available to developing countries in recognition of the 
specific economic, social, and administrative challenges they face. The G90 has advocated the use 
of these flexibilities. These includ e "flexibilities " for developing members, contained in GATT (1994) 
Articles XII (balance of payment) and XVIII (infant industry and balance of payment), in the 
Agriculture Agreement, TRIMS, TRIPS and in the SCM Agreement. Additional derogations are 
provide d by the Enabling Clause, effectively creating exceptions to the MFN clause of the GATT for 
preferential trade agreements and South –South trade agreements, and several other ad hoc 
waivers.  
13.  Article XX of GATT allows derogation from GATT rules in order to achieve certain legitimate 
policy objectives, including protection of public morals; protection of human, animal or plant health 
life; conservation of exhaustible natural resources; restriction on exports of domestic materials 
necessary to ensure essential  quantities of such materials to a domestic processing industry. There 
are, however limitations arising from specific WTO Agreements that need to be reviewed to provide 
flexibility in application and interpretation, providing 'policy space ' for Governments  to respond to 
the unfolding polycrisis in a more inclusive and agile manner. Thus, the call by the African Group for 
greater policy space should not be confused with existing SDT provisions in various WTO 
agreements. Rather, this call should be considered  as an integral feature of the WTO reform process. 
A reform process aimed at making the WTO, as a multilateral institution Members have all collectively 
built, better able to respond to the implications of the polycrisis to the interest of its Members.  
14.  The African Group, therefore calls on members to initiate discussions to elaborate on what is 
meant by the growing calls for greater policy space to promote industrialization and to address 
growing consolidation and concentration of market power in key produ ct and service markets. 
Moreover, such discussions must also dedicate their attention to emerging challenges such as the 
impacts of climate change and digital industrialization on domestic, regional and global production 
and supply networks.   
15.  Furthermore, the African Group has identified the TRIMS Agreement, the ASCM, the TRIPS 
Agreement and matters related to technology transfer as key agreements and areas where members 
can initiate policy discussions. These discussions should be undertaken with a view to rebalancing 
and calibrating trade rules in a manner that ensures that they enable structural transformation, 
diversification and industrialization  in an inclusive and equitable manner.   
16.  These agreements or areas are by no means exhaustive of the arena wher e necessary policy 
space is needed to contribute to industrialization . They may further include, among others, those 
areas that could be identified in the course of the evolving policy discussions. These areas might 
include the role of trade, debt and fina nce and the scope and role of infant industry protection as 
complementary policy tools or measures.  
3.1  Agreement on Trade -Related Investment Measures (TRIMS Agreement)   
17.  The WTO TRIMS Agreement came into force in 1995, as part of the Uruguay Round negotiation s. 
Members increasingly consider TRIMS as useful tools of industrial development and economic 
diversification. In the context of global supply -chain disruptions, pandemics and geo -political 
conflicts and the reconfiguration of globalization , it is importan t to focus on how these tools can be 
used to respond to the challenges of the moment. Moreover, the heightened focus on strategies for 
climate change mitigation and adaptation bring into sharp focus the need for the development of 
capabilities that enable structural transformation and decarbonization in response to these 
imperatives.   
18.  Members across the board are seemingly employing these policy tools to build domestic 
manufacturing capabilities and stimulate production linkages. Unsurprisingly so, as growi ng firm -
level needs for shorter lead times and supply uncertainty has prompted many firms to consider 
producing goods and services closer to markets, as global logistics and supply costs are yet to return 
to pre -pandemic levels. This environment has also l ed to notable tensions and disputes.  WT/GC/W/868 • G/C/W/825 • WT/COMTD/W/270 • IP/C/W/695 • WT/WGTTT/W/33  
 
- 4 - 
 
  19.  For example, local content requirements were the main reason for the different WTO disputes 
that have taken place since 2010 on subsidies for renewable energy. In these disputes, local content 
requirements were always challenged under Article III of GATT, under the TRIMS agreement, and 
under the SCM agreement. The challenges related to policy interventions by both developed and 
developing countries. This clearly demonstrates the increasing interests by Members across th e 
board to make use of this policy tool for what they deem legitimate objectives.   
20.  It is pertinent to explore the degree of a threshold that can be applied to determine the fairness 
and proportionality of policy responses that Members choose to adopt to ac hieve these legitimate 
policy ends. Any system that does not respond to the challenges confronting its Members and adopts 
a rigid interpretation is bound to fail or suffer from a crisis of credibility and legitimacy, or lead to 
trade tensions. A multilater al framework is required that to open policy space especially to 
developing countries to use local content requirements and other measures as policy tools to enable 
and incentivize the strategic development and maintenance of domestic and regional capaciti es. 
Acquiring such, allows developing countries to make good on the benefits arising from trade, 
alongside achieving their industrial diversification, climate goals and digital transformation.  
3.2  Agreement on Subsidies and Countervailing Measures (ASCM)  
21.  The Agreement on Subsidies and Countervailing Measures contains multilateral rules on whether 
or not a subsidy may be provided by a Member. These measures are enforced through the WTO 
dispute settlement mechanism or through the imposition of countervailing du ties or measures. It is 
instructive in this regard that developing countries are the main targets of countervailing measures 
by developed economies.   
22.  The expiry in 2000 of Article 8 of the ASCM that used to provide some policy space for Members 
to address technological, poverty and environmental challenges — all crucial issues for sustainable 
development - is an issue that Members need to reconsider in view of emerging global challenges. 
Article 8 of the SCM provided cover for non -actionable (green -light) s ubsidies toward research and 
development, regional development and environmental protection. Some nations took advantage of 
these provisions, but their full potential had not yet been realized when Article 8 expired in 2000.   
23.  The Doha Declaration provides the opportunity to negotiate reinstatement and expansion of 
these subsidies, especially where subsidies are used to correct the numerous distortions in the global 
trading system. The tension between multilateral trade rules and the demands of domestic firm s, 
the market and societies, within an unfolding polycrisis, are becoming more pronounced. These 
tensions are increasingly driving many Members to act unilaterally resulting in an unpredictable 
trade environment that continues to disadvantage developing co untries, especially African countries. 
There has been extensive use of subsidies by many Members, yet the political systems that deliver 
the subsidies, the substantive meaning of subsidies in those systems, and the forms those subsidies 
take differ. While developed countries can afford to act unilaterally, developing countries are limited 
by various factors in doing so. Not least geopolitical and uneven market power dynamics that render 
developing countries vulnerable to wide -ranging punitive and retaliator y actions. In order for the 
multilateral trading system to be just and equitable, a multilateral framework that provides policy 
space and certainty to developing countries to implement legitimate policy measures is urgently 
required.  
24.  Given the centrality of subsidies to both conflict and stability going forward, the WTO needs to 
find a way to accommodate and manage them. Consideration should be given to flexibilities required 
within the context of the ASCM to enable developing countries to grant subsidies,  including through 
complimentary localization initiatives, for industrial development and structural transformation, 
including technology research and development funding, production diversification and development 
and to allow measures to promote green in dustrialization to confront climate change and freight 
rebates to mitigate high transport costs. This could be in the form of a "Greenbox,  which would 
include revisiting the policy space and tools that were phased out in the course of implementation 
of the ASCM post the Uruguay  Round.  WT/GC/W/868 • G/C/W/825 • WT/COMTD/W/270 • IP/C/W/695 • WT/WGTTT/W/33  
 
- 5 - 
 
  3.3  Agreement on Trade -Related Aspects of Intellectual Property Rights (TRIPS 
Agreement) and Technology Transfer  
25.  Technology and technical know -how are essential for improving productivity and enhancing 
firm-level and sector competitiveness, promoting export gr owth and realizing the development 
aspirations of developing countries, especially in Africa. There is a need for the WTO to ensure that 
trade rules provide a better balance between protection and incentives to promote research and 
innovations on the one h and and the unfolding needs of society on the other. The COVID -19 
pandemic has exposed this imbalance.    
26.  Technology transfer is therefore an important policy tool to narrow the technological and 
productivity gap, as seen in the widening digital divide. Tec hnology transfer allows for the promotion 
of meaningful integration of developing countries in global trade. Article 8 of the TRIPS provides that 
members may take steps to safeguard the public interest in economic and technological 
development. Articles 7 and 8 of the TRIPS express the intention of the drafters of the TRIPS 
agreement to allow countries to pursue measures protecting their societal interests. However, 
Members have not developed mechanisms to achieve these objectives.  
27.  In addition, Article 66. 2 of the TRIPS Agreement places a positive obligation on developed 
countries to provide incentives to enterprises and institutions in their territories for the purpose of 
promoting and encouraging technology transfer to least developed country Members in o rder to 
enable them to create a sound and viable technological base. LDCs have expressed reservations 
about the extent to which this obligation has been fulfilled.  
28.  The WTO needs to develop a framework for technology transfer, including a set of appropriat e 
channels for technology transfer to ensure that it is affordable and accessible to developing 
countries. There is an urgent need to facilitate digital and green technology transfers to enable 
African countries to structurally transform. The TRIPS Council  and the Working Group on Technology 
Transfer could be tasked within their mandates to consider this issue.  
4  THE IMPORTANCE OF MULTILATERALISM AND THE NEED TO ADDRESS UNILATERALISM  
29.  The global economy is witnessing significant policy shifts in the advanced  countries such as 
near-shoring that have huge implications for developing countries. The pandemic, supply -chain 
disruptions, and geo -political tensions have exposed the risks of concentrating market power and 
production, among a few, at the expense of the  many. Such a situation will undoubtedly introduce 
and highlight the tensions between trade rules and the requisite policy space Members require to 
address emerging challenges that necessitate that Members take action to protect their legitimate 
interests.   
30.  Unilateral and punitive measures implemented by some result in "beggar thy neighbour " policies 
that change the terms of competition, lock -in technology advances; carrying great economic costs, 
especially for developing countries. In the context of curren t global challenges, a multilateral 
framework to rebalance trade rules to promote domestic and regional production must be developed 
urgently. This will provide developing countries the policy tools to respond in a fair and balanced 
manner.  
5  WAY FORWARD  
31.  There is a balance of interests that needs to be arrived at in the multilateral trading system to 
enable predictability of trade rules whilst simultaneously allowing Members the requisite policy space 
to achieve their development objectives. Such a balance requires that Members are provided the 
flexibility to implement legitimate policy measures to address common contemporary and future 
challenges such as climate change, uneven industrial and economic development, job creation, 
improvement of living standard s inter alia. Some of these legitimate policy objectives underscore 
the notion that trade is not an end in and of itself as outlined in the preamble of the Marrakesh 
Agreement, but rather an avenue towards the advancement of human and social progress.   
32.  The African Group, therefore calls for focused discussions by Members to address the constraints 
inherent in certain WTO agreements which limit the policy space to drive industrialization, economic 
diversification and structural transformation programmes, inc luding the ability to respond to WT/GC/W/868 • G/C/W/825 • WT/COMTD/W/270 • IP/C/W/695 • WT/WGTTT/W/33  
 
- 6 - 
 
  emerging challenges such as climate change.  In the context of growing impulses of unilateralism 
and beggar -thy-neighbour policies coupled with inevitable trade tensions and litigation, this 
submission further underscores th e importance and relevance of multilateralism  as a means through 
which trade rules can be adapted to respond to this unfolding polycrisis. Whilst the General Council 
shall conduct and oversee the policy discussions at a policy level, it may delegate, as ap propriate, 
discussions to the Committee on Trade and Development, or any such WTO body relevant to the 
issue at hand. Members could also submit specific proposals in the relevant  WTO bodies in relation 
to recalibrating trade rules to provide policy space f or industrial development.   
__________  