Industrial Policy and the World Trade Organization: Between Legal Constraints and Flexibilities (Introduction)

Abstract

A series of “industrial revolutions” taking place from the eighteenth century onward has changed the production process tremendously. The first industrial revolution mechanized manufacturing with water and steam power, marking a historic shift from a manual to machinery-based production. The second one used electricity for mass production. The third or “digital” revolution automated production through the incorporation of electronics and information technology (IT). The current fourth industrial revolution builds on the digital revolution and creates a fusion of technologies – for example, artificial intelligence, the Internet of things, 3-D printing, nanotechnology, biotechnology, and so on – cutting across the physical, digital, and biological domains.

Industrialization without any government’s involvement is hardly conceivable. In practice, many governments have played an undeniable role in establishing, stimulating, and protecting domestic industries even when it was contrary to market principles. Such a government’s participation is captured by the concept of “industrial policy,” which itself has never been defined in a commonly acceptable manner. The severe global financial crisis of 2008 could not be overcome without government interventions through industrial policy.

This timely book analyzes industrial policy from the perspectives of trade law and economics under the WTO system. The author expertly examines both general tools of protecting and supporting domestic producers and specific topics like special economic zones, localization, greening measures, and creative economy. In addition to legal texts and jurisprudence, this book extensively utilizes other WTO materials to show what is actually discussed in WTO meetings and forums on relevant issues. Where applicable, the author advances practical recommendations for “right” or “optimal” industrial policy in certain contexts based on trade rules, case law, and some countries’ real experiences. The author concludes this work with some thoughts on concrete actions to be taken at the WTO and national levels and in academic circles in order to better tackle industrial policy issues.

Keywords: industrial policy, fourth (4th) industrial revolution, WTO, trade rules, policy space, flexiblities