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RESEARCH AND ANALYSIS: WORKING PAPERS
Regulatory Autonomy and Multilateral Disciplines: The Dilemma and a Possible Resolution

A major challenge for the multilateral trading system is to secure the benefits of trade liberalization without infringing on the freedom of governments to pursue legitimate domestic objectives.

No: TISD-98-02

Authors:

Aaditya Mattoo
World Trade Organization
Arvind Subramanian
International Monetary Fund

Manuscript date: January 1998

Abstract Back to top

A major challenge for the multilateral trading system is to secure the benefits of trade liberalization without infringing on the freedom of governments to pursue legitimate domestic objectives. The difficulty lies in distinguishing between two types of situations. In one, a non-protectionist government cannot prevent certain domestic policies from incidentally discriminating against foreign competitors. In the other, a protectionist government uses a legitimate objective as an excuse to design domestic policies which inhibit foreign competition. The challenge is to devise rules which are sensitive to the difference between these two situations, exonerating the former while preventing the latter. The approach suggested in this paper is to create a presumption in favour of the economically efficient policy measure, with departures inviting justification.