Trade and development report 2014: global governance and policy space for development

The report examines recent trends in the global economy, with a focus on growth, trade and commodity prices.
It highlights that, six years after the onset of the global economic and financial crisis, the world economy has not yet established a new sustainable growth regime. With an expected growth between 2.5 and 3 per cent in 2014, the recovery of global output remains weak. Furthermore, the policies supporting the recovery are frequently inadequate, as they do not address the rise of income inequality, the steady erosion of policy space along with the diminishing economic role of governments and the primacy of the financial sector of the economy, which are the root causes of the crisis of 2008. Putting the world economy on the path of sustainable growth requires strengthening domestic and regional demand, with a reliance on better income distribution rather than new financial bubbles.
The Report then takes a long-term perspective in analysing the evolution of the debate on global governance and policy space. Policy space is understood in the Report as the freedom an ability of governments to identify and pursue the most appropriate mix of economic and social policies to achieve equitable and sustainable development in their own national contexts, but as part of an independent global economy. The Report emphasizes the role that proactive trade and industrial policies can play in the post-2015 development agenda and points to various policies which, in the changing dynamics of the world economy, can help achieve sustained income growth, full employment, poverty reduction and other socially desirable outcomes. On trade, TDR 2014 argues that negotiations on rule making need to refocus on multilateral agreements which recognize the legitimate concerns of developing countries. It also argues that developing countries should carefully consider the loss of policy space when engaging in bilateral and regional trade and investment agreements. Such agreements often come with stricter commitments than in the same areas covered by multilateral agreements or extend to new areas, requiring policymakers to forsake the use of instruments that have proved effective in supporting industrialization. The Report also points to problems arising from the current international investment framework and the related ad hoc arbitrage tribunals that have assumed important law-making functions usually allocated to States.