Nicolás M. Perrone*
Industrial policy is again at the centre of the world economy. The United States, the European Union and China all use subsidies, public procurement, preferential finance and other instruments to support strategic sectors, accelerate the energy transition and secure supply chains. At the same time, both the United States and the European Union consider that Chinese practices go beyond what is acceptable although they pursue change in very different ways. While the United States acts largely unilaterally, through tariffs and economic statecraft, the European Union has invested in a multilateral reform agenda at the WTO. In July 2026, it submitted a set of reform papers to the General Council, including one entitled ‘Further Reflections on Disciplines, Subsidies and Industrial Policy’(WT/GCREFORM/W/5), which addresses subsidies, industrial policy and the commercial conduct of State enterprises.
Developing countries are caught in between. They want to expand their productive capacities and reduce their dependence on commodity exports, yet must do so with far fewer financial and technological resources. They have other advantages. Latin America, for instance, is abundant in the critical minerals that the green and digital transitions require.
The EU paper addresses a genuine problem. Large-scale state intervention can create excess capacity, depress international prices and undermine industries elsewhere. Latin American economies, which cannot compete in subsidy races, have much to gain from stronger disciplines on the measures of the world’s biggest economies. But the proposal also raises a difficult question: if countries possess different economic advantages, should they not have space to build industrial policies around those advantages? Advanced economies draw on deep capital markets, technological capabilities, intellectual property, large public budgets and powerful consumer markets. Many Latin American countries possess few of these assets; their principal advantage is often the abundance of natural resources.
The central challenge is therefore to distinguish industrial policies that generate unjustifiable international spillovers from policies through which resource-rich developing countries attempt to transform natural-resource advantages into broader productive capabilities.
From State enterprises to raw materials
The EU paper focuses principally on State-owned and State-invested enterprises operating in commercial markets. Their weight is growing: according to the paper, more than 200 of the world’s 500 largest firms were State-controlled in 2023, up from around 50 in 2000. The EU argues that, when not properly regulated, these enterprises may distort competition through regulatory advantages, access to privileged information, dominant positions reinforced by legal monopolies, cross-subsidisation and financing on favourable terms. The concern extends to private enterprises entrusted or directed by governments, especially as providers of preferential funding or of raw materials and other inputs.
The discussion of raw materials is of particular relevance to Latin America. In the EU’s view, inputs supplied on non-market terms distort competition twice over: they make downstream products artificially cheap, and they distort the raw-material markets themselves by constraining foreign access or raising international prices. From this perspective, preferential access to minerals, energy or other inputs is a potential distortion of competition.
The EU identifies real gaps in the existing framework. GATT Article XVII disciplines only the narrower category of State-trading enterprises, while the Agreement on Subsidies and Countervailing Measures covers financial contributions by public bodies or by private entities entrusted or directed by the State. No WTO agreement comprehensively regulates the wider commercial conduct of State enterprises. Disciplines on export-side measures are similarly incomplete: GATT Article XI prohibits export bans and quantitative restrictions, (see Indonesia — Measures Relating to Raw Materials), but export duties and other mechanisms that raise the price of raw materials for foreign buyers remain largely unregulated for most Members.
As a way forward, the paper proposes reviewing and consolidating at the WTO the rules already found in the accession protocols of fifteen Members — including China, Russia and Vietnam — and in roughly one hundred free trade agreements. State enterprises would be required to act according to commercial considerations and non-discrimination, subject to stronger transparency, monitoring and reporting obligations.
At first sight these principles appear reasonable. But their implications depend on how “commercial considerations”, “non-discrimination” and “non-market terms” are defined. Interpreted broadly, they could reach many of the instruments through which Latin American countries might seek to develop industries linked to their natural resources.
Raw materials as developmental assets
Latin America holds substantial reserves of copper, lithium, iron ore and other minerals, alongside hydrocarbons, agricultural resources and considerable renewable-energy potential — resources of growing strategic importance as major economies scramble for secure supplies of critical inputs.
Resource abundance, however, has not automatically produced structural transformation. The region has persistently exported commodities with limited processing and weak linkages to the domestic economy, while technology, advanced machinery and high-value services are imported. The most profitable stages of global value chains remain largely outside the region, creating pressure to intensify extraction rather than to upgrade.
Contemporary industrial policy seeks to change this pattern: to use lithium, copper and other resources as a platform for refining, processing, component manufacturing, engineering services and domestic supplier networks, as well as for capabilities in sustainable production, from cleaner techniques to consultation and benefit-sharing with affected communities. Public development banks, State enterprises, procurement preferences, infrastructure investment and conditions attached to access to resources may all form part of such strategies.
From this perspective, raw materials are not simply commodities to be allocated at prevailing market prices; they are developmental assets through which States may seek to reposition their economies within global value chains. Not every policy favouring domestic processing is effective or desirable. But preferential provision of raw materials cannot be assessed solely against an abstract market benchmark. One must also ask what developmental purpose a measure serves, whether it can generate new capabilities, and how its international effects compare with the industrial policies of other economies.
The unequal geography of industrial policy
The language of a ‘level playing field’ used in the EU’s communication can conceal deep differences in how countries support their industries. Advanced economies deploy tax credits, research grants, procurement contracts, consumer subsidies, loan guarantees and infrastructure, channelled largely through formally private firms embedded in mature technological ecosystems. Resource-rich developing countries rely more heavily on State enterprises, development banks, public ownership of mineral resources and local-content or processing requirements — instruments visibly connected to the State and therefore more easily characterised as departures from competitive neutrality.
A reform agenda that disciplines the second set of instruments more strictly than the first would not be neutral. It would privilege the industrial-policy model available to countries that already possess capital, technology and fiscal space. The relevant comparison is not between a State enterprise receiving preferential access to minerals and a hypothetical unassisted private firm, but between industrial-policy systems. A private corporation in an advanced economy benefiting from tax incentives, publicly funded research and subsidised infrastructure affects international competition no less than a public enterprise benefiting from domestic raw materials or preferential finance. WTO disciplines should therefore be ownership-neutral and instrument-neutral. Competitive neutrality cannot mean requiring developing countries to sell their minerals without regard to development objectives while advanced economies subsidise the industries that process those same minerals.
Legitimate concerns about spillovers
Recognising the developmental role of raw materials does not mean rejecting international disciplines. Export restrictions, discriminatory supply arrangements or artificially cheap inputs can transfer costs to other economies, undermine foreign producers and fuel geopolitical competition over essential resources — and Latin American economies themselves suffer when subsidised production by large economies depresses world prices. There are domestic risks too. Resource-based policies may become vehicles for rent-seeking and patronage, intensify extraction, weaken environmental standards or bypass affected communities without changing the productive structure. The issue is not whether raw-material policies should escape WTO scrutiny, but how to distinguish measures supporting genuine structural transformation from measures whose principal effect is to manipulate markets or exclude competitors.
Towards a more balanced approach
A balanced framework should rest on five elements. First, support delivered through State enterprises, tax systems, procurement, private corporations and financial regulation should be assessed under comparable principles. Second, disciplines should target significant international effects—considering the size of the economy, the scale and duration of the measure and its trade impact—rather than treating State ownership or preferential pricing as proof of distortion. Third, rules should preserve meaningful space for mineral processing, supplier development, technological learning and infrastructure, with measures that are transparent, time-bound and linked to identifiable development objectives. Fourth, special and differential treatment should shape the substance of the rules, not merely implementation periods. Finally, resource-based industrialisation should be tied to environmental safeguards, community participation and fair benefit-sharing.
The EU has opened an important debate, and Latin America has a real stake in rules that protect it from overcapacity, subsidy races and unilateralism. But the reform debate should not assume that all countries can industrialise with the same instruments. If advanced economies may build on capital, technology and market size, Latin American countries must be able to build, at least in part, on their natural resources. Otherwise, rules presented as guarantees of fair competition may instead freeze the existing international division of labour: some economies exporting raw materials, others subsidising the industries that capture their value.
*Nicolás M. Perrone
Professor of Economic Law & Director, Center for Law, Regulation and Sustainable Economics, Universidad de Valparaíso (Chile). Co-Editor-in-Chief, Business and Human Rights Journal (CUP).