Vanessa Baird concludes with 14 ways – at least – towards a better global trade.
It is often said these days that the post-War, rules-based world order, founded on liberalism and international co-operation, is unravelling. Selfish nationalism, populism and protectionism are to blame.
But it can also be said that this process has been well under way for some time. The three disgraces of free-market fundamentalism, privatization and deregulation have been ripping apart the fabric of social liberalism for several decades. The tendencies incarnated by Trump and Brexit are consequences rather than revolutions – and certainly not solutions.
We can respond to the damage being done by leaping to the defence of the established order that prevailed before rightwing populism erupted so rudely onto the world stage.
Or we can seize the opportunity to create something better – the current threats and fractures providing an opening for change and creativity.
Here is a 14-point stab at the principles, at least, that could underpin just, open and green trade:1
1 Trade is for and about people. It should never be separated from its social context. Trade should improve people’s lives and the public good. International trade agreements should not trump human rights or the social contract a government has with its citizens. Governments need therefore to have policy space within trade deals to foster development, employment, food security, access to education and healthcare. Trade agreements should not block public ownership in key areas such as public health, education and transport.
2 Trade strategy must be subservient to environmentand climate goals and accords to tackle global warming. That will include reducing trade and investment in fossil fuels and encouraging renewable, climate-saving technologies, agro-ecological and organic cultivation. It will involve localization and creation of domestic and regional markets. Any trade deal must require all imported food, goods and services to meet the same strong domestic safety and environmental rules, and comply with international biodiversity and endangered species codes.
3 Labour and wage standards that are strong and enforceable should be included in trade deals. According to the International Labour Organization (ILO), deals with strong labour rights increase the value of trade more than those that don’t.2 A progressive trade and investment agenda should protect skilled jobs as well as human, gender and workers’ rights based on internationally recognized labour standards. USMCA’s minimum wage clause is an example to build upon.
4 Trade rules that drive up the cost of life-saving medicines by giving pharmaceutical companies extended monopolies on drug patents should be scrapped. The WTO’s agreement on Trade-Related Aspects of Intellectual Property (TRIPS) gives manufacturers patent- and price-setting rights that make many medications inaccessible to the poor – particularly in developing countries.
6 The privileging of big corporations in trade and tax arrangements must end. The system is skewed massively in their favour. They hold colossal global market share – one per cent of exporting firms accounted for 57 per cent of country exports on average in 2014.3 But they can also make fortunes by locating a company’s tax base in low-tax jurisdictions. The fact that US companies generate more investment income from tiny Luxembourg and Bermuda than from large markets like China and Germany shows how distorted the system is.
7 Trade alone cannot rid a country or the world of poverty. It can help lift people out of poverty; it can also deepen and create poverty. But the WTO’s abandoned Doha Round did try to put development at the heart of international trade strategy and it’s still possible – under the WTO’s Enabling Clause – for industrialized nations to operate non-reciprocal preference schemes for vulnerable countries.2 These include duty-free and quota-free access for exports from the world’s least-developed countries – which should be encouraged and expanded.
8 Investor rights exercised through the Investor-State Dispute Settlement (ISDS) system or International Court System (ICS) must be eliminated. They currently give corporations unlimited power to sue governments regulating for the public good.
9 Financial deregulation and the speed and ease with which capital can cross borders has been toxically destabilizing – as the 2008 financial crisis conclusively demonstrated. More than half a century ago, economist John Maynard Keynes had cautioned: ‘Let finance be primarily national.’ Capital controls – anathema to free market fundamentalists – are sometimes a necessary tool in a government’s box, used by Iceland during the 2008 financial crisis. Even the IMF has changed its tune on this matter. Financial services should be a well-regulated sector.
10 Stop and reject bullying tactics. Powerful parties in trade negotiations – such as the US, the EU and China – often use coercive tactics to prise open the markets of weaker partners. In the case of trade deals with African countries, these tactics have included threats to withhold development aid or investment. But a weakened, isolated, post-Brexit Britain could also be forced to open its National Health Service to, say, US commercial interests. Often the use of trade sanctions – such as US-instigated sanctions against Iran, Venezuela or Cuba – are politically motivated to destroy the economy of an ideological enemy.
11 Cut out the dirty tricks and add rules against trade cheating. Common tactics include a complex trick of ‘shifting boxes’, used predominantly by rich-world countries, which involves craftily reclassifying products – to your advantage – to get away with unfair subsidies. Deliberate and systematic accumulation of trade surpluses can be an unfair practice – one of which Germany is actually more culpable than China.
12 Trade should encourage innovation rather than oligopoly. The world needs to curb the monopolizing power of the internet titans such as Google, Apple, Facebook and Amazon (aka GAFA). Superstar firms crush competition and deepen global inequality. Regulating digital super-platforms is essential for developing countries to gain from e-commerce. Without this, poorer countries linking into existing super-platforms will only provide the companies that run them with more data – strengthening them further and facilitating their market access and domination.
13 Not all trade is good and more trade is not necessarily better. Judgement and moderation should prevail. Some just should not happen at all, like trade in arms to countries that are serial human rights violators. Not all investment is good either. For example, Britain enjoyed record inward foreign investment in the past year, but much of it was in the form of mergers and acquisitions that caused thousands of job losses.
14 Fair Trade makes up a tiny fraction of global trade, but is an important model for trade that is direct, ethical, non-exploitative, paying producers a fair price and providing continuity of purchase. Fair-traded food products, cotton and handicrafts have scaled up successfully and may well continue to do so.
There’s something missing in the above list – the World Trade Organization.
Even before Donald Trump and his international trade representative Robert Lighthizer gave it a kicking at the last ministerial summit in Argentina in 2017, the power and effectiveness of the WTO as the custodian of the multilateral trading system has been waning.
The failure to conclude the Doha Development Round – meant to put the needs of developing countries at the heart of talks – has not helped. Increasingly, major trade negotiations take place at a regional or bilateral level, outside the WTO.
But a critical function of the WTO remains to settle disputes between member trades. By vetoing the approval of new judges to the Appellate Body of the dispute system, Trump and Lighthizer managed to strike a potentially lethal blow. Unless this issue is resolved, by the end of 2019 the court will grind to a halt with just one judge left – calling into question the ongoing viability of the WTO itself.
The White House claims that the WTO is unfair to the US in its trade disputes, mainly with China. But this is not so, as the dispute settlement record shows – the US is the biggest complainant and has won 90 per cent of its cases over the past 20 years.
Trump’s deep hostility to multilateralism itself was apparent when, at the end of the 2017 WTO summit, he vetoed a statement affirming the ‘centrality of the multilateral trading system’.
There is widespread acceptance within the WTO that the organization needs reforming and updating – not least so that it can keep pace with the digital revolution, and many new trade issues thrown up by the data economy, e-commerce and power of platforms.
But there is also a determination to save the multilateral system. ‘What’s the alternative?’ says South African trade expert Mustaqeem De Gama. ‘War?’
Canada’s trade minister Jim Carr recently called a 13-party summit to forge an alliance of nations that support a rules-based multilateral trading system and to discuss how such a system can be modernized and improved. The EU, Australia, Japan and South Korea were among those that attended. Separately, China and Russia have called for the WTO to be strengthened.
But is the WTO fit for purpose and should it be saved? In his book What’s Wrong with the WTO and How to Fix It,Rorden Wilkinson, professor of international political economy at Sussex University, argues that the WTO system should be dismantled and rebuilt to provide equity of opportunity for all. The unfairness in the system, between countries at different stages of development, has existed since its conception. It reflects the trade requirements of its principal architect, the US, and was crafted to fit around existing US commercial methods, legal frameworks, styles of negotiating and economic ideas. Throughout the WTO’s history, tactics have been used, directly or indirectly, to prevent developing countries from competing in the global marketplace or fully participating in the negotiating process. Unequal deals have come about because competitive negotiating among unequals is embedded in the machinery of trade governance.
For Wilkinson, key to reimagining the WTO is a new declaration of its aims and objectives that places trade-led development-for-all, in an environmentally sustainable fashion, at the forefront of the multilateral trading system – with particular emphasis on helping those in most need.
One of many negotiations now taking place outside the WTO is the Trade in Services Agreement (TiSA). In the thick of trade war, the focus has been predominantly on goods being traded. But the trade in services (banking and financial, utilities, communications, insurance, health and so on) is almost as important. In some cases – Britain, for example – services form the larger part of a country’s exports. The US, while bellowing about its trade deficit in goods, keeps quieter about its trade in services – which is actually in surplus.
Services are set to be the big growth area, with the TiSA negotiations involving around 50 countries, including Australia, Canada, New Zealand/Aotearoa, the US and the membership of the EU. The sectors under discussion include financial, telecommunications, movement of persons, shipping, air and postal services, professional, electronic commerce, public procurement, environment, energy and services related to health.
Critics see TiSA as a corporate take-over that will target public services and lead to job losses. This view was confirmed by WikiLeaks’ exposure of draft texts under negotiation, showing how TiSA would seek to eliminate regulation and national legislation, enabling privatization and serving big business.
The US has most to win from liberalizing financial services, information and communication technology and postal services. The EU too has its eye on financial services. Trade unions are leading resistance because so many people are employed in the service sector. Whether in the ports of Canada or the hospitals of Pakistan, TiSA threatens to take away thousands of jobs.
And the EU?
Also missing from the 14-point list is specific mention of EU reform. Like the WTO, many agree the EU needs to change, but in what way? President Emmanuel Macron of France wants greater integration, fiscal and even military; a stronger Europe that can stand up to China and the US on the world stage. Highly indebted Italy is pulling in quite the opposite direction, fighting for more autonomy and setting an anti-austerity budget that the EU says is irresponsible and will destabilize the Eurozone. Italy’s coalition Right-populist government argues that the country followed EU rules and yet still its debt mounted. It can point to Greece – a weak member of the Eurozone – which suffered huge job losses and saw 25 per cent of its economy vanish when forced to comply with EU-imposed austerity measures following the 2008 financial crash. The self-harming shambles of Brexit, however, do not provide an encouraging example for those who want to leave the Union. Many say it’s better to stay and reform from within. University of London economics professor Costas Lapavitsas disagrees, saying that meaningful reform is impossible – the EU’s institutions are fundamentally designed to uphold the interests of capital against labour.7
Fellow leftists Hilary Wainwright and Mary Kaldor, however, say that there have always been contesting visions within the EU and point to significant victories for transnational social benefits and against corporate power. These include labour rights and other aspects of the EU’s Social Chapter, which Margaret Thatcher dubbed ‘socialism by the back door’.
Equality and anti-discrimination agreements have pulled many member states, including the UK, into a far more progressive place. And the EU stands out as world leader in tackling data protection issues and taking on the oligopolistic excesses of the digital titans.
Michael Holmes, director of the European Institute at Liverpool Hope University, points out that the structures of the EU make it very difficult to engineer meaningful reforms, but he is not totally pessimistic. ‘What is needed at this stage is the development of a Europe-wide progressive alliance to create a consensus about how best to democratize the EU and shift its policy priorities away from the dominant conservative orthodoxy, and how to promote broad values of social solidarity among the peoples of Europe. It’s a difficult path to travel on,’ he says, ‘but a very necessary one.’
Meanwhile, Caroline Lucas, a fierce critic of the democratic deficit in the EU while she was a member of the European Parliament, says that as a result of campaigning pressure, transparency and accountability have improved and are now better than in the UK parliament, of which she is now a member.
The future is plural
Meanwhile, the world is changing. It has shifted from being a unipolar world, with the US in charge, to an increasingly multipolar one. Not only China and the EU, but emerging economies like India, Brazil and South Korea are taking their place – pushing European countries down the league table of top economies, and becoming more assertive in international bodies.
There are moves towards strengthening and creating new regional trade blocs in Africa, Latin America and Asia-Pacific. A new 55-nation African Continental Free Trade Area is the most ambitious of these plans.
Dani Rodrick envisages ‘a pluralist world economy where nation-states retain sufficient autonomy to fashion their own social contracts and develop economic strategies tailored to their needs’.
Joseph Stiglitz calls for ‘fair globalization’ with shared prospects. The rules of the game have to be rewritten for the 21st century, he says.
Maybe the era of hyper-globalization is coming to an end. The growth in global trade is slowing down, according to the WTO. We have seen regional resistance to big power bullying: African nations standing up to the EU’s EPAs and rejection of ISDS spreading across the Global South, from South Africa to Ecuador to Indonesia. In Latin America a progressive trade justice platform is forming and there have been significant victories – international action got rid of the EU-US TTIP. We are also seeing signs of growing resistance to China’s ambitions within RCEP, to TiSA and to a rebooted TransPacific Partnership (or TPP 11) labelled a ‘job killer’.
A multipolar world has to be better, but balance of power in itself is not enough. Core values and principles are vital – and, for that reason, so is the role of social movements, campaigning across borders for trade that is shaped, not by raw competiveness, but by ideas of justice and sustainability.
We need an international mobilization that is pro-trade, but not enslaved to the mendacious corporate-driven delusion of ‘free trade’.
And developing trade that is just, open, green – for people and planet – starts with a vision.
1 Numerous sources have been helpful in compiling this section, including: Just Trading, Labour Party; Public Citizen’s Global Trade Watch, Global Justice Now, TNI, War on Want, Dani Rodrik, UNCTAD, Joe Zammit-Lucia and David Boyle, Yash Tandon, and conversations with activists and experts around the world.
2 Labour Party (UK) Just Trading, 2018.