An alternative vision for trade

READING TIME 15 mins
An alternative vision for trade

Overview: international trade at a juncture

Where Are We Now?

The international trade regime is at a juncture. In 2016, opposition to secretive mega-deals that threaten labour standards, public health and the environment brought millions onto the streets in an international movement that killed the Trans-Pacific Partnership agreement (TPP) and severely hobbled TTIP, CETA and TISA. At the same time, a wave of popular discontent with the uneven benefits of globalisation, and anger at a distant political class felt to know little and care less about the real world consequences of economic ‘dislocations’, propelled the UK towards Brexit and Donald Trump into the White House.

What Way Forward?

There are three possible responses to this crisis in legitimacy of the trade regime. The first is a business as usual approach, one that pays lip service to demands for greater accountability and sustainability while pursuing the same old agenda. There is evidence of this in the worthy but non-binding social and environmental chapters shoehorned into socially and environmentally destructive trade deals, or minor procedural reforms to investment arbitration rules that grant extraordinary powers to corporations. But this cosmetic approach will fail because dissatisfaction with international trade is about more than perceptions. By failing to address underlying problems, a business as usual approach to trade will simply shore up even greater trouble for the future.

The second approach, pursued by the Trump administration and a resurgent far right across Europe, is to scapegoat migrants at home and castigate the rising powers of the developing world, promising a return to a ‘golden age’ when post-colonial powers used trade rules to maintain dominance. This has long been evident in the approach of richer countries at the WTO, where their priorities are being pursued to the neglect of former colonies and in the US rhetoric in respect of countries like China and Mexico. This approach bodes disaster, because a) it will unleash dark forces of racism at home and conflict overseas on a scale not seen since the 1930s and b) it will not deliver promised levels prosperity as it will do nothing to address the structural problem of gross inequality and corporate delinquency facilitated by trade deals that are now undermining basic democratic principles.

This leaves a third approach: to remake trade rules from the bottom up based on the principles of local, democratic accountability and international solidarity, in a way that responds to both uniquely regional and globally common challenges. This approach defines trade not as an automatic good or end in itself, but as a tool to advance living standards, wages, and rights and accelerate the transition to an economy that does not destroy the resources and natural support systems on which all of us depend. As Brexit returns trade and investment policy to full UK competence, there is a pressing need to formulate – and then fight for – a new, progressive vision for trade. Given the other choices on the table (and to repurpose a slogan once popular with market fundamentalists) – there is no alternative!

In depth: what an alternative trade regime could look like

Growing consensus

In 2014, a group of over 50 UK and EU civil society organisations launched the Alternative Trade Mandate. The Mandate presented a new vision for trade calling for transparency and openness, a strengthened role for parliaments with opportunities for revisions before and after the conclusion of trade agreements, an expanded role for civil society organisations and the prevention of corporate capture of trade negotiations.

Two years later, the Namur Declaration emerged out of the immense diplomatic pressure placed on the Belgian region of Wallonia for its stand against CETA. Presented by the Walloon Minister-President and signed by leading academics including Nobel Prize winning Thomas Piketty, the Declaration calls for three principles to inform trade negotiations: 1) respect for democratic procedures; 2) compliance with social, economic, health and environmental rules; and 3) the highest protections for the public interest in trade dispute resolution. At the same time in the US, a proposal for an alternative, climate-friendly trade model has been grounded in similar principles: trade rules that shield national climate policies from WTO or ISDS challenges; rules that require strong climate commitments from partners; and rules that mitigate the negative environmental impacts of international trade.

Modern trade agreements touch on almost every aspect of public policy and there is, of course, a live debate across progressive movements as to the best way forward in specific areas. But a number of common headline demands have emerged that unite progressive voices. These can be summarised as the following:

  • More democracy and transparency

  • The public interest front and centre

  • An end to market fundamentalism

More transparency and democratic accountability

The evolution of trade negotiations over the past 20 years means that trade policy now has implications for almost every aspect of daily life, from the way services are provided to jobs and the environment. This means that, although trade negotiations can be complex and technical, there is no such thing as a purely technocratic approach. To have any legitimacy, trade negotiations must be opened up to legislative and public scrutiny.

  • As trade negotiations shape public policy, they cannot be approached in secret, as is the case for private contractual negotiations. Governments should publish detailed negotiating objectives and draft texts should be published after each negotiating round. The claim that this ‘weakens the hand’ of government is a misconception about what and who trade negotiations are for. But secrecy certainly does weaken the hand of citizens in holding their governments to account.

  • Trade is a matter of public policy, and consultation with and approval of relevant local and national parliaments should be required at every stage of trade negotiations, including a final, binding vote on any trade deals.

  • Closed door lobbying of trade negotiators by big business is not acceptable. Negotiators should seek information and analysis from interest groups – but all interactions and proposals should be on the public record, and input between different interest groups, from business to unions to NGOs, should be fairly balanced.

  • Countries should be free to renegotiate or terminate trade deals within a reasonable timeframe. This means that trade deals should not contain ‘overhang’ clauses that bind parties for ten or twenty years after they have left an agreement.

Putting the public interest front and centre

Labour, environmental and human rights standards represent a century of hard fought gains and are non-negotiable. Rather, trade deals should treat existing national and international standards as a floor, and create mechanisms to shield countries from competitive commercial pressures as they seek to raise standards ever further.

  • General: Trade deals should lock parties into their labour/environment/human rights standards at the time of signing, while doing nothing to prevent parties adopting more ambitious standards in the future. Independent bodies should continuously monitor compliance, and citizens groups or affected individuals should have standing to bring actions to enforce public interest commitments through a dispute mechanism. Not only should public interest commitments have the same ‘hard law’ status as other trade provisions in an agreement, but all other trade provisions should be subordinate to public interest commitments, and only enforceable to the extent they are compatible with these commitments.

  • Labour standards: Implementation of international labour agreements and an enforced nationally-defined living wage should be preconditions for entering a trade agreement, and there should be a phased effort, over time and with financial support, to raise the labour standards of all parties to the highest among the parties.

  • Climate commitments: Trade deals should seek binding commitments from all parties on meeting their emission reduction commitments as expressed in ‘Nationally Determined Contributions’ that are currently non-binding under the Paris Agreement. Deals should also commit parties to sharing green technology, particularly with developing countries, prohibiting fossil fuel subsidies and restricting the production and international trade in fossil fuels.

  • Human rights protections: Implementation of international human rights agreements should be a precondition for entering trade agreements, and there should be a phased effort, over time and with financial support, to raise the human rights protections of all parties to the highest among the parties. Human rights should be understood in the broadest sense to encompass economic, civil, political, social and cultural rights. Beyond protecting existing rights, trade agreements should contain proactive commitments to advancing the interests of marginalised groups, with a particular focus on gender and racial equality.

Ending the ‘one size fits all’ approach to trade

Since the 1970s, an ideology and set of rules broadly defined as ‘neoliberalism’ has been widespread in government and academia, reaching an almost unassailable position in the years following the fall of the Soviet Union. Neoliberalism calls for the removal of all barriers to trade and investment flows – from regulations to limits on the movements of profits – and is closely associated with privatisation and deregulation. Unsurprisingly, these objectives have been embedded in trade agreements. But in the face of so called ‘market failures’, from the financial crisis to climate change, it is now time for trade rules that free up our governments to address our common challenges efficiently and on a level commensurate with their scale.

  • Countries should be free to subsidise sectors, technologies and processes that deliver a public interest dividend, where the public interest would otherwise be unmet.

  • Countries should be free to establish tariffs and quota rates that restrict the trade in harmful goods or goods produced through harmful production processes, and that facilitate the trade in socially beneficial goods.

  • Countries should be free to use trade barriers that are protective (e.g., tariffs) or supportive (e.g., procurement and buy-local rules) to foster burgeoning domestic industries, where these industries contribute to public welfare.

  • Developing countries should be free to nurture infant industries in order to to increase domestic capacity and skills in higher value production.

  • In promoting democratic ownership models for industry, services and natural resources, governments should not be tethered by international investment rules that entrench existing ownership structures and make reform prohibitively expensive.