Prof Jane Kelsey
Rethinking the trade and investment agenda in turbulent times
These days I feel depressed, cautiously optimistic, and frustrated at the same time.
Depressed because the harm caused by four decades of capitalism unleashed, fostered by a neoliberal regime expanded and locked in through free trade and investment agreements. Poverty, inequality, precarious jobs, decaying infrastructure, social dis-ease surround us. Governments and international institutions admit that reality at almost every international meeting I go to. They acknowledge there is a crisis of legitimacy in the current regime, and pepper their speeches with the buzzwords of social inclusion, empowering women and indigenous peoples, reversing inequality and embrace the economic, social and environmental pillars of the sustainable development goals – although they rarely go as far as mentioning climate change.
Why is that depressing? Because powerful governments, international institutions and their officials don’t intend to change a thing in a way that would address those or other morbid symptoms of a broken system effectively. Instead, they have continued to negotiate new agreements with more extensive and intrusive rules. A stark example is the so-called e-commerce chapters that will strengthen the oligopoly of Google, Apple, Facebook and Amazon (GAFA) and tie the hands of governments trying regulating the increasingly problematic digital domain and preserve their tax base.
Yet I am cautiously optimistic about the prospects of change, because the forces of creative disruption are breaking the mould, with the caveat that the outcome is not always progressive. We can debate the pros and cons of the UK’s Brexit and Trump’s withdrawal from TPPA, the rewriting of NAFTA, Trump’s tariffs on traditional allies and China alike, but there is no denying or reversing the jolt that has given to the system.
Separately from that, the World Trade Organization (WTO) has been paralysed for some years by the refusal of rich countries, including our own, to deliver to poorer countries the rebalancing they were promised in return for agreeing in 1994 to US-driven rules on services and intellectual property. Ironically, Republicans and Democrats both told me in Washington recently that the WTO’s rules and dispute processes are stacked against them.
While the US throws its toys out of the WTO cot, other mostly affluent countries, including New Zealand, are proposing reforms they hope will pacify the US’s concerns and lure it back. They are also pushing an aggressive new agenda on digital commerce, investment and constraints on domestic regulation, that will heighten internal factures and external antipathy to the WTO. The WTO is set to become an even more contested zone.
China is also a circuit breaker, for good and bad. The hegemony of the US and secondarily the EU is under threat. The US originally expected to draw China into the orbit of US-designed rules at the WTO, and cement China’s subservience. Instead, China has become an economic powerhouse with an independent modus operandi. Both Democrats and Republicans complained to me that China is breaking the rules, and justified imposing trade sanctions as a matter of national security. China has responded by appealing to the rules-based system!
While the US-China trade war is important, it’s a symptom of a larger transition, as China offers an alternative paradigm. Funding and contracts under China’s One Belt One Road initiative, the Ali-Baba-dominated digital ecosystem, the Asian Infrastructure Development Bank and bilateral state-to-state relationships are attractive alternative to many, mainly developing countries. There are costs, with China directly or indirectly controlling the infrastructure it funds, much of which rely on fossil fuel. Faced with growing criticism, China has also become increasingly keen on protecting its investors through agreements, including with investor-state enforcement.
These fractures in the current regime stepped up a pace this month, with the revised North American Free Trade Agreement (NAFTA) allowing the US to kick Mexico or Canada out of the deal if they negotiate an FTA with China. If that becomes the established US position, we will have a new cold war via FTAs, with countries pushed to choose between the US or China. I’m sure Terence will have more to say about these developments.
On a more progressive note, the escalating backlash against bilateral investment treaties and investment agreements in FTAs has brought real change. These rules protect foreign corporations from the adverse impacts of new laws and decisions, allowing them to recover their investment and lost future profits from taxpayers even when they are at fault, through private, unaccountable offshore investor-state tribunals – ISDS.
States have terminated stand-alone investment agreements, are developing new genuinely progressive models, and have refused to include ISDS in new agreements – indeed, that is formally NZ’s position, although the government has yet to deliver on it and has played no role in promoting its critique of ISDS internationally. This week the UN Human Rights Council is meeting to discuss a Binding Treaty to hold TNCs accountable for human rights violations, as a direct challenge to put indigenous and other human rights ahead of corporate profits. The Trump administration has even stripped ISDS out of the NAFTA in relation to US and Canada and severely limited it with Mexico. That is highly significant as NAFTA was the first FTA to include ISDS. the exception of oil and gas contracts with Mexico demonstrates the ongoing power of the corporate lobby and the blindness to climate change.
Affluent countries, neoliberal international institutions, and the arbitration industry are fighting a rear-guard action to defend privileges of foreign investors, including the EU’s proposal to establish a permanent multilateral investment court, but not change the rules it would enforce. The outcome would be the equivalent of the Multilateral Agreement on Investment (MAI) that we defeated in 1998.
Other innovations in NAFTA appeal to the working-class voters Trump stole from the Democrats, with promises to bring jobs back home that were offshored to lower wage countries, notably Mexico. For example, products can only benefit from lower tariffs if they have a minimum content made in the three countries, and 40% of that is by workers paid USD16 per hour. That has laid bare the Democrats’ failure to develop their own progressive alternative and poses a quandary for those demanding real change.
Which brings me to why I am so hugely frustrated. An unprecedented turbulence has subsumed the ‘free trade and investment’ regime that was born 30 years ago. It faces an existential crisis. UNCTAD’s recent 2018 Trade and Development Report recalls the dominant “free trade narrative” of a rules-based system that has broken free from local political oversight and can promote a level playing field and prosperity for all. In reality, UNCTAD says, we live in a hyperglobalised world
where money and power have become inseparable and where capital – whether tangible or intangible, long-term or short-term, industrial or financial – has extricated itself from regulatory oversight and interference. …
Resisting isolationism effectively requires recognizing that many of the rules adopted to promote “free trade” have failed to move the system in a more inclusive, participatory and development-friendly direction…
The tragedy of our times is that just as bolder international cooperation is needed to address those causes, more than three decades of relentless banging of the free trade drum has drowned out the sense of trust, fairness and justice on which such cooperation depends’. (xii-xiv)
There is a serious void in international leadership towards such a values-based paradigm. I don’t want to downplay the significance of Bernie Sanders and Jeremy Corbyn, the two elderly white men who are incongruously have led progressive politics in two of the power-house states that would need to embrace real change.
But the more powerful fall-out from globalisation has been the decline of democracy and rise of populist authoritarianism. Trump is now burning down the neoliberal model with his trade war, NAFTA, WTO – a model previously drawn up by US in its self-interest – and creating a global legitimacy for authoritarianism, with other strongmen. Capitalising on populism of fear, not populism of the positive, he appeals to those who feel alienated and disempowered while elevating the super-rich and powerful to new heights.
Labelling the current dynamics as unilateral protectionism is simplistic and dangerous. The Pavlovian response is to call for multilateralism based on profits, not on values. That is a critical distinction. The patrons and beneficiaries of the existing system are mobilising to restabilise it. The New Zealand government, past and present, are active players in that project.
Incremental reforms will not work, for several reasons. They are nowhere near the necessary speed, and will settle for the least common denominator. They purport to address critical issues that have become lightning rods, like ISDS, and the social harms by gender, labour, environment, and indigenous rights, by cosmetic clip-ons that change nothing. Digging us deeper into the regime is not a fix. Instead, it will extend the time needed for larger scale paradigmatic reform.
Consider two of the most pressing challenges to that system. You can’t shoehorn climate change into the existing regime. Equally, digital technologies are bringing a fundamental transformation to which old models of trade, investment, even intellectual property no longer apply. You can’t address the opportunities and challenges this poses by tinkering. We need to move from the economic reality of the past to a future based on a different paradigm.
We have to fill the vacuum of leadership before others do. We have seen radical change before – in the post-depression era of Keynesian welfarism and the neoliberalism of the 1970s. If progressive ideas are not yet in vogue then we need to create intellectual framework and build movements to generate a momentum for ideas, communicate them, create political will, and make sure our ideas are on the table. Otherwise the void will be filled by the ‘corporations-first’ model of recent decades, or an America-first model competing for ascendancy with an equally self-interested China.
We have the capacity to do that, but it is part of a larger political and social project. We need to re-empower governments because they have outsourced so much of what needs to be done and make sure that policy and regulatory space is not closed off by even more deals. But it is not enough to reassert the role of the state. States are not benign. Their alignment with capital and political and economic elites has to be constantly contested. National regulations can be even worse than the international agreements. Silenced voices – Maori, women, precarious workers, including migrants – which have been systematically disempowered by the state, by corporations and by agreements, need to be genuinely empowered in reformulated economic models and governance processes.
There are also limits to what states can do to address global aspirations and abuses, such as the catastrophic threat of climate change and the private global oligopoly of GAFA and Ali Baba. By default and design, responses to these challenges are being framed by the rules of neoliberal trade and investment treaties. We need global aspirations, based on different visions, values, politics and institutions.
To end with my favourite line from Gramsci: We are in an interregnum. The old regime of international economic agreements is dying. We are surrounded by morbid symptoms of its demise. The new is yet to be born. We don’t know what it will look like. It could be more of the corporate-led agenda that the neoliberalism and financialised capitalism. It could be a battle between the world’s most powerful authoritarian regimes. Or it could be remade according to fundamental principles of social justice and survival of the planet. The third seems a no-brainer to me.
What might this involve?
I don’t want to pre-empt the discussion at this hui or the ideas you might produce at the end – and Jim Stanford is about to present some ideas of his own. Let me identify a handful of progressive alternatives that are already underway.
The UNCTAD Trade and Development Report 2018 cited earlier urges states to revisit the original post-war Havana Charter on which the GATT was based and update it for the digital age. Born of post-war Keynesianism, the Havana Charter recognised the links between labour market conditions, inequality and trade, as well as anticompetitive business practices, monopolistic control and limited access to market. Returning free trade rules to their roots and shedding the non-trade ephemera would be a start.
The UN Human Rights Council is meeting this week to advance its mandate to develop a legally binding international instrument on transnational corporations and human rights. There is an internal battle between the state and NGOs supporting the treaty, mainly from countries that have been targets of investment disputes, and OECD countries led by the EU seeking to sabotage it. New Zealand has not YET participated in this process. If we are looking at real rebalancing by putting people and planet before corporate interests, New Zealand needs to become involved – on the right side.
Still at the UN, rapporteur for indigenous peoples Victoria Tauli-Corpuz has strongly criticised the adverse effects of free trade agreements and investment agreements, especially ISDS. Maori attended a regional workshop she hosted in Peru and another in Bangkok. The new Minister of Crown Maori Relations has a mandate to take the lead on resetting Crown/Māori relationships on hard issues and find opportunities for active partnerships between the Crown and Māori. He could work with the Rapporteur and counterparts internationally, and identify and develop tikanga based processes and options in Aotearoa that are consistent with the UN Declaration on the Rights of Indigenous Peoples, The Declaration of Independence and te Tiriti o Waitangi. The panel this afternoon will explore that further, and before lunch Wayne Garnons-Williams will share some insights from the First Nations in Canada during the rewrite of NAFTA.
Then there are many initiatives to address the democratic deficit and enable citizens to hold their governments to account. Measures promoted and adopted in various countries include ongoing disclosure and debate on mandates and negotiating proposals and texts; guaranteeing elected politicians the right to oversee mandates and negotiations; ensuring full, balanced and independent cost-benefit and impact analyses during the course of negotiations; requiring referenda or super-majorities for their adoption; and including sunset provisions that limit the life span of such deals.
The World Health Organisation and peak international and national health bodies have developed the methodology for full health impact assessments of proposed agreements during the course of negotiations, as part of broader human rights impact assessments, with the presumption that negotiations that fail that assessment should be abandoned.
How might we address the legacy problem of existing agreements? Countries around the world are terminating bilateral investment treaties. A conference I was at in New York earlier this month explored and debated various alternatives. South Africa has substituted a domestic law, where foreign and local investors are treated the same, whereby their rights and obligations are subject to the post-apartheid constitution, and disputes are heard before the domestic courts. India has a new model agreement which, while not as socially progressive as the draft, includes real protections for social rights and the right to regulate, and gives priority to the domestic courts. Brazil’s Congress had never approved investment agreements, and it has developed a new model that emphasises long-term investment relationships and uses mediation rather than investor enforcement. A decade ago this kind of talk was incendiary. Today we are not discussing whether, but how.
There is active talk about developing a multilateral agreement through which signatory states could extinguish prior agreements, rather than having to unpick them one by one. Countries that feel vulnerable if they take unilateral steps to terminate could benefit from the protection of a critical mass, especially if some larger and stronger countries also want to reconsider their obligations. One precedent for this is the multilateral Mauritius Agreement on Transparency in Investor-State Arbitration 2014, that changes provisions of existing agreements among signatory countries. The EU is adapting that to terminate bilateral investment treaties between EU member states.
A parallel example is the anti-tax-avoidance Base Erosion and Profit Shifting or BEPS process in the OECD. The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS would result in mass change in double taxation treaties to make them consistent with the agreed BEPS actions. Among other things, the Convention modifies the application of thousands of bilateral tax treaties concluded to eliminate double taxation.
There is no reason why a similar approach could not apply to free trade agreements that are legally easier, but politically more difficult, to exit, rewrite or trim back as the UNCTAD report suggests.
These are all practical, achievable ideas if there is the political will, and the momentum and ideas to create that will. Let’s advance that discussion over the next two days, and beyond.
What Does Progressive Trade Policy Look Like?
Jim Stanford is an economist and Director of the Centre for Future Work at the Australia Institute, based in Sydney.
Hello! I am Jim Stanford. I am Economist and Director of the Centre for Future Work at the Australia Institute, based in Sydney.
I hail from Canada originally – which is why I am coming to you on video, rather than in person. I would much rather be there in person, believe me! But the scheduling wouldn’t allow it.
I’ve spent a lot of time in New Zealand over the years — including in July this year, when we sponsored a special course on Progressive Economics for trade unionists in Auckland, with our friends at the NZCTU.
I know this is a really exciting time in New Zealand. You have a chance to really push the envelope in all kinds of policy areas. We’re seeing it in environmental policy, social policy, hopefully in labour policy. There’s some very inspiring policy coming from this new government.
And New Zealand could also be an important, progressive voice promoting new approaches to trade, international development, and sustainability. But we need a strong movement to push the government to do the right thing. And that’s the point of this hui!
OK: let me jump right into my topic for today: we know we need a progressive trade policy alternative. What will that that alternative look like?
Progressive economists have been opposing neoliberal trade deals for decades. We have shown that the assumptions of neoclassical trade theory bear no relationship to the real world we live in.
Progressive economists have proven that free trade is not actually “free” at all – in fact, neoliberal trade deals are chock full of restrictions and protections and rules and constraints. It’s just that all those rules are aimed at protecting business and investors, rather than the rest of us.
And we have shown there’s a huge difference between “trade”, and so-called “free trade deals.” Trade deals address many things that have nothing to do with actual trade – whether it’s goods or services. And in many cases, the trade deals restrict trade, not grow it. So the assumption that if you want more trade, you should sign free trade deals, is quite wrong.
In fact, in many countries exports are actually declining relative to the overall economy – not growing. Despite free trade deals – or perhaps because of them. This is certainly true in New Zealand.
Look at this graph [on video!]: in 2017, exports of goods and services made up 25% of New Zealand GDP. But that export share is down by 10 percentage points in the last 15 years. Exports are shrinking under neoliberal globalization, not growing. A similar trend is visible in Canada and Australia … and many other countries.
So WHY is trade falling, despite the supposed “opening” of the world economy through free trade deals? Many reasons.
Those trade deals, as I mentioned, do not actually “open” the economy – in many ways they restrict it.
Also, free trade deals have promoted a clear pattern of deindustrialization in many countries, including New Zealand, Australia, and Canada. Neoliberal free trade has pushed those countries into relying more on pure resource extraction – losing value-added industries and services. That leads to falling trade intensity. And it locks us into an economic trajectory that is clearly unsustainable, both economically and environmentally.
Neoliberal trade deals have also set up a beggar-thy-neighbour competition between countries, all competing for the biggest possible trade surpluses. A kind of quasi-mercantilism, where you boost your exports and limit your imports. That works for come countries: like China, Germany, Korea, a few others. They export far more than they import, and that supports their employment and output and currencies.
But the flip side of the coin is all the countries that run balance of payments deficits, like New Zealand, Australia, Canada, the U.S., and more. What happens when they experience big trade deficits? They deflate their domestic economies. And the result is unemployment and stagnation, around the world.
Here’s a startling fact: not every country in the world can run a trade surplus at the same time. So not every country in the world can benefit from export led growth.
At least not unless we sign a free trade agreement with Mars. Then we could all run trade surpluses. And Mars would have the trade deficit.
We could send Matt Damon to negotiate a trade deal with Mars.
Of course, free traders claim that trade deficits don’t matter. Everyone’s a winner from free trade, they say, thanks to incremental gains in productivity as each country specialises in their respective comparative advantage industries.
What nonsense. Exactly why is it that some countries get to specialise in expensive technology-intensive products and services? While other countries specialise in digging stuff out of the ground? Why does Korea sell us cars and electronics and smart phones, while we sell them milk and timber?
Is that a mere coincidence? Of course not. Economic advantage is constructed, it’s not “endowed.” There’s nothing natural about who specializes in what. It’s a product of history. And policy. And power.
And this idea that trade deficits do not matter is also a lie: Try telling that to all the debtor nations in the world. Who built up enormous debts one trade deficit at a time. Because that’s what international debt is: the cumulative total of all your previous trade deficits.
Even New Zealand has a $156 billion net foreign debt. The US has a much bigger foreign debt: $9 trillion. It equals the sum total of all those US trade deficits. Those deficits, and the jobs that were destroyed because of them, are a big reason why Donald Trump is in the White House today.
Speaking of Donald Trump, we have been reminded of one very important lesson since he came to power.
Trade agreements do NOT tie the hands of national governments. They are NOT set in concrete. They are NOT inevitable, everlasting, unchangeable constitutions.
Far from it. Trade agreements are political arrangements that reflect the balance of political power. Whose interests they serve, depend on what sectors of society are able to project their priorities and interests most effectively into the battle of ideas and power.
National governments create trade deals. And national governments can undo them. It’s all about what choices they make.
In less than two years, Donald Trump has done many things that were supposed to be impossible in the age of globalization. He rewrote the rules. He invoked all kinds of protections. He tore up entire trade deals – like NAFTA – that were supposed to be permanent.
Obviously, I am not suggesting that Trump is doing good. His plan is disastrous. Even his trade policies, which are supposed to protect American jobs, will hurt workers more than help them. And the other elements of his program (like tax cuts and program cuts and attacks on unions) are incredibly damaging to workers.
But at least Trump reminded us that free trade isn’t natural or permanent or inevitable. Trade deals are creations of governments, and they can be changed by governments. So this myth of inevitability and powerlessness we’ve been fed for a generation, is a lie.
Trump just reached a new North American trade deal with Canada and Mexico. It’s called the “USMCA”. Another acronym!
Notice that they don’t even bother calling it free trade anymore. There are all kinds of rules and interventions and constraints in this one – most of them benefiting corporate investors. Like stronger drug patent laws. We’ll pay for that, big time. A patent is not free trade, by the way: it’s the exact OPPOSITE of free trade. It’s a legislated, government-backed monopoly. That’s not free trade.
There are some good things in this new North American deal. They are getting rid of investor-state dispute settlement between Canada and the US. That reflects the long hard campaign progressives have waged against that profoundly anti-democratic idea. But they are keeping ISDS for Mexico. So that’s wrong.
And there are many other negative aspects to the new deal. Including an incredible prohibition on governments creating publicly-owned enterprises in any sector of the economy that competes with private business. This proves what neoliberal trade policy is all about: it’s not about trade. It’s about protecting private business.
OK, enough about the problem. What about the solution?
At this critical moment, progressives must put forward an ambitious, honest, and pragmatic vision of how to better manage the international economy. How to regulate trade, capital, and human flows in ways that enhance living standards, equality, and the environment, rather than racing to the bottom.
Progressive economic policy always tries to make the economy work better for the majority – even within a single national economy. And we have some tried and true tools at our disposal. The most important tools in our toolbox have been:
Stimulating more output and employment, through things like fiscal and monetary policy, and other macroeconomic levers. Unemployment always exists in capitalism. But when unemployment is lower, workers are better off.
Empowering workers to win a better deal in the ongoing distributional struggle which is a hallmark of our economy. This means stronger minimum wage laws; stronger income security programs; and stronger unions and collective bargaining.
Regulating private companies, to reduce the harm they impose on workers, communities, and the environment – through labour laws, consumer protection standards, environmental measures, and more.
And last … Challenging the dominance of private investment and production over the economy, by establishing and expanding a strong public and non-profit section of the economy, and expanding public services.
Those are the things we fight for, all the time, to make the economy better for the majority. Keep these things in mind as we think about an alternative to globalization: because these are exactly the same tools that we’ll need, in order to better manage the effects of globalization. In other words, “progressive trade policy” ultimately relies on preserving and enhancing our capacity to keep doing these basic progressive things.
I have identified ten key policies which I think are essential to a progressive trade policy. Ten strategies that would allow us to manage trade and investment flows and migration, in a manner consistent with decent work, equity, and sustainability:
#1 Preserve the power to regulate. Government’s ability to regulate the conditions and side-effects of private business is crucial for building an economy that works for the majority: with labour laws, consumer protection standards, environmental rules, and more. Neoliberal trade deals define these regulations as “trade barriers” — banning many of them, or establishing “ratchet” rules so that the intensity of regulation can only diminish over time. These provisions should simply be eliminated from trade deals. Government must retain the authority to regulate any business activity in the public interest.
#2 Active sector development strategies. We used to call this “industrial policy.” But I like the broader term, “sector development policy.” To participate successfully in global commerce, every country needs a good share of desirable industries: high-technology, high-productivity, export oriented sectors. Governments should actively support these strategic industries (which can include services, as well as manufacturing and other goods-producing sectors). Otherwise free trade will pigeon-hole us into narrow, unsustainable boxes – as faced by resource-dependent economies like New Zealand, Australia, and Canada.
#3 End preferences for investors. Another symptom of the unbalanced priorities of neoliberal trade deals is their extraordinary provisions to protect and privilege businesses and the investors who own them – everything from strengthening patent and copyright restrictions, to anti-democratic investor-state dispute settlement systems. These preferences have no justification in progressive trade policy. Indeed, our goal is precisely to constrain the actions of private firms. Decisions about patents, company taxes, consumer protection, and other topics should always fall within the purview of national democratic decision-making.
#4 Regulate capital and currencies. Flows of foreign direct investment can enhance the productive capacity and know-how of the host country, and in some cases deliver benefits to the source economy as well. However, FDI must be accountable to public interest goals through a thorough review process. Countries should have the power to block unproductive investments (like takeovers which don’t enhance investment but merely transfer control), and extract commitments from incoming firms to high-value activity (like global product mandates, commitments to R&D, or domestic sourcing). International financial flows are especially questionable. Cross-border flows of hot money should be controlled through stricter banking regulations, capital controls, and transactions taxes.
#5 Invest in public export infrastructure. Most countries, including New Zealand, have a glaring need for a massive expansion of public infrastructure. The macroeconomic and job-creation benefits of infrastructure spending are well-known. Export infrastructure can be one useful component of a broader infrastructure strategy: including investments in transportation, communication, research and development, and other facilities which support export-oriented enterprises.
#6 Make market access conditional on human and labour rights. Most free trade deals now have token clauses addressing labour and environmental issues. But those “side deals” or special chapters never have real force. Suppression of basic human, labour, and environmental rights distorts competitiveness and thus influences production and investment patterns. Limiting this damage requires powerful remedies, not symbolic feel-good statements. Ultimately, market access under trade deals should be conditional on participating countries meeting basic standards of democracy, human rights, labour rights, and environmental protection. Failure to meet universal standards should result in losing that access: either through trade penalties or exclusion from trade zones altogether.
#7 Meaningful adjustment, transition, and training supports. Conventional trade policy also pays lip service to the reality that certain industries and groups of workers will suffer losses from international competition. But there is rarely any meaningful commitment to transition, relocation, or retraining assistance to help affected workers adapt. As part of a broader focus on job-creation (which I will discuss further in a moment), well-funded skills, adjustment, and early retirement programs can reduce the human costs of sectoral and employment shifts resulting from international trade.
#8 Humane and just immigration. Immigration is one of the most important and potentially beneficial aspects of globalization – but is also fraught with hardship and risk. High-quality immigration programs should permanently settle migrants (including refugees). They should be supported with services, housing and employment, and be protected by the same laws and standards as anyone else. Temporary migrant labour programs are a recipe for exploitation and abuse; these programs should be phased out (with pathways to permanent migration for existing temporary migrants).
#9 Manage trade imbalances fairly. Export-led economies (like China, Germany, and Korea) have every incentive, and full permission under current trade rules, to accumulate ongoing surpluses. Those surpluses imply corresponding deficits (and resulting unemployment) among their trading partners. We must replace that beggar-thy-neighbour mercantilism with a balanced adjustment process: limiting trade imbalances, and sharing the burden of adjustment fairly between both surplus and deficit countries. Trade surplus countries must recycle their earnings into new spending (including imports from other countries), or else face restrictions on access to foreign markets. That recycling would in turn stimulate stronger output and job-creation on all sides.
#10 An inclusive, full-employment economy. An overarching commitment to job-creation, economic inclusion, and equality is a prerequisite for ensuring that most people experience rising incomes and better security. This is true no matter what is the driver of growth: exports, domestic consumption, or public services. The existence of a consistently inclusive domestic economic agenda explains why opposition to trade liberalization is mild in the social-democratic countries of Europe: there, most people know they won’t be left behind by any economic change (globalization, technological change, or any other), and hence can embrace change rather than resisting it. Committing to full employment and comprehensive social security, is a prerequisite for any progressive trade strategy.
These policies are feasible, realistic, and concrete. This is not utopian. It is far less utopian, in fact, than conventional trade theories – which, after all, are based on the assumption that everyone can find a job, everyone is paid according to their productivity, and all national income is shared between households. Now THAT’S utopian!
And our vision of actively managed international trade and investment does not imply autarky, or erecting barriers to trade, or restricting trade. To the contrary, by eliminating the deflationary bias of the current system, we will stimulate more trade, not less. It cannot be dismissed as protectionist or anti-trade.
There is no doubt that the next few years will be a turning point for the international trade system, which is coming apart at the seams after decades of imbalance and dislocation. Donald Trump and other erratic populists ultimately want to reinforce corporate power; they will never help the true victims of globalization. Instead they will lead the world into intensifying social conflict, recession, and even war.
At this dangerous moment, we progressives can promote a more hopeful and positive vision. We can show how to take charge of globalization, seriously address trade imbalances, and priorize living standards, inclusion, and sustainability. This is truly a time for progressive trade activists to think big, and to make our voices heard.
Our vision is realistic and sensible. And if we build a powerful movement, we can win it.
So, thank you all for participating in this hui. Good luck with your deliberations. And I can’t WAIT to hear what you come up with.
There are two written versions of my presentation available on-line:
A complete version has been published by the Canadian Centre for Policy Alternatives, our progressive think tank in Canada.
And this shorter version was published by the Guardian.
Thank you very much for your attention. Together we can take back control of the world economy. Let’s do it! Have a great hui!