After years of upheaval in international economic relations, a new approach to trade policy is taking shape: multipurpose trade policy. Inspired by competing narratives about globalization that bring different values to the fore, this approach no longer just tries to achieve an efficient international division of labour through trade liberalization. Rather, it tasks trade policy with achieving other substantive policy objectives as well, which include bolstering labour rights, addressing inequality, building resilient supply chains, safeguarding national security, and mitigating the climate crisis.

Trade officials have long been attentive to the effects of trade on other policy objectives, often portraying them as either positive or negative externalities of trade liberalization. On the positive side, increased international interdependence was expected to promote peaceful international relations. Some expected that rising incomes would lead to better working conditions and more support for environmental protection. Others argued that trade produced negative externalities, such as the overexploitation of resources and environmental degradation, and advocated for the expansion of exceptions to trade obligations to resolve conflicts between trade and other objectives. Since the early 1990s, trade agreements have also often featured provisions regarding labour rights and the environment to ensure that greater international competition does not take place on “unfair” terms.

The key distinguishing feature of the more recent shift to multipurpose trade policy is that other policy objectives no longer come into the picture as externalities of trade liberalization or as safeguards against unfair competition. Instead, those other policy objectives have taken a place alongside, and in some cases the place of, trade liberalization as the immediate objectives that trade policy is supposed to pursue.

The purpose of this article is to sketch the evidence for this paradigm shift in trade policy, outline the key challenges that it presents, and explore its implications for international trade cooperation.

The Crisis of Globalization

It is now commonplace to observe that globalization is in crisis. One piece of evidence of this crisis is that the establishment view of globalization as an inevitable force for good is increasingly being challenged by other narratives that bring a range of competing values to the fore. From the economic establishment’s perspective, free trade and an efficient international division of labour have the potential to make everyone better off—if governments implement the right policies domestically to help workers adjust to the dislocations that competition in a truly global economy may cause.

As Anthea Roberts and I show in our book Six Faces of Globalization, many other narratives are testing this view. There are those who argue that the damage that job losses cause to certain groups of workers outweighs the benefits of cheaper products and additional economic opportunities that globalization may create in other places and for other professions. Another narrative maintains that the investment and intellectual property protections in international economic agreements contribute to rising inequality. There are also rising concerns about the security implications of international economic interdependence; Russia’s invasion of Ukraine is only the latest illustration of why it may be unwise to become overly reliant on a trading partner whom one cannot trust. Yet others point out how the COVID-19 pandemic has exposed the fragility of global supply chains and our economic systems’ lack of resilience to shocks. And finally, the drumbeat of news about floods, droughts, extreme heat, and wildfires provides a daily reminder of how the global diffusion of Western patterns of production and consumption has set the world on a path to climate breakdown.

The Turn to Multipurpose Trade Policy

We can understand the shift to multipurpose trade policy as a response to these narratives. As European Union Director General for Trade Sabine Weyand has written, it is now “normal to ask what trade can do to address the big tests of our time. How can it help combat climate change? How can it promote labour rights globally? How does it impact security?” Weyand notes that “trade is seen as a tool to attain broader objectives more than ever.” Trade policy is increasingly moving away from efficiency as its primary objective. United States Trade Representative Katherine Tai has argued that the pursuit of efficiency has created a “quite fragile global economy” and that “in refashioning globalization to a Globalization 2.0 … we [need to] adapt the rules of trade to incentivize firm behavior to take into account more than just efficiency, but to promote and to reward decisions that are made to pursue sustainability for our people and our planet.” The U.S. initiative for an Indo-Pacific Economic Framework, which the United States is negotiating with 12 countries in the region, foregrounds the objectives of “resilience,” “inclusion,” and “sustainability.” At the same time, ever more aspects of U.S. trade policy are dominated by considerations of national security, especially in its relationship with China.

Multipurpose trade policy also plays an increasingly prominent role in the World Trade Organization (WTO). The Agreement on Fisheries Subsidies is the first WTO agreement that primarily pursues a sustainability objective. In the wake of the global supply chain crisis and rising food and energy prices, food security has taken a much more prominent place on the WTO’s agenda. And the debate about how the WTO can help its members do a better job of weathering the next pandemic is in full swing.

Not all new objectives enjoy universal support. While some goals, such as sustainability and resilience, are broad enough to garner virtually universal assent, others, such as the use of trade measures to promote labour rights or shore up national security, are more controversial. Even on the widely supported objectives, there is disagreement on how best to achieve them. However, the bottom line is that trade policy is now expected to pursue a much broader range of objectives than even a few years ago.

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Since the 1990s, trade rules have promoted what economist Dani Rodrik has referred to as “hyperglobalization.” The focus has been on liberalizing capital flows with few—or no—constraints on where that capital goes. However, liberalizing capital flows without rules to foster fair competition incentivizes countries to vie for capital investments—and to engage in race-to-the-bottom policies to secure them. Many countries lower costs through labor rights suppression, environmental deregulation, and de minimis tax rates. They may also use subsidies and currency manipulation to further rig cost structures.

This suite of rules is essentially laissez-faire in its orientation. Any government effort to promote competition is disparaged as a protectionist undertaking. The only goal worth pursuing, in this arrangement, is low cost and high returns, regardless of how they are achieved.

However, this low-cost model is expensive. It pits workers in one country against workers in another, as returns to capital increase while returns to labor decrease; it promotes the degradation of the environment; and it robs nations of sufficient revenues to fund the basic needs of their people. Increasingly, these policies are seen as part of a broader violation of the social contract.

Because of these rules, the global trading regime, and bilateral and regional trade agreements, benefit certain sectors, and certain classes, within each country. Yet, these rules do not benefit all sectors, or all classes. We have papered over these structural concerns by relying on the axiom that trade provides an aggregate good. Yet by focusing on the aggregate good, we ignore that the rules of trade decide, at an individual level, for whom trade is good.

This axiom has also blunted our ability to appreciate the validity of the critiques of globalization, which we too easily attribute to misplaced populist grievances. Increasingly, we assure ourselves that if we simply do a better job in domestic policy areas, such as training and the social safety net, we will address any negative consequences arising from trade. While better domestic policy is certainly important, it is no substitute for reforming the rules of globalization, which themselves favor the elite at the expense of the working class.

It is possible to structure the rules of trade differently. Rather than writing rules to allow corporations maximum flexibility to exploit artificially low costs, we can write rules that promote fair competition. We can write labor and environmental standards that frustrate the ability of corporations to press a race to the bottom. We can write rules that prioritize the sovereign right to regulate over the corporate rejection of governance in the public interest. We can write rules to shine a light around which corporations are paying tax in which jurisdictions.

By writing rules that prioritize fair competition, we cannot only begin to correct the existing imbalance in favor of elites, but we can enable American workers and businesses to compete for customers around the world—all while preserving our values. Indeed, the latter is essential because if we value liberal democracy, we must place greater value on creating markets, both at home and abroad, that support the middle class and strengthen, rather than erode, its purchasing power. The facile argument is that purchasing power is enhanced through cheap consumer goods. However, more thoughtful analysis, such as that offered by Matthew Klein and Michael Pettis in their recent book “Trade Wars are Class Wars,” demonstrates the ways in which government policies promoting income inequality pervert trade and financial flows. These policies promote underconsumption by the people who are most in need, and whose expenditures would do the most to help the economy—the working class. In defending the existing rules of globalization, we focus too much on the consumer, and not enough on the worker.

For decades the prevailing theory has been that trade policy must be insulated from democratic pressures, under the theory that removing such pressures will produce more ideal economic outcomes. However, insulating policy from the influence of the voting public is antidemocratic, and, as we have seen, self-defeating: it leads to a revolt by that same voting public against a regime that, by design, dismisses their views.

Further, far from producing a trade policy free from special interest influence, this approach instead facilitates policy by special interests with preferred access to decision makers—in other words, elites, particularly at financial institutions, pharmaceutical companies, and big tech.

Because of this approach, for many years there have been “one size fits all” bilateral and regional trade agreements. Do these agreements work for developing countries? We have no idea. The U.S. experiment with Central America suggests there is much work to be done to understand the circumstances under which developing countries—and the various classes within those countries—benefit from trade agreements, and the circumstances under which they do not. Do benefits inure to the elite, with, at best, trickle-down benefits to the working class? 

A model that returns to basics allows us to focus on our priorities. The first American trade agreement was with France. Negotiated by Benjamin Franklin and ratified by the Continental Congress, it was called the Treaty of Amity and Commerce.

If trade agreements are meant to serve the overarching goal of improving amity between the parties, then it follows that we must focus on crafting rules that build positive relations between the parties. That is not achieved by rules that promote Darwinian behavior by stateless corporations that have no allegiance to any sovereign.

However, if these are truly to be agreements grounded in amity, then we must recognize that neither we, nor our friends, are perfect. Trading partners rarely comply with all their obligations. Usually it is clear in advance where they will fall short. The European Union does not want as much American beef or chicken as Americans would like them to want. Canada believes its dairy farmers in Quebec are worth saving, even if it means betraying pure market principles. Our trading partners feel the same way about certain sectors in the United States.

It is partly because of such frictions that the girth of these agreements has expanded. The rules grow ever more detailed as every form of possible cheating (or “chiseling,” as a former negotiator called it) is anticipated and more rules are written to prevent it. As a result, the rules constraining government also grow ever more detailed.

Yet this legalistic approach to trade ignores the reality that, for key sectors, determined governments will inevitably find a way to protect that which they wish to protect.

These elaborate rules are, therefore, both too strict and too porous. The rules are functionally deregulatory, but they do not end circumvention of trade rules in politically sensitive sectors.

It is time to take a more realistic view of what trade agreements can achieve. They can promote amity, if we accept that free market perfection is not achievable and, in any event, not the goal; they can promote values, if we think workers, the environment, and the tax base represent values worth prioritizing; they can promote fair competition, if we believe that competition is more important than phony “efficiencies.”

If we return to a model of amity, then we must also ask who the parties to these agreements should be. Not every trading partner seeks amity with us. Interdependent trade relationships with hostile foreign powers put us in a position of dependence on geopolitical rivals. That does not necessarily mean we should never trade with such countries; rather, it means we must consider under what circumstances we are willing to do so. The United States entered into the Treaty of Amity and Commerce in 1778 with France to solidify the relationship in the face of hostilities with Britain. Britain is, of course, no longer an enemy. Relationships evolve, and so should trade agreements.

As global trade tensions grow, we are now seeing discussion of new forms of cooperation between like-minded democratic allies that have much in common with the historic concept of a Treaty of Amity and Commerce—such as the D-10 grouping of leading democracies formed in 2014. What role can trade agreements like this play in promoting better relationships with countries that share our economic and democratic values, and in weaning our dependence on countries that do not?

This paper provides an explanation of each of the 10 chapters of a Modern Agreement of Amity and Commerce. The agreement sets out a more equitable trading regime with the overarching purpose of fostering positive relations between like-minded parties.

To download the white paper, please click here.

To download the full text for each individual chapter, please click here.

Beth Baltzan founded American Phoenix, and previously worked for the Office of the United States Trade Representative and the House Ways and Means Committee.

© Open Society Foundations Some Rights Reserved

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While the EU as a whole might be better placed than the UK to absorb the economic shock of a no-deal, the fallout within the EU will be uneven, resulting in winners and losers. The asymmetrical impact and differential capacity and willingness of national governments to mitigate the shock could exacerbate regional disparities and unbalance the EU’s internal level playing field. As the economic realities of Brexit will be felt differently across the Union, it might become more difficult to maintain the same level of EU unity post-no-deal.

The EU-UK relationship can be expected to become more conflictual and competitive, particularly in the absence of common rules under a no-deal. Regardless of whether a deal is reached, the UK government’s willingness to breach international law is likely to have a lasting effect on trust and has brought an element of precariousness into the relationship. This lack of trust and predictability will also affect the EU’s and UK’s ability (and willingness) to amplify the other’s voice in the geopolitical and security sphere, at a time when the UK’s departure is weakening both sides’ respective weight and capabilities.

All these negative repercussions will be intensified should the talks end in an acrimonious divorce. In any case, the potential for a no-deal by accident or design remains high. The only way to secure a deal at this point is for Boris Johnson to make a double U-turn on his red lines and the Internal Market Bill. Nevertheless, even so, the deal would be a thin and precarious one with low levels of trust, while the threat of further treaty breaches would impede the normalisation of the EU-UK relations. The EU, therefore, must anticipate a much more conflictual and difficult relationship, no matter the eventual outcome.

To download the full paper, please click here.

Jannike Wachowiak is a Junior Policy Analyst in the Europe’s Political Economy Programme at the European Policy Centre.

© 2019, European Policy Centre

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Worker rights are a prominent issue in U.S. FTA negotiations. Some stakeholders believe worker rights provisions are necessary to protect U.S. workers from perceived unfair competition and to raise labor standards abroad. Others believe these rights are more appropriately addressed at the International Labor Organization (ILO) or through cooperative efforts and capacity building. Since 1988, Congress has included worker rights as a principal negotiating objective in Trade Promotion Authority (TPA) legislation. The United States has been in the forefront of using FTAs to promote core internationally recognized worker rights. Labor provisions have evolved significantly since the North American Free Trade Agreement (NAFTA), moving from side agreements to integral chapters within FTA texts, with more provisions subject to enforcement. The conclusion of NAFTA renegotiations resulted in the U.S.-Mexico-Canada Agreement (USMCA), which replaces NAFTA and has a new labor chapter and enforcement mechanism. USMCA entered into force in July 2020.

Issues for Congress

In considering future TPA legislation (the current reauthorization expires in July 2021) or trade negotiations, Congress may wish to examine the application of worker rights provisions in FTAs. This debate could include

• The effectiveness of FTAs as a vehicle for improving worker rights and labor standards in other countries;
• The extent to which FTA partners are complying with labor obligations and whether dispute settlement provisions have been applied effectively;
• Whether USMCA labor provisions serve as a new template for future U.S. FTAs;
• The effectiveness of FTAs in providing technical assistance and trade capacity building; and
• The role of businesses in promoting U.S. labor practices abroad and conducting supply chain due diligence.

Cathleen Cimino-Isaacs is an Analyst in International Trade and Finance at Congressional Research Service

M. Angeles Villarreal is a Specialist in International Trade and Finance at Congressional Research Service.

To download the full report, please click here

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INTRODUCTION

This brief is the first in a series that CSIS’s Human Rights Initiative (HRI) will produce to identify how businesses, governments, multilateral organizations, NGOs, and other actors can work together to address XUAR-linked forced labor. This brief enhances understanding of relevant supply chains and includes a deeper dive into forced labor risk in cotton production and supply chains in the XUAR. HRI’s work has focused less on labor transfers from the XUAR into the rest of China to avoid replicating the ongoing work of others.

The brief does not provide recommendations but rather a starting point for a common understanding of relevant supply chains and labor risks, helping to ground further research and policy solutions. The brief starts with an overview of the current policy environment in China and the XUAR as it pertains to forced labor practices and the products that the XUAR is producing and exporting. Some of the statistics used are drawn from Chinese government sources, which are not necessarily reliable but are often the only available data. The brief then looks more deeply at how the XUAR’s forced labor practices are linked to the textile, apparel, and footwear industries. The third and last section discusses areas that merit more exploration because of their ability, in combination, to provide a path forward to address XUAR-linked forced labor.

Amy K. Lehr is a Director and Senior Fellow at the Human Rights Initiative.

To download the full policy brief, please click here.

CSIS BRIEFS are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2020 by the Center for Strategic and International Studies. All rights reserved.

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U.S. customs law has contained prohibitions against importing goods produced by certain categories of labor since the end of the nineteenth century. Beginning in 1890, the United States prohibited imports of goods manufactured with convict labor. In 1930, Congress expanded this prohibition in Section 307 of the Tariff Act to include any (not just manufactured) products of forced labor. Although a few Members of Congress brought up humanitarian concerns during debate, the central legislative concern was with protecting domestic producers from competing with products made with forced labor. As such, Section 307 allowed the admission of products of forced labor if it could be shown that no comparable product was made in the United States or the level of domestic production did not meet domestic demand (“consumptive demand” clause).

Over the decades, lawmakers and civil society became increasingly concerned about forced labor in the context of human trafficking. The Victims of Trafficking and Violence Prevention Act of 2000 (P.L. 106-386), for example, included forced labor in its definition of human trafficking. In 2015, Congress removed the “consumptive demand” clause, as part of the Trade Facilitation and Trade Enforcement Act (reflecting this interest in addressing human rights abuses in the context of forced labor).

Issues for Congress

Trade Policy and Forced Labor Provisions

The treatment of forced labor in U.S. trade policy and free trade agreements (FTAs) has been of long-standing congressional interest and has evolved in recent years. Consistent with negotiating objectives set by Congress in Trade Promotion Authority, recent U.S. FTAs commit countries to maintain laws on core labor rights/principles of the International Labor Organization (ILO). This includes the elimination of forced or compulsory labor.

For the first time in a U.S. FTA, the U.S.-Mexico-Canada Agreement (USMCA) also commits parties to prohibit imports of goods produced by forced labor through “measures it considers appropriate,” and to establish cooperation for identifying such goods. The 116th Congress passed USMCA implementing legislation in early 2020. It created a Forced Labor Enforcement Task Force, chaired by the Secretary of Homeland Security, to monitor enforcement of Section 307, and reporting requirements.

In addition, eligibility criteria for U.S. trade preference programs, such as the Generalized System of Preferences (GSP), includes taking steps to maintain internationally recognized worker rights. Some eligibility reviews by the U.S. Trade Representative have involved concerns over labor practices. Recently, the Administration withdrew GSP benefits for Thailand over forced labor in the fishing sector.

Trade agreements and programs have expanded coverage of trade and labor issues in part because the World Trade Organization (WTO) does not cover such rules. However, Article XX(e) of General Agreement on Tariffs and Trade (GATT), provides exceptions to a country’s obligations for measures related to imports of products of prison labor.

Christopher A. Casey is an Analyst in International Trade and Finance for the Congressional Research Service.

Cathleen D. Cimino-Isaacs is an Analyst in International Trade and Finance  for the Congressional Research Service.

Katarina C. O’Regan is an Analyst in Foreign Policy for the Congressional Research Service.

To download the full report, please click here.

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