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.

The post Toward Multipurpose Trade Policy? How Competing Narratives About Globalization are Reshaping International Trade Cooperation appeared first on WITA.

This information note explores trade issues associated with the spread of diseases of animal origin and the international framework in place to address them. It seeks to map actions being taken to control these diseases so as to ensure safe trade in animals and animal products, including in wildlife. The note is not exhaustive, but, rather, is an overview of the current issues and the status of legal frameworks and planned future actions to control the spread of zoonoses through trade

CONCLUSION

The existing guidance for trade in animals and animal products and the international legal framework are built on the recognition that safe trade in animals and animal products is possible, based on the implementation of science-based interventions to manage risk. Implementing existing guidance and developing more detailed standards and guidance for particular risk factors requires engagement at the international level, and investment to ensure that domestic, regional and global public, veterinary and environmental health systems are well prepared and have a solid basis for collaboration.

The SPS Committee provides a forum where WTO members can exchange information and discuss their approaches to the SPS measures adopted to address the risk of COVID-19 and other zoonoses; other WTO committees can serve as discussion fora for related issues. By providing a “peer-review mechanism”, whereby WTO members can comment on other members’ SPS measures and share relevant information on good practices and scientific evidence, these exchanges can help to improve the quality of regulation in this area, thus ensuring that trade measures contribute to enhancing future resilience to diseases of animal origin.

To download the full informational note, please click here.

The post FUTURE RESILIENCE TO DISEASES OF ANIMAL ORIGIN: THE ROLE OF TRADE appeared first on WITA.

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

The post The Modern Agreement of Amity and Commerce: Toward a New Model for Trade Agreements appeared first on WITA.

At a time when the United States needs to repair its alliances and form new partnerships, trade offers an avenue to forge habits of cooperation. Before the United States-Korea Free Trade Agreement (KORUS) negotiations, trade tensions were a net negative on bilateral relations. But the United States and South Korea emerged as closer partners, as Wendy Cutler and Seok young Choi explain, and their cooperation was extended into the Asia-Pacific Economic Cooperation (APEC), the G20, and other international fora. Trade became a stabilizing force in the U.S.-South Korea alliance, and South Korea became an advocate for high standards in subsequent trade agreements.

The United States now hopes that Kenya will play a similar role in Africa. “The two countries recognize that an agreement between them has the potential to serve as a model for additional agreements across Africa,” the governments said in a joint statement last month. But Judd Devermont cautions that any deal should not detract from an existing success, the Africa Growth and Opportunities Act (AGOA), nor harm the prospects of the African Continental Free Trade Area. The United States is more likely to succeed, he explains, if it can fashion a deal with an affirmative focus. Rather than merely countering China, the goal should be to advance Africa’s future.

Signaling is another strategic objective. The first U.S. free trade agreement, with Israel, was of modest economic consequences but significant symbolic value. “It underscores the importance of Israel to the United States as an ally, as a trading partner, and as a friend, and it underscores the U.S. commitment to Israel’s security and prosperity,” President Reagan said in 1985. Today, signaling is central to the case for a free trade agreement with Taiwan. “For the United States, the benefits would include a stronger partner in critical strategic trade sectors, a chance to define positive new trade rules in a crucial region, and—perhaps most important—bolstered U.S. leadership in Asia,” writes former ambassador Kurt Tong.

Competing with China also requires looking across the Atlantic. The combined heft of allied economies could present a formidable front. As Heather Conley writes, “Can the combination of the world’s largest and fifth-largest economies create a sufficient geo-economic ballast, in the form of a U.S.-UK free trade agreement, to balance China’s rise?” Tariffs are already low, but there is room for mutual gains in aligning and harmonizing standards and regulations. Political calendars are challenging. But done right, the gains from a deal could extend beyond economics to deepen cooperation in the defense and digital realms.

Digital trade, currently a thorn in transatlantic relations, must become a central part of an allied economic strategy. The United States has momentum, having completed deals covering digital trade with Canada, Mexico, and Japan. Building a consensus with the European Union, the United States’ largest trading partner, will not be easy, but the strategic stakes make it a necessity. “Given the centrality of the digital economy to politics, power, and life, building this coalition of support for free digital trade will be central to building a democratic bloc that can compete effectively in the twenty-first century,” Sam duPont writes.

Trade agreements can also promote U.S. values. “The concept that hard work will be rewarded, that anyone has the chance to achieve economic mobility, and that workers should be respected are American values that should be front and center in U.S. economic policy,” writes Jack Caporal, arguing that labor provisions can enhance U.S. soft power. There is also a national security nexus with some of these issues. By prohibiting fishery subsidies and illegal, unreported, and unregulated (IUU) fishing, a source of revenue for criminal enterprises, the U.S-Mexico-Canada Agreement also benefits U.S. national security, Grace Hearty explains.

Humanitarian responses can harness the power of trade as well. “Covid-19 may be the most important humanitarian crisis of the twenty-first century. Every tool at the United States’ disposal should be considered in this light. U.S. trade policy may prove to be one of the most powerful such tools for heading off disaster,” writes Matt Warner. With foreign aid budgets being squeezed, trade offers a critical avenue of support, one that is also more sustainable.

China’s response to the pandemic, the most recent episode in a longer-running economic offensive, demonstrates the power that trade can carry. China’s “mask diplomacy” is a prime example of using inducements to advance strategic interests, Audrye Wong explains. Other examples can be seen along China’s sprawling Belt and Road, where promises of investment and the prospect of additional trade encourage foreign capitals to align with Beijing’s policy preferences. China has even used inducements to influence Taiwan’s election. Beijing is not waiting for Washington to rediscover this vital tool.

Trade, of course, is no magic bullet for all the foreign challenges the United States faces. U.S. domestic interests should come first, and agreements must have sound economics alongside their strategic benefits. There are plenty of practical challenges to harnessing the positive power of trade, which is less easily directed and slower to act than kinetic force. But the United States neglects this tool at its peril. After all, it is the positive power of economics that makes coercive applications possible. As it leans heavily on the stick, the United States must rediscover the power of the carrot.

To view the original article at CSIS , please click here

The post The Forgotten Power of Trade appeared first on WITA.