Future economies: what next for globalisation and trade?
Last week I was invited to the British-German Forum – a symposium for young people from both countries – at Wilton Park, an agency of the FCO, to talk with my colleague Jan Stern from the German trade union confederation the DGB, about the issues facing globalisation. Here’s an edited version of my remarks.
I’m going to talk mostly about the trade agreement aspects of globalisation, but these remarks are relevant to other aspects and I’d be delighted to discuss the implications for other issues like immigration.
Wilton Park discussions on trade usually address trade agreements as either a technical question about how to remove barriers, or as war by other means, as Clausewitz described politics, between a series of unitary national interests, whereas in fact they are often much more about how to address different & conflicting interests in each country involved, not least consumers and producers: consumers are usually held to benefit from freer trade, while producers sometimes don’t.
So one of the things that is generally missing from discussions about trade agreements is winners and losers within a country, and what to do about them. Telling the losers to buck up, or that they are wrong, may not be the most effective approaches.
Generally, the UK trade union movement – like the DGB – has been a free trade movement because we recognise the benefit freer trade brings in reducing household costs and therefore raising real wages. But that depends on producers adapting to greater trade by upskilling or reskilling, raising productivity, and spreading the benefits of both fairly.
This isn’t to say that trade necessarily destroys jobs, although research in the US suggests that that is more true than economists have previously allowed. It’s certainly true that technology has done more to do that than trade – but that technology has often been introduced precisely to address the productivity and competitiveness challenges free trade produces.
So trade agreements can be successful and even popular where a range of non-trade actions are taken by employers or governments. Where they don’t do that, they provoke distrust, anger and populist protectionism. (Sometimes it’s just that people are angry about the situation they are in, and approach trade agreements – including in this case EU membership – in James Dean style when asked “what are you rebelling against?” they answer “What have you got?”)
This is why the EU has been such a successful trading bloc (whatever else its failings) over the past 60 years: effectively, the social dimension (especially in the last 30 years since the Delors reforms) has made it possible to go further in terms of free trade than any other trade agreement. It’s why Scandinavian trade unionists are more positive about trade agreements than trade unions in the rest of Europe. And it’s why developing countries need aid for trade, broadly described, allowing them to adapt to freer trade.
So, if we want to have more successful trade agreements, and more generally a fairer globalisation, what do we need to do in the next 15-20 years? (I should say I’m a bit of a sceptic about how effective trade agreements are at promoting trade: I suspect making things or providing services people actually want to buy is more important! But they have a geopolitical importance beyond the immediate economic benefits.)
First, I’d scrap investment protection – certainly in trade agreements – I think we’re on the way to that anyway, with the Commission’s ground shifting from Investor State Dispute Settlement to a multilateral investment court, and the European Court of Justice judgment on the EU-Singapore deal. ISDS has no proven economic benefits, as the LSE made clear about the Transatlantic Trade and Investment Partnership (TTIP) and as OECD research, unpublished and likely never to see the light of day unamended, show.
Second, address the redistribution from winners to losers by beefing up the social chapters of trade agreements (you won’t find anything as good as the EU social acquis, but we can get better than a stiffly worded letter as the Canada EU deal provides) and take measures inside countries that mitigate the effects of trade deals, such as greater labour market regulation (which for instance may be part of the solution to concerns on free movement), public investment in infrastructure and skills, redistributive taxation and active industrial strategies.
Third, treat people like adults and discuss trade agreements in public rather than in secret. Trade unions are natural negotiators, so we know that some strategies and red lines need to remain secret, along with some of the cut and thrust. But the presumption should be to be open unless it’s vital to be closed, rather than vice versa.
This is actually also my prescription for an EU-UK deal. Frankly, I don’t think we should throw away UK membership of the single market, with all its requirements and rules, unless someone can provide a better way to protect great jobs and workplace rights. Certainly we should stay in the single market for a transitional arrangement.
I think opinion in the UK on the form that leaving the EU should take – which was of course never tested in the referendum, but may have been a key component of the General Election result – may tilt towards putting the economy and labour market regulation above EU migration (recent polling by the LSE suggests there is still a preference in all age groups and social classes for EU migration over non-EU migration) and a different definition of sovereignty than the one Theresa May advocates.