I recently visited in Belgium. Brussels, its capital, sold as the heart of Europe, is home to the European Parliament and the Commission. It is also the site of numerous protests. From Kurds to labour unions to dairy farmers, the space in front of the European Parliament building in Place Luxemburg has been used for years to draw attention to injustice and abuses of power; to wave placards and generally air grievances.
While I was there, the issue of the day was the Transatlantic Trade and Investment Partnership, a.k.a. TTIP, the free trade agreement (FTA) between the EU and the US that has been on the table since June 2013. Protestors see this deal as a corporate takeover, an instrument to lower food quality standards and weaken labour rights and consumer protections. Negotiated in secret, with big multinational companies having unfettered access, they argue TTIP, and other agreements like it such as CETA – the FTA with Canada, are a threat to democracy.
To give some background, open borders and the free movement of goods and capital, facilitated by trade deals, have been the aim of most governments since World War Two. With economies laid to waste by war, they sought increased wealth and stability through agreements with other countries. This interconnectedness, of countries, companies and cultures, is called globalisation.
Supporters argue that the result has been an improvement in living standards, with millions in developing countries being dragged out of poverty by export-led growth and foreign investment. Migration tends to benefit host countries, with economic migrants providing a net contribution to the economy and boosting public finances. Put simply in a 1997 essay titled ‘The Case for Free Trade’: “We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets.” It is true that, in general, free trade was viewed favourably and the advantages recognised.
However, fast-forward to today, and the picture is very different. There is anger and fear against migrants and rally cries against trade deals; not just in Europe but also in the US, where voters have elected a protectionist President Trump to succeed open, trade-oriented Obama.
During his campaign, Trump took aim against FTAs, calling the North American Free Trade Agreement (NAFTA) “the worst trade deal maybe ever signed anywhere.” He blamed it, with typical bluster, for decreased manufacturing and job losses.
So it seems with The Donald soon in power, the TTIP, along with the other FTAs the US is negotiating, will likely be dropped. But what happened to cause this protectionist backlash? No small number of people believe that globalisation has failed them, that it benefits only the elites and should be stopped, the clock turned back. I disagree, but I do think free trade needs to be done better.
For a start, the secrecy around negotiations breeds conspiracy. It makes perfect sense to be secretive in a business setting, as you don’t want the other side to know concessions what you are prepared to make. But in the public sphere, where every small detail has a huge and far-reaching impact, this approach is not appropriate and makes those locked out of the negotiations fearful.
And, while economists agree that the vast majority benefit from free trade, they rarely mention the little that is done to help those who do not. The negative effects must be managed appropriately to stop those who lose out from being left behind. Workers who have lost their jobs due to, for example, production being moved overseas to countries with cheaper labour costs, should be offered the opportunity to retrain and re-enter the workforce. In the US, a mere 0.1% of GDP is spent on retraining workers. The reluctance of the elites to prepare for or even acknowledge the negative consequences, no matter how small, of a new trade agreement means those affected feel disconnected and ignored.
This is only thinking within the box. Some are questioning whether there isn’t a better way to achieve results similar to a traditional trade agreement, namely increased growth and GDP, by developing a new dimension of the international trade relationship. For example, other facets of economic diplomacy, the full toolbox of instruments that countries use to economically influence one another, of which trade agreements is but a small part, could play a bigger role. FDIs (Foreign Direct Investments), where foreign companies invest in domestic companies, and FIIs (Foreign Institutional Investors), where foreign companies invest in the domestic stock market, are other options available. The implications would be different but the benefits, of increased GDP, would be similar. This new approach, rather than relying solely on FTAs, could be explored as a way of avoiding a protectionist backlash.
Free trade is a good thing. It opens up new opportunities and drives growth. But, it needs to be managed properly, with the negative consequences properly explored and explained, and policies drawn up and implemented that will negate these effects. If politicians on both sides of the Atlantic don’t wake up and realise that the current way of doing things isn’t working, if voters’ attitudes do not change, the backlash against globalisation will continue, and nations will fall into close-minded protectionism. And we will all be the poorer for it.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of The Social Jungle.