Multilateral Free Trade Agreements (FTAs), praised as engines of development by their supporters, have experienced a revival recently in a number of multilateral negotiations including the Transpacific Partnership Agreement (TPPA) and the Transatlantic Trade and Investment Partnership (TTIP). In this blog post, I will critically discuss the record of FTAs and suggest potential key principles of an alternative trade regime from a workers’ perspective, including one set of principles around national sovereignty and another against the increasing structural power of transnational capital. I will, thereby, draw on my freely downloadable paper ‘From ‘free trade’ to ‘fair trade’: proposals for joint labour demands towards an alternative trade regime’, published by the Rosa Luxemburg Stiftung in Johannesburg/South Africa.
From GATT to WTO: moving towards an expanded free trade regime.
Since the establishment of the WTO in 1995, the free trade regime does no longer only include trade in goods, encouraged through lowering tariff barriers, but has been expanded into new areas covering also services, trade-related investment measures, intellectual property rights and investor-state dispute settlement mechanisms (ISDS). Despite the claims by FTA supporters the empirical results in terms of development have been miserable. In a study by the NGO War on Want, it is illustrated that global economic growth in the 1980s and 1990s, the time of neo-liberal globalisation, was slower than in the 1960s and 1970s. Moreover, ‘the number of people unemployed and the number in unstable, insecure jobs has actually increased – from 141 million to 190 million (1993 to 2007) and from 1,338 million to 1,485 million (1997 to 2007) respectively’ (War on Want 2009: 4). Developing countries have yet again been the main losers of this period. Trade liberalization often implied deindustrialisation and import dependence for them. An analysis of the consequences of trade liberalisation in Africa and Latin America during the 1980s and 1990s reveals widespread job losses, increasing unemployment and declining wages in both continents (War on Want 2009: 5-13).
FTAs tie developing countries into relationships of unequal exchange with developed countries. First, unequal exchange resulted from productivity differentials between industrialised and developing countries. As Ernest Mandel pointed out, ‘on the world market, the labour of a country with a higher productivity of labour is valued as more intensive, so that the product of one day’s work in such a nation is exchanged for the product of more than a day’s work in an underdeveloped country’ (Mandel 1975: 71-2). Second, the dominance of industrialised countries has been ensured through the control of technological invention, access to resources, the globalised financial system, communications and information technology – as well as, in the last instance, weapons of mass destruction (Amin 2003: 61-5). Importantly, these additional means allow capital to extract super-profits from labour in developing countries, which go beyond the subsistence level of workers. Thus, wages are depressed below the value of labour power (Higginbottom 2014: 30-2). In short, free trade rather than being at the benefit of everyone involved institutes the continuing exploitation of developing countries by developed countries.
Proposals for joint labour demands: the centrality of state sovereignty.
Historically, no country developed exclusively through free trade. ‘During their own process of development the rich countries relied heavily on trade protection and subsidies, … they did not generally abide by patent laws or so-called intellectual property rights, and … they generally championed ‘free trade’ only when it was to their economic advantage’ (Shaikh, 2007: 60). State sovereignty is clearly a crucial component of development. It is on this basis that a first key principle of a fair trade regime is the protection of national policy space allowing countries to pursue independently additional objectives to trade and liberalisation.
Additionally, close related demands could include (1) the democratisation of trade policy-making, (2) the right to food sovereignty as well as (3) the right to resource sovereignty. In short, key principles of a fair trade regime need to ensure that people and countries are in charge to decide what they want to trade and which areas they want to protect against competition.
Changing the Balance of Class Power: Proposals for Joint Labour Demands to Restrain Transnational Capital.
One of the lessons to be learned from the Northern labour movements is that the balance of class power in society was decisive in the establishment of the welfare state in the post – World War Two period (Wahl 2011). When discussing potential alternative ways of how to organise ‘free trade’, the implications of these alternatives for the balance of class power need to be kept in mind.
The transnationalisation of production has fundamentally changed the power balance between capital and labour at the global level in favour of the former. Starting in the 1970s with the shift of labour intensive production to countries in the Global South, globalisation has led to an increasing transnationalisation of production, with the production of many goods being organised across borders. In order to allow workers to organise against the exploitation by TNCs, the ILO conventions are essential. Hence, the first key principle to change the balance of class power could be that all FTAs must include a social clause that commits capital to respect the seven crucial ILO conventions (29, 87, 98, 100, 105, 111, 138) which provide for the freedom of association, the right to collective bargaining, abolition of forced labour, prevention of discrimination in employment and a minimum age for employment.
The International Confederation of Free Trade Unions (ICFTU), the predecessor organisation of the International Trade Union Confederation (ITUC), attempted precisely this in the 1990s, but in the form of a WTO clause. At the time, the proposals failed, not only because of resistance by transnational capital, but also because some labour movements in the Global South were concerned about the link between these demands and the WTO, giving the latter even more power. Considering the increasing unrest by Chinese workers against exploitation in a situation where these rights are not available, perhaps this is the moment to return to global labour standards and to explore whether pursuing them jointly could be an acceptable way forward for the global labour movement.
The ISDS mechanisms, which allow companies to sue individual countries for losses of expected future profits as a result of changes in these countries’ public policy, are the latest step in the increasing power of transnational capital. Hence, another key principle of a fair trade regime from a labour perspective is that investor–state dispute settlement mechanisms must not be part of any trade agreement. Additional key principles are (1) all tax havens are to be closed and tax avoidance schemes abolished to regain control over transnational finance, (2) a commitment to eradicate corporate corruption, and (3) essential services such as water, health care services and education have to be excluded from all FTAs.
Considering the increasingly widespread resistance against FTAs in general and the success of the Stop-TTIP campaign in particular, this may be an ideal moment to reflect from a labour perspective on the main principles of an alternative, fair trade regime.
Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
21 April 2016