Book Review

Campaign to redesign trade policy with social democratic approach

Asjadul Kibria | Published: May 23, 2019 21:46:19

Developed countries and multinational entities have long been accused of indulging in unfair and distorted trade practices. Oxfam International along with its 13 affiliates initiated the campaign 'Make Trade Fair' at the beginning of the current century with the goal of correcting this situation. It called on governments, institutions and multinational entities to change rules to make trade practices fair. The core idea behind the proposition was to doing trade in such a way so that it could become a part of the solution to poverty. Now comes the campaign to redesign trade policy with social democratic approach.

Social democracy is known as a 'political-social-economic philosophy that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and a capitalist mixed economy.' Based on freedom, justice and solidarity, it aims advance responsible, equitable, and participatory governance practices where human rights are upheld. Friedrich-Ebert-Stiftung (FES), the oldest political foundation in Germany having strong bias towards social democracy, has initiated the campaign and calls for "a new trade policy, one which can be shaped and one which rebuilds trust, strengthens democracy and the rule of law, and enforces justice." (P-3) In December last, it published a paper titled 'Fair Play in World Trade: Towards a Social Democratic Redesign of Trade Policy.' Jointly drafted by 15 social democrat politicians, economists and researchers, the paper outlines a template of social democratic trade policy. Though focused on Germany, the outline may be applicable for many countries including Bangladesh to a large extent. 

The paper argues that as the formulation and implementation of trade policy has a multifaceted effect on human lives, it needs to be redesigned so that a fair global order could be created. It further mentions that free trade is increasingly coming under scrutiny as it by no means benefiting everyone and produces winners and losers. Without readjusting the trade policy, there will be no improvement in this regard. It is to be noted that trade policy is a comprehensive policy that dictates rules and patterns of international trade of a country. 

FES paper notes that there are a number of conflicts and trade-offs in international trade policy. As trade liberalisation reduces the importance of tariffs, rises of non-tariff measures in the form of standards and regulations are there.  In reference with this development, FES paper mentions: "In the event of conflicting goals, this carries the risk that vested interests of corporations, regarding market access, cost savings, investment protection, etc. will prevail over consumers' and workers' interests. Critics also fear substantial encroachment on the democratic decision-making autonomy of nation-states."(P-7) It maintains that the core challenge is to 'facilitate a reasonable convergence of standards alongside regulatory cooperation with international trade partners' and also 'ensuring that democratic principles are respected, applied, and under no circumstances undermined.' It strongly argues that trade agreements 'must not be excluded from the social and political debate' which is a current practice globally.

The guiding principle of a social democratic trade policy includes: fair multilateral rules incorporating all aspects of sustainability, particularly socio-environmental sustainability and adequate political room for manoeuvre. According to the authors of the paper: "Social democratic approaches differ fundamentally from that of free-market liberals: we believe that trade relations must follow politically defined rules. We want a fair and democratic trade regime. For us, this means a trade regime in which the goods that are traded on our markets are produced under fair social and environmental conditions and human rights are respected; in which we strive to safeguard and improve the development prospects of our trade partners in the global South; in which trade strengthens rather than undermines rights; in which the government's capacity to provide public services both here in Germany and in our partner countries is not restricted; and in which we give multilateral approaches precedence." (p-11)

The FES paper stresses on a seven-point reform agenda to redesign the trade policy. The first one is an inclusive and solidarity-based approach to redesigning the trade architecture which keeps faith on multilateral trade regime. It supports the central role of the World Trade Organisation (WTO) in the international trading system 'as a monitoring, enforcement and dispute settlement body' and says: "Owing to its multilateral structure, the WTO also ensures equality between poorer and richer countries at the negotiating table. Trade policy must not be power-based but, instead, rules-based. A strong WTO is needed to ensure this." (p-12) Considering the longer period of multilateral negotiations and difficulty to reach any consensus, it also favours plurilateral negotiations in some cases.

Strengthening democratic processes and transparency in trade policy is the second agenda of reform. In this connection, the paper says: "Democratic participation in trade policy is vital for the future of trade agreements: if the latter are to win acceptance and achieve democratic participation, who should be involved and how much say should they have?" (p-14) It further adds that not just economic interests but also other social interests and views must be adequately taken into account in the negotiation process.

The paper underscores promotion and enforcement of higher labour standards and places it as a third reform agenda in a sharp contrast to the current practice which keeps labour issue out of the trade policy. The authors also stress on participation of trade unions and civil society in trade negotiations and enforcement of labour standards through dispute settlement. This kind of proposal would naturally face objection from businesses especially when neo-liberalism is driving the economic and trade policies.

FES advocacy for social democratic trade policy calls for protecting the rule of law by balancing investor rights with investor obligations while the current Bilateral Investment Treaties (BITs) "have not provided for a reciprocal right of action on the part of the state against a foreign investor." (P-17) It also solicits reducing current account surpluses especially by Germany and supporting the losers of globalisations.

The authors of the FES paper argue on 'achieving social and environmental sustainability through a coherent trade policy' and 'placing a stronger focus on global value chains.' It observes that there is a growing imbalance in the GVC (global value chain) and it needs to be reduced by 'trilateral talks between trade unions, multinational corporations and local producers/suppliers.'

When WTO is at a crossroads, US President Donald Trump starts a tariff war and ultranationalists and populists are rising in the different countries of the world, the idea of fair trade policy with social democratic approach is an interesting proposition. The prescriptions are apparently over-ambitious. But the flaws of the current trade policy regime, as identified by the paper, are difficult to ignore even for those who don't endorse social democratic approach.



Fair Play in World Trade: Towards a Social Democratic Redesign of Trade Policy

Friedrich-Ebert-Stiftung, Berlin, Germany. December, 2018

Share if you like