Freed from trade? Towards a fairer EU Trade Agenda

‘Fair’ and ‘sustainable’ are key words in the programme of the German EU Council Presidency. At the same time, Germany pursues ‘modernization’ of the World Trade Organization (WTO) and ‘rapid progress’ on free trade agreements with Mercosur, New Zealand and Australia. Are these goals really compatible? Can we be concerned about fairness and sustainability while continuing with ‘business as usual’?

 

The covid-19 pandemic further highlights the vulnerability of global supply chains, such as cashew production in West Africa. © Michael Drexler, GIZ
The covid-19 pandemic further highlights the vulnerability of global supply chains , such as cashew production in West Africa. © Michael Drexler, GIZ

Jan Orbie

Jan Orbie is Associate Professor in European Union (EU) External Relations at the Department of Political Science at Ghent University (Belgium). He is a member of the Centre for EU Studies (CEUS) and the Ghent Centre for Global Studies (GCGS) at the same university. He has published on the EU’s external trade, social, development, humanitarian aid and democracy promotion policies. Recently, he has published on the labour rights and fair trade dimension of EU external policies, on civil society involvement in EU trade agreements, on the impact of the covid-19 crisis on EU trade policy, and on EU development policy including from a post-development perspective.

 

Ghent University

The answer is negative. Instead of further extending the EU’s free trade agenda, the Presidency could use these exceptional circumstances to reflect on radical reforms of the European and global trading system. In this blog, we suggest that the EU cease trade negotiations and we propose three ideas for a transformative trade agenda: (1) halting trade in meat and animal products, (2) making our companies accountable on human rights, and (3) regulating commodity prices.

 

Rampant free trade

Nobody can be against trade as such. However, there are serious problems with the excessive liberalization agenda of the previous decades. The European and international trade agenda has deepened and broadened to an extent that the overall gains which Adam Smith and co. had in mind have become marginal (or even negative), whereas profits go mostly to multinational corporations. ‘Free trade’ with countries in the global South has been particularly problematic by shrinking policy space and perpetuating neo-colonial power relations.

 

There is nothing new about these observations. Activists, civil society groups, parliamentarians and other critical observers have fiercely lamented the free trade paradigm since the 1990s. Currently, the EU-Mercosur agreement is being attacked not only for its impact on European agriculture but also for its weak sustainability provisions. Belgian, Austrian, Irish, Luxembourg and even the Dutch parliaments are voicing opposition against the trade deal. It will be a challenge for the German Presidency to finalize the agreement – and one that should not be taken up.

 

The Covid-19 pandemic further highlights the vulnerability of global supply chains. Not only for ‘us’ in Europe, who lack testing and protective material, but also for ‘them’ in the global South who witnessed radical interruption of exports without adequate safety nets.

 

The free trade agenda forms part of our growth model. The rationale is that free trade stimulates productivity, competitiveness, economic growth (in terms of GDP) and, by extension, welfare and wellbeing. There are a lot of assumptions behind this reasoning that have been questioned by a mounting body of alternative visions which call for de-growth, post-growth, post-development, foundational, circular and other doughnut economies. These diverse views share a critical position towards the dogma of free trade and the curse of protectionism.

 

Ceasing trade regimes

However, these ideas seem not to have reached Brussels. So far, the EU’s trade policy response has been to advocate more liberalization with small and temporal exceptions. The Trio Presidency (Germany together with Slovenia and Portugal) aims not only to finalize the trade deals with Mercosur, New Zealand and Australia, it also intends to make progress in trade talks with Mexico, Chile, China and India.

 

Instead, the ongoing negotiations regarding recent trade agreements with Japan, Canada, Vietnam, the Andean region and several African countries and regions should be abandoned. This would provide space to reflect carefully on their relevance for sustainable development. Currently, Sustainable Impact Assessments (SIAs) of EU trade agreements appear shamefully late, and they are blind to the wider implications of the growth paradigm. For instance, the SIA about the EU-Mercosur agreement only came out in July 2020.

 

The solution is not to ‘modernize’ the WTO, as pursued by the EU and the German Presidency, but to seek fairer and more sustainable alternatives.

 

The European Commission will point out that it uses its trade leverage to pursue sustainable development objectives through a separate chapter in its trade agreements. In reality, exactly the opposite is true: these chapters have served as leverage to convince public opinion and parliaments to ratify the trade agreements.

 

The WTO, too, can be abandoned. This is not really radical: it merely turns the clock back to 25 years ago, when the General Agreement on Tariffs and Trade (GATT) still applied. Despite its flaws, the GATT at least provided a more modest framework for liberalization of goods between industrialized countries. This allowed governments to pursue socio-economic policies that underpinned the creation welfare states in the west. WTO commitments are much wider, deeper and more intrusive. This is mostly experienced by the weaker members. Indeed, WTO rules and dispute provisions only work effectively when they serve the largest economies’ interests – as illustrated by the impasses of the Doha Agenda and the Appellate Body. Hence the solution is not to ‘modernize’ the WTO, as pursued by the EU and the German Presidency, but to seek fairer and more sustainable alternatives.

 

Curbing meat trade

Restricting international trade in meat and animal products would be a step towards more sustainability and animal welfare. © Hans Braxmeier, Pixabay
Restricting international trade in meat and animal products would be a step towards more sustainability and animal welfare. © Hans Braxmeier, Pixabay

An obvious place to start would be to put an end to international trade in meat and animal products. The devastating climate impact and unnecessary animal suffering involved in livestock farming are well documented. This business is also characterized by deplorable working conditions, even in ‘advanced economies’ such as Germany (illustrated with the Covid-19 outbreak in the German slaughterhouse Tönnies). Moreover, critics have pointed to links between zoonotic epidemics and the growth of industrial farming.

 

World trade in meat shows how far the trading system has been derailed. Importing soy from deforested Amazon in Brazil to feed pork production (to be facilitated by the EU-Mercosur agreement) in Belgium, which pollutes our soils before being exported to Ghana, Ivory Coast or Korea (again thanks to EU free trade agreements with these countries)… that does not really sound like anything fair or sustainable, does it? Animal welfare is mentioned in the German and Trio Presidency programmes, but only in passing and with reference to ‘food labelling’. If we take social, health, environmental and animal welfare issues seriously, the import and export of formerly living animals for human consumption will at some point need to be restricted.

 

There is much scope for more ambitious action in this area. The Covid-19 crisis has encouraged local and regional trade and even entailed a shift towards more plant-based diets. Instead of attempting to circulate even more animal products across the globe with even more trade agreements, policy-makers should take these societal tendencies seriously and build on them when reflecting on the future of trade.

 

Regulating commodity prices

Prices of commodities and agricultural products are typically declining and unstable. This has a significant impact: low prices lead to suffering of agricultural producers, whereas high prices cause ‘food riots’ and famine. Such fluctuations do not only result from the ‘objective’ laws of supply and demand: as dependencia theorists already demonstrated in the 1960s, they are also inherent to how global markets function. The latter are dominated by oligopolistic firms (such as Nestlé) and manipulated by intense financial speculation (such as the Chicago Board of Trade).

 

Over 60% of global cocoa production comes from a few countries in Western Africa. © Leslie Searles, GIZ
Over 60% of global cocoa production comes from a few countries in Western Africa. © Leslie Searles, GIZ

Solutions would involve the creation of arrangements that manage the supply of tropical commodities in international trade. The UNCTAD could play a key role, given its decade-long expertise in trade-development issues and its legitimacy with the global South. Lessons could be drawn from the ill-fated calls for a New International Economic Order in the 1950s and 1960s. Moreover, the ‘COPEC’ experiment could be inspiring. In 2019, the Ivory Coast and Ghana created an ‘OPEC for cocoa’ involving a floor price, a ‘living income differential’ and a stabilization fund. This should provide a higher and stable income for workers at the bottom of the cocoa supply chain. Ideally, it would also address the problems of child labour, overproduction and deforestation that have plagued the cocoa sector.

 

While the merits of this initiative remain uncertain, it should be carefully examined by the EU. If successful, this scheme may be more significant than fifty years of fairtrade initiatives and development programmes in West Africa. European policy-makers may oblige cocoa importers to join the scheme. Similar initiatives for other products and with other countries – inside and outside the EU – could also be considered.  

 

Making companies accountable

The EU could establish legal accountability of our (European) companies for wrongdoings throughout the supply chains. The current tendency is to ‘punish’ or ‘reward’ so-called developing countries according to their compliance with human rights, labour standards and environmental norms. This also  features in the Dutch-French non-paper on trade reform in May 2020 and from the EU’s likely imposition of trade sanctions against Cambodia on 12 August 2020. Business and human rights legislation would avoid such neocolonial interference and reorient the responsibility towards our companies that are (in)directly and seriously violating the ethical principles that we claim to cherish.

 

The Covid-19 crisis has again shown the vulnerability of workers working in textile, IT and agriculture. Fashion giants cancelled orders or failed to pay delivered clothes, with disastrous consequences for women working in the textile industries of Bangladesh and Myanmar. As ethical consumers, we might attempt to boycott C&A, but there is no legal basis to address such abuses of market power.

 

Fair trade relies entirely on ethical consumers and responsible producers. © Isaac Fryxelius, Pixabay
Fair trade relies entirely on ethical consumers and responsible producers. © Isaac Fryxelius, Pixabay

Additional advantages of binding legislation are that our companies no longer need to elaborate lofty charters on Corporate Social Responsibility (CSR) and that we as consumers no longer need to sift through various product labels. Instead of their ‘hands-off’ approach to fair trade, European governments would again take responsibility. The coronavirus crisis reminds us that governments have a key responsibility to respect our health; in the same vein, we may expect governmental guarantees that imported products are not ‘infected’ by slave labour or heavy pollution.

 

Things are already moving on this front. In 2021 the European Commission will propose legislation on mandatory due diligence for European companies. Lessons from a similar French law, adopted in 2017, show that such obligations should cover all companies and be sufficiently concrete. In July 2020, two German ministers advocated a supply chain law against exploitation for German companies. This would allow the German Presidency, which pledged to support CSR in relation to a (non-binding) ‘EU action plan’, to play a leading role in European debates on this issue. In the same vein, Germany could engage EU member states in United Nations negotiations on a Binding Treaty on Transnational Corporations and Human Rights. Since these started in 2014, the EU has successfully put on the brakes for an ambitious treaty.

 

Building a better economy

Critics of free trade are either characterized as old-fashioned protectionists who will drop us into the next depression and world war or as naive do-gooders who idealize prehistoric lifestyles and don’t understand the benefits of globalization. Add to this a selective misreading of Smith-Ricardo, poor interpretations of advances in world poverty reduction, and tributes to the delights of coffee, and the current trading system is sufficiently legitimized.

 

We may well benefit from some mental distancing of the logic that ever-more trade will benefit us all.

 

However, discontent with this system is growing. This has so far been captured by far-right populists. European policy-makers would be wise to carefully reflect on alternatives that are transformative. The European Commission’s ongoing Trade Policy Review, which includes a public consultation, may provide an opportunity in this regard.

 

Our suggestions are not as radical as they might seem. Instead of resuscitating the WTO system and further expanding the EU’s web of trade agreements, we may well benefit from a lockdown of trade negotiators and some mental distancing of the logic that ever-more trade will benefit us all. This is not about halting trade flows altogether, it is rather about restoring the unbalanced situation that we created over the past decades and building a better economy based on recent insights on de-growth, post-development and global justice.

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