The following is excerpted and adapted from Vaillancourt’s book, L’Empire du libre-échange (The Stranglehold of Free Trade), released by M éditeur in 2014. It has been lightly edited to fill in context provided elsewhere in the book.
Because we regard free trade as necessary and inevitable we rarely think about what could replace it, about other ways of organizing international trade so that it might not be so damaging to people. Conventional wisdom tells us that free trade agreements establish a legal framework that some admit may not be ideal, but that makes it possible to avoid chaos and economic instability. The failure of the Free Trade Area of the Americas (FTAA) and the paralysis of the World Trade Organization (WTO) suggest that wisdom is lacking, to say the least. So does the reality that the agreements already in place do not prevent trade wars. But free trade continues to move in a single direction, through the negotiation of new agreements based on a single model replicated again and again. Some of these deals are signed, others are held up. And while the battle for and against them plays out each time, with an all-or-nothing decision forced upon us, the power elite never even considers alternative trade rules that would be more beneficial for more people. And there are alternatives.
Free trade is one of the chief weapons of neoliberal ideology, one of the surest ways of achieving irreversible globalization in the interest of big business. It is one of a large number of economic practices deemed to be inescapable, taught as such in all universities, promoted relentlessly by business circles, applied zealously by governments, and by now familiar to us all. The others include “dismantling” the state (which in fact means putting the state at the service of business), adopting a method of public administration inspired by the private sector, deregulating, privatizing, ensuring the free movement of capital, prioritizing the interests of shareholders, lowering taxes, ending employment security and maintaining strong competition among workers. It will be difficult to reform free trade without questioning all these practices. In other words, proposing concrete, feasible and effective solutions for escaping from free trade requires the political courage to go against the dominant ideology. For the powerful, the failures of free trade are no reason to question it; they deny its negative impacts and see what it pleases them to see. That is why it will take special patience and perseverance simply to put forward an alternative vision and the corresponding policies to see it through.
Opponents of free trade do not question the need for trade among nations, but such trade should obey rules very different from those that are in place. The Havana Charter, which would have established an International Trade Organization founded on co-operation more than competition and concerned with full employment as much as expanded trade, showed that states can design trade rules that are more equitable, less weighted in favour of the powerful. (The U.S. withdrew its support for the charter in 1950.) In many respects the charter can serve as a model today; its principles are still relevant and should be championed. It also goes without saying that the world has changed a great deal since the 1950s. The environment has been profoundly degraded, wealth has been monopolized by a shrinking minority, and international trade has grown significantly. Many new facts must therefore be taken into account. But one thing remains as true today as it was in the early days of multilateral trade negotiations: to escape from free trade, we must stop thinking of international trade as an absolute priority.
While economist Paul Krugman expresses skepticism about the miraculous effects of free trade on the world economy in La mondialisation n'est pas coupable : vertues et limites du libre-échange (Globalization is not guilty: The virtues and limits of free trade), it has been demonstrated that large-scale exports can improve people's living conditions. This is not a recent miracle, and the benefits are not always distributed as they should be. The prosperity of an exporting country may be achieved at the expense of less fortunate competitors, as in the case of Germany, which holds a dominant position in European markets and whose economic success comes at the expense of Greece, Spain, Italy and other partner countries. Some insist this is just how competition works and that better economic management by the losers would have avoided the disastrous outcomes. The truth is the economic war waged in the context of free trade is particularly brutal: it punishes whole populations who had no voice in the decisions made by their governments, who are victims of the ruthless games of international competition.
As explored earlier in this book, the WTO raised itself to the rank of most powerful international organization by means of its arbitration tribunals (for resolving country-to-country trade disputes) and the power to impose economic sanctions. Although the WTO has been weakened somewhat by the failure to conclude the latest Doha “development” round of international negotiations, the fact remains that the organization, and the thousands of other bilateral free trade agreements in place globally, prioritize trade above all else. All else is secondary. The hyper-commodification of everything that is the product of this attitude is regularly denounced by the opponents of free trade. They have repeatedly said that human rights and environmental protection must be the real priorities. Forceful steps must be taken to achieve this objective.
Out with the old
Trade agreements must be negotiated transparently, not in ivory towers where professional negotiators representing no one take decisions with enormous consequences for public policy and economic development. Before starting trade negotiations, governments should consult widely with civil society groups, especially unions and environmentalists, and stop listening only to major employers and their lobbyists. The most far-reaching agreements, those such as the Canada–European Union Comprehensive Economic and Trade Agreement (CETA) that will profoundly transform the economic landscape, should be approved (or defeated) in public referenda.
Canada’s Foreign Investment Promotion and Protection Agreements (FIPAs—a type of bilateral investment treaty), as well as provisions in free trade deals on the protection of foreign investments, must be eliminated. There is no justification for these arrangements except to give more power to businesses. National legal systems have the necessary tools to settle corporate disputes with governments related to policy decisions. They do so more transparently and with somewhat less bias towards business than private investor–state tribunals. The use of diplomacy to resolve international trade disputes can mitigate differences of opinion and obliges firms to have a solid case before resorting to action.
Environmental stewardship is now of the utmost importance as global warming increases and the problems associated with pollution multiply. But governments and businesses have taken various measures to prevent effective environmental and climate policy. Public funds provided to environmental groups are being reduced or eliminated. Despite being staffed by experts, these groups are rarely consulted in a meaningful way when major projects with a significant environmental impact are pursued. Some groups have been hit with strategic lawsuits against public participation (SLAPP suits) that paralyze them for extended periods. In some countries environmental activists are threatened, intimidated or attacked. In addition to these depressing tactics, foreign investment protection agreements are being used as powerful tools for thwarting environmental laws. They are now so numerous that companies can easily find ways to sue the country of their choice (including their own) through subsidiary firms based in tax havens with which that country has signed a FIPA or free trade deal. As long as investor–state dispute settlement is a factor, governments will hesitate before adopting environmental protection measures that inevitably conflict with someone’s economic interests, and as such provide grounds for a corporate lawsuit. The survival of our planet is infinitely more important than the profits of a few individuals and, it must be said, than a few good jobs.
Individual investors and companies, not governments, should assume the risk of when they seek to invest or do business abroad. Governments must retain the ability to nationalize industries, to expropriate a company in the public interest and to adopt laws that protect the public—all without running the risk of extralegal (investor–state) lawsuits. Democratic decisions must take precedence over the profits of investors. Eliminating foreign investment protection provisions will put an end to the dilemma of choosing between investors’ rights and human rights. It will no longer be possible to give priority to trade agreements over international treaties on civil, political, economic, social and cultural rights. The world once managed without bilateral investment treaties; their absence would create no economic slump nor would investment flows be dangerously constrained or limited. As an additional benefit, as investors assume more risk, they will be required to act with prudence—to take more responsibility for their choices.
It is essential for public services to be excluded from free trade agreements, that there is no possibility of their inclusion in new negotiations. That will require that we reject the standard approach in trade talks that “everything is on the table,” and decide from the outset what services should or should not be subject to the conditions of any eventual agreement. We can find inspiration for a better model in the Convention on the Protection and Promotion of the Diversity of Cultural Expressions, although its scope is insufficient for our task. For example, health and education should remain public and under government supervision, off limits to private firms, whether they are local or foreign. Governments must be able to keep other sectors (e.g., water delivery and sanitation, highways, public transportation, prisons, postal services and electricity) in the public realm, free from any pressure to “liberalize,” which is to open to private competition. Proposals in trade agreements (like CETA and the Trans-Pacific Partnership) that have a direct impact on the cost of public services, such as extending the life of drug patents, must be rejected out of hand.
All levels of government must retain substantial control over procurement contracts. Public spending can and should be used more frequently to develop the local economy; the money would go much further if it came with conditions on bidders that promote job creation, environmental protection and good working conditions. But for this to happen public procurement would no longer be included in trade agreements. In fact, calls for private tenders could be reduced considerably in most government departments, since the best protection against corruption and cost overruns is to allow public employees to do the work themselves.
In with the new
Instead of lifting restrictions on agriculture and promoting food exports at all costs, an alternative trade policy will give priority to food sovereignty. Agricultural products will cease to be transported over vast distances—with the high energy costs and harmful environmental consequences this entails—before turning up on dinner tables. Short shipping routes will be the norm. Countries that wish to will be able to keep or create a supply management system, though these must be more open to small producers, and impose tariff barriers on agricultural imports that benefited from subsidization by wealthy exporting countries. Better trade agreements will protect small farmers, encourage organic farming and cease to give pride of place to a polluting, energy-intensive agro-industry designed for export at the expense of the needs of local populations.
Free trade agreements today pretend to promote the “development” of the poorest countries. In reality, they achieve the opposite. It is startling we ever believed that by treating great economic powerhouses and smaller, poorer countries as equals, apparently to eliminate “discrimination,” it would naturally benefit the latter. Bringing countries out of poverty and truly promoting development requires a very different strategy. The interests of richer economies prevent them from seeing a more helpful development model. They choose instead to support exclusively their largest exporters and big employers so that they might conquer foreign markets and give back as little as possible in return.
To really change the situation it will be necessary to go against the basic principles of free trade. Why not institute positive discrimination in favour of the poorest countries? Their goods could be exported free of trade barriers, provided that such trade does not deprive their people of essential goods. At the same time, these countries could be allowed to impose trade barriers to prevent the dumping of goods and services that prevent their local enterprises from developing. Customs duties would be useful for these countries to fund public services. The fight against poverty, not increased exports, would become the top priority.
Achieving this goal will mean relying less on foreign aid, which is often ineffective or mainly benefits the companies or NGOs of the donor countries. A responsible and democratic audit poor country debt would allow them to challenge odious and illegitimate payments on debt accrued by dictatorial regimes. Loans to these countries would no longer be conditional on the dismantling of public services, as they still too often are in structural adjustment plans imposed by the International Monetary Fund and the World Bank. Free of debt, these countries could start combatting the diseases that destroy their lifeblood, such as dengue fever, malaria and AIDS, and offer quality education to far greater numbers of people. Better living conditions would allow them to retain an educated workforce less tempted to emigrate. The contribution of these workers to the local economy would be more equitable and more stimulative than the remittances returned by expatriates working abroad, which are sizable but poorly distributed. A tax on financial transactions, a large portion of which would go to development assistance and combatting climate change, is far more conducive to real development, and more valuable than uncertain foreign investments focused on interests that differ from those of the population.
Some of these ideas go beyond international trade. Those who advance them are often criticized as naïve or impractical optimists who misunderstand how the economy works. Yet some of these solutions have already been applied successfully. As concrete and pragmatic—or easy to sell—as free trade policies appear to governments, it’s time to recognize their role in perpetuating many of the world’s current economic misfortunes. Isn’t it about time we tried something new? It is not as if we are lacking alternatives.
Claude Vaillancourt is a novelist, essayist and professor at the University of Quebec in Montreal (UQAM). He is the president of ATTAC-Québec (Association for the Taxation of Financial Transactions and for Citizen Action) and a frequent media commentator on Canada’s trade and investment policy. You can find his writing at www.claudevaillancourt.net.
Translated from the French by Frank Bayerl.