Wednesday, December 26, 2012

From free trade to fair trade: first steps

The process of globalization means that more and more of the important decisions made, are made beyond the national level, for example through multi-national trade treaties and international bodies ranging from the United Nations to the World Intellectual Property Organization.

For democracy to thrive in a globalized world, democracy too must move beyond local borders. One proposal that I would like to offer is that the world needs to move beyond free trade to fair trade - not just for coffee and a few other goods; let's make fair trade the default.

This is a huge task and I would not underestimate the difficulty of the journey. One strategy that I propose is to transition our free trade agreements, slowly, into fair trade agreements. Instead of a race to the bottom - companies looking for the lowest labour costs, poorest environment protection - let's raise the floor, use the advantages of being able to participate in global trade to leverage good practices for the environment and for people. This post introduces three elements that seem highly likely to enjoy support from those in power: currency fairness, local economy health, and eliminating tax avoidance.

Update December 27: commitment to access to knowledge - thanks to Glyn Moody for the suggestion.  Good point, many countries have made this commitment already.

The optimum would be a complete and immediate reversal of direction globally. However, this may not be realistic. What might be realistic is incremental change, beginning with elements of fair trade that would appeal to the powerful players in the international arena. For this reason, I would like to suggest some elements that might appeal to those who have a lot of influence in global politics, such as Barack Obama.

One is currency fairness. I understand that Obama is well aware of the global impact of China's artificially keeping its currency low. In the short term, the purpose would be to rebalance the global economy, in favor of the U.S., but in the long term, introducing one element of fairness could be a first step towards global fair trade policy. The current Trans Pacific Partnership treaty negotiations might be a really good time to bring this up.

Another is local economy health. There are advantages to trade, but if free trade decimates the local economy (anywhere), what's the point? This is one area where the optimum is probably balance rather than all-free-trade or only local. Obama is concerned about jobs in the U.S., and the E.U.'s desire to protect local industries could help get support for this point.

In a global economy it becomes far too easy for large corporations and wealthy individuals to avoid taxes through such means as offshore tax havens. Countries everywhere would benefit from addressing this problem, and the most effective way would be for all countries to implement solutions at once, perhaps by tying tax avoidance solutions into participation in the World Trade Agreement

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