Monday, 31 October 2016

How far should we push globalisation?

The discussions about CETA, the trade agreement between Canada and the European Union, have focused almost exclusively on two questions. They are important but certainly not the most fundamental ones.  In this article I first discuss these two questions and then turn to the more fundamental question of how far we should push globalization.
The first question at the center of the debate around CETA concerns the way national regulations on environment, safety and health are made consistent with each other. To make trade possible in a world where trading partners have different rules about the environment, health and safety, a procedure must be followed to make these rules mutually acceptable. When, for example, two countries wish to trade in poultry, they must agree on what constitutes a healthy chicken. The attitude of many opponents of CETA in Europe is that European regulation is superior to the Canadian (or American in the context of TTIP), and that as a result Canadian and American chicken are suspect, if not poisonous. The implicit hypothesis of this attitude is that European governments care more about the health and safety of their citizens than the Canadian and American governments do about their citizens.
Such an attitude makes trade agreements very difficult. Moreover, it is not based on facts. There is no reason to assume that European legislation of health, safety and the environment is superior to the North American one. If that were the case, the European regulators would long ago have curbed the harmful emissions of rigged European-made diesel cars. They did not, the US authorities did.
The second question at the forefront of the CETA negotiations had to do with the legal procedures to resolve disputes between foreign investors and national authorities. The CETA trade agreement, like many others, provides that foreign investors who feel harmed by new environmental, health, and safety regulations can turn to a special arbitration procedure. This is indeed a problem. It would be better to accept the jurisdiction of national courts in these matters, rather than allowing international investors to turn to special arbitration courts. The feeling in many countries that this is an unacceptable discrimination favoring mostly multinational corporations should be respected. It is better to rely on the national courts to settle disputes. Yet I have the impression that the opponents of CETA (and TTIP) have blown this problem out of proportion, even arguing that the ratification of these trade agreements would undermine the foundations of our democracy.
A more fundamental issue that arises here and which has not sufficiently been addressed in the discussions around CETA has to do with the question of  how far we should push globalization?
In my academic career I have always been an advocate of free trade. Free trade provided the basis of the phenomenal material prosperity we have achieved in Europe in the postwar period. It has also made it possible for hundreds of millions of people, especially in Asia, to be pulled out of extreme poverty and to live a decent life.
But it now appears that globalization reaches its limits. These limits exist for two reasons. Firstly, there is the environmental limit. Globalization leads to very strong forms of specialization. There is of course nothing wrong with specialization as it provides the condition to create more material welfare. But specialization also means that goods are transported around the globe a lot. The lengthening of the value chains that has been made possible by the reductions of trade tariffs means that the same goods can travel back and forth between many countries before they achieve the final consumers. All this transporting around creates large environmental costs (e.g. CO2 emissions) that are not internalized in the price of the final product. As a result, the prices of these products are too low and too much is produced and consumed of them. Put differently, globalization has made markets freer but these  markets do not function properly, giving incentives to produce goods that harm the environment.
When the proponents of CETA (and TTIP) argue that trade agreements will lead to higher GDPs they are right, but they forget to say that this will be accompanied by rising environmental costs. If we subtract the latter from the former it is not certain that this leaves something positive.
The second limit of globalization has to do with the highly unequal distribution of benefits and costs of globalization. Free trade creates winners and losers. As argued earlier there are many winners of globalization in the world. The most important winners are the hundreds of millions who used to live in extreme poverty. There are also many winners in the industrial countries, e.g. those that work for or are shareholders in exporting companies. But there are also many losers. The losers are the millions of workers, mostly in the industrialized countries, who lost their jobs or have seen their wages decline. These are also the people that have to be convinced that free trade will ultimately be good for them and their children. Not an easy task. If, however, we fail to convince them the social consensus that existed in the industrial world in favour of free trade and globalization will deteriorate further.
The most effective way to convince the losers in the industrial world that globalization is good for them is by reinforcing redistributive policies, i.e. policies that transfer income and wealth from the winners to the losers. This, however, is more easily said than done. The winners have many ways to influence the political process aiming at preventing this from happening. In fact since the start of the 1980s when globalization became intense most industrial countries have weakened redistributive policies. They have done this in two ways. First, they have lowered the top tax rates used in personal income tax systems. Second, they have weakened the social security systems by lowering unemployment payments, reducing job security and lowering minimum wages. All this was done in the name of structural reforms and was heavily promoted by the European authorities.
Thus, while globalization went full speed, industrial countries reduced the redistributive and protective mechanisms that were set up in the past to help those that were hit by negative market forces. It is no surprise that these reactionary policies created many enemies of globalization, that now turn against the policy elites that set these policies in motion.
I come back to the question I formulated earlier: How far should we push globalisation  My answer is that as long as we do not keep in check the environmental costs generated by free trade agreements and as long as we do not compensate the losers of globalisation  or worse continue to punish them for being losers, a moratorium on new free trade agreements should be announced. This is not an argument to a return to protectionism. It is an argument to stop the process of further trade liberalization until the moment we come to grips with the environmental costs and with the redistributive effects of free trade. This implies introducing more effective controls on CO2 emissions, raising the income tax rates of the top income levels and strengthening social security systems in the industrialized countries.


  1. Very important fundamental points, which were indeed unfortunately obscured by the posturing around the two other concerns (one irrelevant and one rather minor).

    However, I suspect globalization is being singled out as a scapegoat for the two ills you mention: uninternalized negative (mostly environmental) externalities, and ineffective redistribution. It seems to me that most advanced economies have been neglecting these two aspects pretty well for over a generation, without requiring globalization as a catalyst. (As a case in point, consider the company car policy in our shared native country, which contributes considerably to overuse of private cars, congestion and pollution.)

    The twin problems of environmental costs not borne by those who reap the benefits, and of poor redistribution of economic gains are significant, and should be addressed with some urgency. But simply stopping new FTAs is not going to solve much, if anything. A better approach might be to use forthcoming FTAs as a lever to bring these two issues into the debate in the wider sense, and thus put them on the national as well as on the international political agendas.

  2. As a mother, I am with those pushing back against globalization. I appear to have raised my children only for export. To the environmental costs in transporting a veritable mountain of unnecessary junk, add the cost of trying to maintain any family relationships. If women had half the power in structuring any globalizing, they would not make such a destructive job of it. I am tired of men's fancy ideas

  3. Wasn't one of the explicitly stated goals of globalisation and privatisation that governments would need to compete with each other for the business and trade, by lowering taxes and reducing the power of trade unions. This has happened now. It was no surprizing side effect. It was a feature. That is how I remember it.


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  8. شركة تنظيف بابها تنظيف بابها لان التنظيف والنظافة لا يمكن الاستغناء عنة في حياتنا اليومية ولا يوجد مكان لا يحتاج الي التنظيف طالما نحن ما لنا علي قيد الحياه ، وكما نعلم فان النظافة من الايمان و ليس مجرد التنظيف العادي فقط ما نحتاجة لاننا في بعض الاحيان نحتاج الي شركة متخصصة في مجال النظافة العامة و تنظيف الاماكن باساليب وطرق متطورة و متخصصة من حيث الماكينات والمعدات المستخدمة مثل ماكينات الجلي وتلميع السيراميك لحاجة مثل هذة الماكينات الي اشخاص مدربين لديهم القدرة علي العمل علي هذة الادوات وطريقة استخدامها ،
    عملية تنظيف المنازل لم تعود مشكلتك الكبيرة بعد الأن نحن فى شركة الشرق الاوسط لخدمات تنظيف المنازل بابها تحتوى على تقوم شركة تنظيف منازل بابهابالتعامل مع ذات المساحات الكبيرة والشاسعة بكل سيولة ويسر نظراً لريادتنا فى مجال المنازل ب . عمال وفنيين يعملون تحت كافة الظروف الممكنة فلا تهتم إن كانت المنزل الخاص بك جديدة وتحتاج لإزالة بقايا الدهانات فنحن نمتلك فريق مدرب ولديه كافة المنظفات المطلوبة للقيام بتلك العملية.
    فنحن على دراية بكل كبيرة وصغيرة ونستطيع التعامل معها بشكل مميز حيث ,لدنيا خبراء فى الحفاظ على الزجاج بعد عملية التنظيف ونقوم بعمليات جلي البلاط وجعله يلمع وبراق بالإضافة لتنظيف المنزل من الخارج لتحصل على حديقة راقية بمظهر يسر الناظرين.
    ما تمتلك من مميزات وخبرات في مجال التنظيف بخميس مشيط
    حيث ان شركة الشرق الاوسط تمتلك الالات والمعدات الحديثة التي من خلالها تستطيع شركة الشرق الاوسط شركة تنظيف بخميس مشيطبافضل صورة ممكنه واعلي درجة نظافة وياتي من اهم عوامل التنظيف ونتميز بوجود فرع لنا فى مدينة محايل عسير شركة تنظيف بمحايل عسير
    عامل مواد التنظيف والمطهرات التي تستخدم في عملية التنظيف حيث اننا شركة الشرق الاوسط نعمل دائماً على استخدام المواد التي تساعدنا على انتاج فاعلية تنظيف عالية الجودة حتي نتمكن من تنظيف المنزل باعلي جودة كما اننا نستخدم المطهرات التي يحتجها شركة تنظيف منازل بخميس مشيطومنها الديتول وغيراها من مطهرات وكذالك نقوم باتباع احدث الوسائل والتقنيات الحديثة والمخصصة لاعمال تنظيف المنزل والعمل على تدريت وتطوير العمالة التي تقوم باستخدام الالات الحديثة والمتطورة التي تظهر بمجال تنظيف المنزل نعمل على تنظيف منزلك من الداخل ومن الخارج لاننا متخصصون فى هذا المجال منذ اكثر من 12 عام لاننا شركة تنظيف منازل بحائلالاقوى دائما والابقى فى هذا المجال وهو تنظيف كل ما يلزم الشقه او البيت من ارضيات وحوائط واسقف وواجهة المنزل وايضا نجيد غسل السجاد والموكيت والستائر والمجالس والركن والمفروشات بكل انواعها ونجيد ايضا التخصص فى مجال تنظيف المطابخ والحمامات واطقم الحمام والبورسلين والرخام والارضيات والدرج وكل ما يخص المنزل ونعمل ايضا فى مجال تنظيف الفنادق والمطاعم والاستراحات والمسابح والمكاتب وجميع الاثاث ونحن افضل شركة تنظيف بحائل تقدم الخدمات المنزليه


  9. شركة مكافحة حشرات بخميس مشيطتستخدم ماكينات حديثة ومطورة ومستوردة من الخارج وذلك حتى تلاؤم جميع أنواع عمليات الرش والتي تعمل علي إبادة الحشرات وذلك حتى يتم عملية الرش بنجاح كما أن الشركة متخصصة في رش المبيدات علي مستوي المملكة وبأفضل معاير المكافحة العالية
    كما أن الشركة شركة الشرق الاوسط شركة مكافحه حشرات بحائل تعمل دائما لتقديم ما هو أفضل للعميل والسعي الدائم وراء التقدم والوصول إلي أحدث الأساليب والمعدات والمبيدات الحشرية حتى تقوم بأفضل النتائج بدون وجود أي أثار جانبية كما جميعا نعلم ما هي الحشرات ومدي ضررها ووجودها فجميعنا نعلم أن الحشرات مختلفة الأنواع من الطائر شركة تنظيف بالظائف ومنها الزاحف وهما ما يشملوا النمل والصراصير وبق الفراش والسحالي والبراصي والعناكب الضارة وغيرها بالكثير من الحشرات المختلفة التي تتواجد في بعض المنازل شركة مكافحة الربيه بجازان تنتشر في الكثير من الأماكن وتعتبر من الحشرات الشائعة لذلك تعمل شركة مكافحة حشرات بنجران علي الاهتمام بهذا الموضوع من كل الجوانب وذلك للتخلص بشكل سليم وبدقة من جميع الحشرات دون أي أضرار أو أي من المشاكل نبين لكم مثال من الحشرات وكيفية التخلص من الفئران وهي الطريقة التي توضحها شركة الشرق الاوسط شركة نقل اثاث بالطائف