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Taking the Leap to Realign Trade and Sustainable Development: Now is the time

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By Mark Halle, February 21, 2017

In the early years of the World Trade Organization (WTO), advocates for sustainable development built up considerable frustration at the condescending and often dismissive attitude of the trade policy community towards their concerns.

Trade was deemed to be “hard” policy, along with fiscal, investment and security policy. Sustainable development was “soft” policy—important, but only in the way that sports, youth and cultural policy might be. Sustainable development is from Venus; trade is from Mars. The hardscrabble horse-trading of the mercantilist trade culture really did seem planets away.

Of course, most trade policy professionals would readily concede that sustainable development is the long-term goal, the exalted end point on which humanity must set its sights. After all, this is enshrined in the preamble to the WTO agreements. However, in the meantime, there were deals to be crafted and the challenges were tough enough without over-complicating them with additional requirements relating to social justice or environmental responsibility. Sustainable development is a good objective in principle; in practice, the trade community sees its role as limited to helping generate growth, which, in turn, will enable countries to address poverty and environment. Anything more requires too many sacrifices.

As advocates for sustainable development we tend to focus on another range of sacrifices—those that we are asking future generations to make without consulting them. Trade assumes the rewards of liberalization and asks concrete evidence of those doubting them. We ask that any aspect of trade policy and practice prove its compatibility with the longer-term goals set by our community of nations—for example, the Sustainable Development Goals (SDGs). For us, any aspect of trade practice that impedes or undermines progress in that direction should be dropped, amended or redesigned. If it is not, our chances of achieving the SDGs by 2030 are bleak.

It is not that trade rules directly or immediately undermine sustainable development. Mostly, they are put in place for honourable and objectively defensible reasons. The harmful effect comes from the fact that their impact is positive only if other policy measures are taken in parallel—such as retraining of workers whose jobs are lost to more competitive trading nations. And while the trade rules are binding and enforceable as international commitment, the domestic policies needed to avoid harm are often not put in place. Trade liberalization brings a mix of benefits and costs, with the benefits generally prevailing in aggregate. But this is scant comfort to those on the losing end of the equation, especially if the competitive pressures placed on states by liberalization prevent them from adequately addressing the predicament of the losers. Constantly repeating the mantra that trade is good (and justifying the claims with models based on inflated forecasts and dubious assumptions) and that a robust, rules-based, multilateral framework for trade offers the best of all possible worlds is no substitute for public policy that addresses job dislocation, rampant unemployment or environmental degradation.

Many sustainable development advocates gave up on trade agreements long ago. They regard the current wave of incipient multilateral trade agreements as an unwelcome extension of an economic system that benefits the rich and that has signally failed to deliver balanced—much less sustainable—development. Instead, it has tended to exacerbate social exclusion while undermining the environmental foundation on which the society depends. Others continue to believe that there is considerable common ground to be found if only the will to explore it could be located.

Many sustainable development organizations relish the prospect that public rejection of the Trans-Pacific Partnership (TPP) or the Transatlantic Trade and Investment Partnership (TTIP) might force countries back to their drawing boards with the instruction better to address the social and environmental consequences of their implementation. Others see these and similar agreements as irreparable and would be happy to see them simply sink beneath the waves. Few suspected, however, the scale and force with which the very fundamentals of open, rules-based trade would be called into question

Recent political developments like the Brexit vote, the election of Donald Trump and, more generally, the political capital that populist parties derive from slamming trade have taken the wind out of the sails of trade negotiations. More serious, there is talk of dismantling existing agreements and introducing protectionist measures that are entirely incompatible with WTO rules. So not only is trade liberalization no longer moving forward, there is a real chance that it might slip back, perhaps even dramatically.

Some will say that the trade community is getting what it deserves. It studiously ignored those who insisted that the real-life consequences of trade liberalization had to be taken seriously, failing which a strong backlash might occur. That backlash against trade liberalization has now arrived with a vengeance. And yet it is a Pyrrhic victory. Only the most radical anti-trade advocates have reason to celebrate. A more sober assessment of the risks and benefits of dismantling the international trade policy architecture would quickly conclude that there are no real winners, and that the potential harm to both trade and sustainable development are considerable.

Maybe the glowering storm cloud has a silver lining? The present situation might provide an opening for genuine cooperation and innovation between the trade and sustainable development communities. Clearly trade policy will now need to rebuild public trust, and that will involve demonstrating how the benefits of open trade can be achieved without paying an unacceptable price in social and environmental terms. And the sustainable development community will need to defend open trade if it genuinely does advance social inclusion and environmental responsibility. The search for this middle ground will require a great deal of creativity and innovative thinking. It will require rallying both communities around a new narrative and binding them together in a common culture, not least to address the SDGs that specifically link trade to broader public policy targets like employment and health.

This opportunity would not have been possible without the slap in the face that the multilateral trade policy community has received. But given the dangers represented by nascent protectionism, the trade and sustainable development communities should join forces to move forward toward a form of trade policy and practice that genuinely advances sustainable development now, and not in some ill-defined and distant future.