What’s missing from many conversations about global trade is an acknowledgement that some trade deals transcend the economic benefit of reducing friction and bring about change in additional ways.
First things first: The primary objective of trade liberalization is to extract the most value possible from the world’s collective assets. The removal of protectionist obstacles like duty fees, surcharges, and quotas encourages the efficient creation of goods and execution of services that have real value. It allows countries to specialize in what they do best.
This, however, cuts two ways. While industry generally benefits from increased access to global markets and consumers generally benefit from having access to a wide variety of lower-cost goods, workers and investors in some sectors face more foreign competition. This has negative consequences. Workers can and do lose their jobs — but there is simply no way to craft trade policy that offers the benefits without being subject to the drawbacks.
Liberalized trade is associated with faster growth and more individual prosperity. This is of course insufficiently beneficial to the people who lose their jobs because of it.
Governments have an obligation to ensure their people have meaningful opportunities to participate in the economy. While well-crafted domestic policymaking should accompany trade liberalization measures to ensure countries honor this pact, the trade agreements recently enacted tend to include provisions that can advance towards this objective.
Depending on which countries step up to lead, an ancillary benefit of free trade can be a more humane, compassionate, and civil global society.
Take the provisions of the Trans-Pacific Partnership that target vulnerable stakeholders (e.g., labor) and existential threats (e.g., climate change). In addition to – or perhaps in exchange for – helping include into the global economy millions of people in places like Malaysia and Vietnam by creating new counterparties for them to trade with, TPP creates incentive to accelerate world-wide adoption of modern labor and environmental standards.
Over time, this could, for example, move the needle in a positive direction on humanitarian issues like child labor and workers’ rights and on environmental issues such as emission standards and the use of environmentally dangerous production methods.
This illustrates how free trade is about much more than just lower duty rates. Countries are using free trade agreements and other trade pacts to drive social changes, and they will continue to do this.
Lawmakers can choose to either lead on free trade, exporting their value systems throughout the world, or be subject to the influence of the ones who do.
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