October 2017 has been a cliffhanger month for global policy uncertainty, especially highlighted by the mirroring acts of brinksmanship during intense trade negotiations on both sides of the Atlantic. With the looming 29 March 2019 Brexit deadline, UK Prime Minister Theresa May surprised Brexit hardliners when she announced on 23 October that there will be no implementation period or transition period for Brexit without a final trade treaty concluded between the EU and the UK. The EU’s Chief Brexit negotiator, Michel Barnier, has already announced that “it would take years to complete” such a treaty, making it clear at this point that Brexit will proceed without a transitional period unless Mrs. May reverses course. Without a transitional period before Brexit, significant uncertainty in the regulatory environment is estimated to already deter investment in British manufacturing sectors, lose 100,000 jobs in the finance sector in the UK, with small and medium enterprises (SMEs) estimated to be hit hardest because of impacts to banking, capital access, and markets for British goods. According to a 2016 OECD study estimating the economic consequences of Brexit, “Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU. The shock would be transmitted through several channels that would change depending on the time horizon. In the near term, the UK economy would be hit by tighter financial conditions and weaker confidence and, after formal exit from the European Union, higher trade barriers and an early impact of restrictions on labour mobility. By 2020, GDP would be over 3% smaller than otherwise (with continued EU membership), equivalent to a cost per household of GBP 2200 (in today’s prices). In the longer term, structural impacts would take hold through the channels of capital, immigration and lower technical progress. In particular, labour productivity would be held back by a drop in foreign direct investment and a smaller pool of skills. The extent of foregone GDP would increase over time. By 2030, in a central scenario GDP would be over 5% lower than otherwise – with the cost of Brexit equivalent to GBP 3200 per household (in today’s prices).” All this, without even factoring in the cost of the Brexit divorce bill (estimated loosely so far at a gross bill of about €100 billion euros) as the financial settlement for all obligations the UK made as a member of the EU.
Similarly, uncertainty pervaded the fourth round of renegotiation talks in October between the United States, Canada, and Mexico on the future of the North American Free Trade Agreement (NAFTA) – taking place under the Damocles sword of US President Donald Trump’s threats of withdrawal from NAFTA. The US Trade Representative’s demands to “rebalance” NAFTA and restore US trade deficits, through an aggressive set of negotiation objectives, have been rejected by the US agricultural sector, and also opposed by the United States Chamber of Commerce as ‘dangerously’ intended to scuttle NAFTA altogether. Scholars, such as Joel Trachtman, have argued that the United States cannot, in any case, unilaterally withdraw from NAFTA without Congressional approval. While NAFTA renegotiation talks have been extended to the first quarter of 2018 (when the US President’s authority to negotiate trade deals under the Congressional grant of Trade Promotion Authority is also up for Congressional renewal), the persistent uncertainty is also hurting farmers, and small business owners in local communities throughout the North American region, deterring investments into the United States, threatening the loss of 14 million jobs in the United States – with 47 economists of the National Association for Business Economics reporting that the United States economy will not gain from, but will be harmed by, the NAFTA renegotiations.
The strident assertions of sovereignty notwithstanding, one has to wonder whether the States willingly inviting the policy, regulatory, and economic uncertainty in their domains are transparently discussing the human costs to these changes, and enabling the widest possible consultations with, and participation of communities, individual persons, and groups in the lasting economic decisions being taken on their behalf. Regardless of the form of the economic decision that treaty negotiators and politicians reach – whether bilateral, trilateral, or multilateral trade agreement or any other political arrangement conceived to steer the State’s course towards more economic development – do States muscling the argument of sovereignty in the current debates about global economic treaty changes recognise the higher claims of the communities, groups, and individual persons – who are the ultimate constituencies of the sovereignties that these States assert?
In this post, I point out that, in this critical time of change that could be both perilous and promising, States immersed in the processes and politics of these tectonic global economic treaty changes have muted the human costs and impacts of change in the policy debates, without giving an equal place for the independent participation of individuals, civil society groups, and local communities alongside lobbying efforts of chambers of commerce and market players. This seeming ‘business as usual’ ethos in the writing and rewriting of trade agreements undermines the right to development as a “comprehensive economic, social, cultural and political process, which aims at the constant improvement of the well-being of the entire population and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits resulting therefrom.” (Declaration on the right to development, Preamble, paragraph 2.) I discuss four overlooked aspects in the current global debates on economic treaty changes and supposed exits from trade agreements: 1) transparency, consultations, and participation; 2) human rights impact assessments; 3) short and long-term trade adjustment strategies through labor and education policies; and 4) interacting long-term economic, social, cultural, and environmental obligations that already constrain how States rewrite the new global terms of trade for future generations. Read the rest of this entry…