Today, networks of trade, investment, and tax treaties contain provisions that guard against smart localization strategies for economic activity, while occupying space that a forward-looking transnational framework could play. What are these rules, and how might we think about changing them?
The so-called global liberal order has as a core organizing principle the notion of non-discrimination. Under the 1947 General Agreement on Tariffs and Trade (GATT), countries are obligated to ensure that taxes and other rules affecting commercial goods “should not be applied to imported or domestic products so as to afford protection to domestic production.” Likewise, other provisions require a regulatory benefit that any one country’s products receive “be accorded immediately and unconditionally” to those of all other countries. These are respectively called “national treatment” and “most-favored nation treatment.” While government procurement and subsidies were originally carved out from these strictures, similar rules were added in for those policy tools during the GATT’s Uruguay Round. During those negotiations, which produced a multi-agreement pact in 1994 referred to collectively as the World Trade Organization (WTO), specific non-discrimination rules were added to govern service sector regulation, investment policy, and consumer standards.
On paper, these rules do not sound particularly objectionable. What good liberal or leftist likes discrimination, which sounds downright prejudiced or xenophobic? However, in practice, these rules have created problems.
On the one hand, there may be legitimate environmental or social reasons to give preference to local or national production. Substantial carbon emissions are generated through trade-related shipping and aviation, and Buy Local or Buy National requirements are one way to curb those. And green policies that are open to all comers – even businesses far away – could undermine the local legitimacy of those schemes. As research by David J. Hess, Quan D. Mai, Rachel Skaggs, and Magdalenea Sudibjo finds, policies that aim, for example, to create local jobs have broad public appeal and can even help build bipartisan coalitions. As climate expert and political scientist Leah Stokes has written, emphasizing local effects that people can see with their own eyes helps to overcome the resistance to taking a big leap forward that would otherwise feel daunting. However, the WTO’s Appellate Body has found that renewable energy policies that explicitly privilege the local in both India and the US are per se violations of trade rules.
On the other hand, even policies that are origin-neutral (meaning they don’t have favoring national goods as a formal objective or an informal motivation) have been ruled against at the WTO. WTO adjudicators have ruled against regulations to discourage teenagers from smoking, to inform consumers about products’ country-of-origin, to disclose how tuna fishing practices impact dolphin welfare, to limit use of overseas tax havens, to reduce cruelty and killing of seals, to protect turtle populations, to crack-down on illicit funding flows, to limit access to addictive online gambling, and more. The common denominator for all of these regulations is that they were not intended to be protectionist, in the sense of helping out national industry at the expense of foreign industry. Rather, they were motivated by various environmental and public interest objectives. Nonetheless, because complaining countries produced a shred of evidence (often quite flimsy) that a regulation has the potential to, at some point in time, even inadvertently, raise business costs for foreign producers relative to domestic producers, the WTO has found a violation. Echoing an analysis made by many progressives, the Trump administration released a report in February 2020 describing the problem thusly:
“Even where a WTO Member makes a significant effort to ensure that a measure is non-discriminatory, the WTO Member has no assurance when adopting a measure that the measure will withstand a challenge in the future based on changes in the market or changes by exporting producers. This low and unpredictable threshold is not the concept of discrimination to which WTO Members agreed. It is difficult to imagine that WTO Members would have agreed to an obligation under which any measure that had a disparate impact on the goods from another WTO Member – even if the impact was entirely accidental – would be in breach of” trade rules.
While the WTO’s agreements on goods and services contain a so-called “General Exception” that regulating countries can use in their own defense, it contains such onerous burdens of proof that it is almost impossible to use. For instance, policies may be defensible only if they are “necessary to protect human, animal or plant life or health”, “not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination”; “or a disguised restriction on international trade.” As they have been interpreted, these terms put the fingers of the scale in favor of uninterrupted and maximized commercial flows as a good thing in and of itself. While there are other categories of policies that may be defended (such as those relating to the products of prison labor), all face similar constraints in their effective application.
Such international rule-making shows that the WTO serves not as a neutral arbiter buffering against nativist trade wars — something the Trump era shows it is not particularly effective at doing in any case. Rather, it serves as a forum for world- and value-shaping that asks governments to be servants for the few, not the many. This makes it a core part of the larger neoliberal project, going back to the Mont Pelerin society meetings midcentury. As stated by Adam Tooze in his review of “Globalists” by the intellectual historian Quinn Slobodian, “neoliberals set out not to demolish the state but to create an international order strong enough to contain the dangerous forces of democracy and encase the private economy in its own autonomous sphere.”
While space doesn’t permit a full excavation of rules against expropriation and double taxation of mobile capital in investment and tax treaties, these too service the neoliberal project in a similar manner. And notably, change of these rules has not risen to the “reform agenda” pursued by either the Trump administration or European Commission. This means that even more recent generation agreements like the US-Mexico-Canada Agreement (USMCA) or the EU’s proposed Multilateral Investment Court would continue to allow international adjudicators to paint as “discriminatory” policies that were never intended as such. And the USMCA goes even further than its predecessor North American Free Trade Agreement (NAFTA) in enshrining an approach to cost-benefit analysis in the domestic regulatory review process that would make ambitious structural change all but impossible.
As of yet, there is no left internationalist project that seeks to marshal international law in the same way that the descendants of Mont Pelerin did.
The global justice movement that emerged in the late 1990s had predominantly subtractionist agenda, attempting to pare back the worst rules and generally do damage limitation. But this does not amount to a proactive, forward-looking, power-building agenda. And recent months have shown that the Trump administration effectively got the populist labor coalition built in and out of Congress after the Battle in Seattle to buy into his repackaged NAFTA. Only environmental groups like the Sierra Club and Sunrise Movement stood strong against the pact that will not only fail to offer marginal improvements, but will in fact make the climate crisis worse.
The Green New Deal presents an opportunity to shift all of that, while also pushing back against the notion that its coalition lacks internationalist strategy or content.
One plan that I have advanced for the United States presents just such a path forward.
First, for the mobilization’s ten-year duration, the obligations of extant international trade treaties should be temporarily suspended. In their place, nations would implement a two-track treatment of goods flows under a Global Green New Deal. For nations that agree to implement domestic Green New Deals and decarbonize their economies, tariffs on all goods would go to zero for ten years. For those that do not, tariffs would rise to prohibitive levels. During the mobilization, Global Green New Deal countries would perform and make public a full audit of their progress towards these commitments every six months. If they fall short, they would be subject to legal challenge at the WTO’s Dispute Settlement Body, which would be converted to an enforcement body for the Global Green New Deal for the ten-year period. At the end of the ten-year period, countries would hold a negotiation to decide whether to keep the Global Green New Deal in place (as perhaps more time will be needed), return to WTO obligations, or develop an entirely new treaty framework. If this seems utopian, consider that the WTO is currently in a severely weakened state as a result of the Trump administration’s attacks on the body. This opens up a critical juncture where fundamental change is not only possible, but probable.
Second, investment treaty obligations should be similarly suspended for a ten-year time frame. In their place, ad hoc arbitration should be available to any investor or civil society group that alleges a government is not upholding its obligations under the Global Green New Deal. The immediate function here is naming and shaming, though sustained violation by a country could be a precursor to multilateral trade sanctions under the alternative WTO scheme mentioned above. Such proceedings would offer a way to directly connect social movements and progressives into the actual operations of international law – giving them a stake in a system they’ve too often been alienated from.
Finally, a suite of policies complementary to the US Green New Deal requirements should be put in place in international economic law and foreign policy practice, including:
This agenda would go a long way towards ushering foreign policy and investment law out of its elite roots in state secrecy and towards a more popular and inclusive formulation.
Photo: Seattle Municipal Archives
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