Using trade barriers to safeguard ‘values’

This speech is important, if you’re interested in the problems of global governance. It’s an interesting, typically intellectual, parting shot from one of Europe’s brightest and most experienced public servants. Lamy’s argument doesn’t succeed, in my view, because he jumps too easily from a description of the success with which WTO has handled this challenge to a recommendation for a new class of ‘exceptional’ barriers to trade or investment or IP. It’s as if he has his target—the proposed safeguard barriers—in view all along. I’m uncomfortable, too, with Lamy’s approach tothe relationship between an individual’s rights as a consumer or contractor and collective preferences. In my view individual rights should have constitutional priority (‘.. endowed .. with certain inalienable rights ..&#8217)and the social frameworks, or ‘collective preferences’, should be drawn as lightly as possible around them by the necessity of protecting their exercise in society. Lamy’s Euro-socialist approach is more dirigiste, giving greater prominence to the social framework. But this is a valuable contribution to the dialogue on how to manage conflict between policy measures at a global level. I agree with Lamy that this is the main task of WTO and has become a more prominent and more complex task for governments as global exchanges multiply and deepen. The following is the Readers’ Digest version of Pascal Lamy’s speech on 15 September that I made for my own use. The full text is available “here”: h4. Introduction [In fact, from the ‘conclusion’ of the speech] bq. ” The ideas discussed in this paper are especially likely to provoke discussion because they bring together two objectives that are viewed as mutually exclusive: to promote greater openness and international integration, except where social choices are at stake, but also to think about imposing limits on international integration to defend the legitimacy and diversity of social choices.” h4. What prompts this discussion? Politicians and trade negotiators must face their responsibility to deal with the disruption that market opening creates and the threat that it seems to represent (or actually represents) to collective preferences bq. ” While efforts have been made to educate opinion and develop accompanying measures to deal with the effects of market‑opening on industry and employment (though the issue of business relocation has recently rekindled controversy), the threat to societal choices has not received proper attention” h4. What are collective preferences? Why are they a problem? bq. ” Collective preferences are the end result of choices made by human communities that apply to the community as a whole … In short, they should be seen as values.” They do not replace, but can supervene individual choices, which are made bq. ” … within the limits fixed by collective choices: this is typically the EU approach regarding GMOs.” Differences between sets of national collective preferences ‘recurrently’ give rise to conflicts and misunderstanding at an internatioanl level. But it’s important to locate the point at which the conflict takes place. bq. ” The specific problems that arise from combining different collective preferences often stem, not from the collective preferences themselves, but from the way in which they have been converted into regulatory measures. And one way of converting them may create more problems for other countries than another way. So the trick in expressing collective preferences is largely one of drawing up or adapting regulatory measures in such a way as to faithfully translate a country’s collective preferences while causing as few problems as possible for others.” h4. Where does trade come into this? bq. ” Traded goods and services are both an embodiment of and vehicle for the collective preferences of the countries producing them; they then become an interface with the collective preferences of the consumer country. Trade is the natural point of intersection for different systems of collective preferences.” As tariff barriers and quantitative barriers have fallen, other measures designed to protect national collective preferences have become more prominent (although they were there all the time). Also, there has been a … bq. ” trend towards a greater “ideological content” in goods and services. The development of trade in farm products raises issues about our relationship to nature, the environment and food, all things that ethnologists class as cultural markers; trade in services raises the question of regulation of public services; and cultural diversity is a modern version of the cultural exception” … and there have been … bq. ” changes in society itself as citizens and consumers have become better informed and more demanding. This greater awareness of issues has crystallised in the form of NGOs and global communications media whose development has given an ideological spin to previously humdrum issues (for instance, we used to change batteries without thinking twice, now it is an act fraught with environmental consequences)” h4. Differences in collective preferences can be good Collective preferences are ‘essentially complementary.’ In medieval christian Europe capital markets were constrained by eclesiastical laws againt ‘usury’ that prohibited Christians from charging interest on money. Lombards and Jews, however, were races whose collective preferences allowed them to be ‘userers’, and whose services supplied the Christian economy (!). h4. WTO has done a good job of accomodating them bq. ” One thing needs to be made clear: the WTO has not dodged this issue. It recognises the legitimacy of preferences and attempts to reconcile openness with respect for legitimate collective preferences. It does not lack the means to do this: its rules allow exceptions to be made on grounds of public health, public order, public morality, the environment or national security, and countries have no qualms about adopting standards that reflect their collective preferences. Where these standards have led to conflict, experience has shown that the dispute settlement body has always sought to strike a balance between the need to ensure that standards are not just protectionism in disguise and the need to protect legitimate collective preferences” [Lamy gives several examples of Appellate Body cases that he says show deference to the role of ‘collective prefernces’] h4. But WTO is limited The ‘case-law’ approach of the WTO dispute settlement sysstem has left wide gaps in understanding about how they will be accomodated in future bq. ” By their sudden emergence in international trade, collective preferences risk provoking a backlash against market opening when that openness is seen as a challenge to legitimately expressed collective preferences. This backlash is fed by the feeling of “dispossession” traditionally associated with globalisation (the people affected by decisions feel remote from the people who take them), but the feeling goes deeper than that because people feel “dispossessed” of their social choices and unhappy that their social choices are being placed on an equal footing with commercial considerations, in a world where everything is viewed as a commodity.” h4. The ‘clash of collective preferences’ can educate and refine public policy bq. ” We should start by stressing that certain beneficial effects flow from the clash of collective preferences and the constraints imposed by trading rules. The way the EU’s agricultural policy has evolved provides a good illustration. Greater openness, dialogue and negotiation led the EU to examine the basis of its agricultural policy and to clearly identify the collective preferences underlying it (rural development, environmental protection, food safety and animal welfare), to distinguish these from mercantilist interests and to rethink its policy accordingly. At the end of this clarification exercise, it was clear that export subsidies are not necessarily the best way of achieving t he objectives referred to with the least possible disruption for our partners. The question then remains: what are the best instruments for achieving those fundamental social objectives while creating as little disruption as possible for other countries?” h4. The market cannot solve the problem Individual choices by the consumer/contractor are the basis of the market; they cannot provide a framework for dealing with the clash of ‘collective choices’ bq. ” But if there is such a thing as a collective choice, then asserting the supremacy of individual preferences and choices amounts to denying the existence of the entire social edifice and valuing the consumer above the citizen.” h4. WTO should embody a strong and symbolic protection for collective preferences. A specific safeguard is needed to instill confidence on the part of civil society and developing country governments that WTO will respect collective preferences bq. ” We have already said that the way the WTO has dealt with these tensions has been satisfactory by and large but has given rise to certain doubts and questions … In fact, a safeguard clause should be seen as an insurance policy, as the ultimate guarantee that trade integration will not pose a threat to legitimate collective preferences. Once again: that is largely how it works now. But it is not seen in that way. So, it would be useful to have an ultimate, formal guarantee to stand as a symbol. It would take some of the heat out of the debate. It would enable the other instruments to fulfil their function more effectively, and stop the issue from paralysing the entire debate on trade policy. ” h4. A trade safeguard would be embedded in the usual WTO guarantees Transparent, non-discriminatory action, justified by a sufficient enquiry, not more burdensome than necessary, proportional, temporary and compensated (at least partially) bq. ” A safeguard clause would have to be accompanied by some major provisos:”
… [first] it would be necessary to demonstrate that there really was a coherent underlying social demand and that the measure adopted was consistent with that demand (i.e. that the legal response did not misrepresent the social demand); [second] … it would be necessary to demonstrate that the measures adopted did not restrict trade more than other measures capable of satisfying the same demand, and complied with the basic principles underlying the multilateral trading system (transparency, non-discrimination, national treatment and proportionality); and, lastly, the safeguard clause could not be used to sanction customs duties, as conventional safeguard clauses do; that would simply fail to address the issue raised. Two other characteristics of any ‘collective preference’ safeguards: bq. ” The protection granted by the safeguard clause should be temporary … [and] … a compensation mechanism (which would act as a counterweight to the guarantee) would be needed to keep up the pressure on countries that used the safeguard clause (since it would not be free of charge), and test their determination and the strength of the collective preferences underlying the choice expressed”

h4. Beyond WTO A global provision for the safeguarding of ‘collective preferences’ may be necessary By the creation of a framework of ‘global’ collective preferences bq. ” There are a great many areas where this sort of agreement on core values seems necessary. That was the idea behind the International Criminal Court, which came into being despite very different political and legal traditions, and certain notable “absences”. In some cases, it is not possible to preserve national collective preferences unless agreement is reached on a “collective preference”. This is the case, for example, with ethics in relation to life sciences and health care, and related technological and medical applications; without a “new world social contract”, they are meaningless. In this respect, a comparison can be drawn between collective preferences and the globalisation of law: beyond the systematic use of comparative law, the need for supranational law is gradually making itself felt; similarly, collective preferences are starting to be needed, rather than just systematic attempts to reconcile different collective preferences.” [Lamy seems to mean that, for example, a national ban on cloning or stem-cell research is meaningless if these activities can take place elsewhere] bq. “And it is particularly difficult in the absence of a world government. However, with enough political will and resources, progress is possible. Look at how the developing countries won access to patented medicines.” h4. The danger of being misunderstood bq. “Since the issue is a relatively new one and raises certain conceptual difficulties, there is a risk that it may be misunderstood in one way or another and that it will run up against an unholy alliance of opponents: liberals might see it as opening a Pandora’s box of arbitrary barriers; the southern countries as protectionism and euro-centrism in disguise; and environmentalists and human-rights activists might see it as representing an unacceptable status quo because it fails to put pressure on those who infringe social standards and destroy the environment … These ideas are not a call for countries to withdraw to more isolationist positions. In promoting a system of governance that takes account of collective preferences, our aim is to make the most of greater openness while ensuring that it does not threaten to override choices in a way that it could not possibly compensate for. And while countries may feel the need to hang on to their regulatory autonomy, they should take those measures that cause the least disruption to others and, if necessary, pay compensation for that disruption. Beyond that, greater openness should itself improve the way in which collective preferences are expressed, through contact with different preferences and through the creation of common rules.”

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