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 ..’)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 the 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 instil 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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