Just as climate change worsens existing vulnerabilities such as food poverty and water shortages, trade amplifies weaknesses in the social fabric. In regions where people have fallen behind economically due to political neglect and technological change, it is jobs lost in the face of import competition that make the headlines. The appeal of Donald Trump and Brexit had much to do with deep grievances felt by those attributing their social problems to the negative impacts of openness and competition from shores afar.
Yet the costs of doing away with globalisation and our open-trading system could far exceed any benefits. This is why, in 2021, the World Trade Organisation (WTO) will begin its metamorphosis into an organisation that puts social issues at its heart.
Economics 101 posits that trade creates winners and losers, but with all countries gaining overall. The economists were, and still are, right about this. Where they fell short was to assume that redistribution would happen. This now looks like magical thinking of the trickle-down era.
For the open global economy to survive, losers from technological change and trade must be compensatedand empowered to benefit from new market conditions. The alternative will be to give up trade, which is a proven way for countries to earn hard currency that could help reduce poverty or secure critical supplies amid, for example, pandemics.
International institutions are often slow to change and the paralysis at the WTO has been exacerbated by US-China geopolitical strife. But in 2021 we will acknowledge that the benefits of global trade are still not felt where they are needed most. The viability of the multilateral trading system now depends on its ability to reduce pain on the economic margins of advanced economies, and tackle trade’s discontents head-on.
To do this, member states will be asked to evaluate and report on their trade readiness not only from the economic vantage point of trade distortions, but also from the point of view of social dimensions. This will force politicians to be more honest about the gains and losses from trade and also about their distribution. It will also encourage more responsible action regarding supply chains, something we are already seeing in California, for example, with the Transparency in Supply Chains Act, which seeks to reduce modern slavery.
Closing borders would create new winners and losers, just as open markets have. The WTO cannot change this equation, but it can promote a more honest discourse on trade and encourage better use of domestic policies to mitigate social ills. It will also be able to lead in the establishment of a new global fund to address social-justice issues around trade and equity.
Globalisation is in crisis and its future depends on a renegotiation of the social contract. Trade is now a weapon of choice for many politicians, but we know from multiple surveys that younger generations are loath to forego concerns over equality, labour rights, the environment and gender parity. In 2021, the WTO will be key to placing social concerns at the heart of our debates about globalisation.
Bernice Lee is the executive director of the Hoffmann Centre for Sustainable Resource Economy