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The ratification of CETA and what it means for trade

Tags: free trade TTIP CETA Jobs Growth

For advocates of free trade everywhere, the ratification of the EU-Canada Comprehensive Economic Trade Agreement (CETA) after eleventh hour objections from Wallonia came as a relief.

The recent developments around CETA also tell a troubling story about the rise in opposition to free trade, and how we might go about addressing them. It’s widely acknowledged that free markets generate many benefits including overall job creation, continued innovation, reductions in poverty, savings to consumers and that, generally speaking, trading nations with close ties will also tend to be nations that will not war with each other.

This is to tell an incomplete story though. It is also indisputable that free trade - besides winners - also creates losers. This is at the heart of the thinking for many economic conservatives, and certainly at the front of the minds of the Wallonian politicians that voted to not ratify CETA previously.

The Minister-President of Wallonia Paul Magnette outlined the usual concerns: concerns over investor state dispute settlement (ISDS) and the disputes around regulatory harmonization between North American countries and the European Union. It would not be worth going back over these.

The really telling part of what Mr Magnette said is the concerns that he felt were posed to some of Wallonia’s farmers and working class by CETA - and this, for many, gets to the heart of their opposition.

What, as free trade advocates we need to face up to is, if besides winners free trade also creates losers, how do we deal with that? Turkeys will never vote for Christmas - and from a rationally self-interested point-of-view, maybe rightly so - but if we want to create an open world, we need to engage with this. We cannot expect those who lose out from free trade to cheer on free trade while businesses abroad are able to undercut them and price them out of existence.

The inability to talk to these new concerns is part of the reason for the death and pushback against many Social Democratic parties all across Europe. With new questions that have arisen out of the global world order, the losers it has created are seeking answers from nationalists.

Given that we have seen these objections many times, and we can be sure that the USA can drive a much harder bargain than Canada, we need to be ready to answer the following questions when it comes to the negotiations on TTIP, and even as concerns FTA negotiations with other major third-country trade partners.

  1. What certainties are there for workers in increasingly flexible markets?
  2. How can governments ensure that adequate national level policies (education, industrial and employment) are put in place that help those potentially disadvantaged by the entry into force of FTAs?

Whilst it seems, in the case of Wallonia at least, EU support programs - like for instance the EU’s Common Agricultural Policy (CAP) - remain admissible for instance to continue to provide those farms and factories an advantage relative to their Canadian competitors, but as trade deals become more ambitious and more multi-sector, these answers will not be sufficient.

Here, as trade becomes more global, domestically we have a crossroads - do we start to make the argument that job insecurity is a price worth paying, or do we start using state power as an active response to restore confidence in the benefits of trade liberalisation?

As someone who considers himself a liberal and a social democrat, this poses some uncomfortable questions but ones we must all ask ourselves.

 

Please note that the views of our guest bloggers do not necessarily reflect the views or position of the Alliance for Responsible Commerce and ARC.trade.

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