Sunday, August 03, 2008

Political Economy: Trade In the Old Model

John Cranford has an interesting column-trade in the old model...its worth a read!


Tuesday, July 22, 2008

comparing the US presidential candidates on trade, the optimist on trade

By Susan Aaronson

Published: July 22 2008 11:32 | Last updated: July 22 2008 11:32

Around the world, the press has portrayed the 2008 US presidential election as a choice between freer trader John McCain and “protectionist” Barack Obama. That traditional paradigm has helped the media simplify the differences between the two men. However, such these labels do not accurately describe either candidate. And it does not fully portray the candidate, Mr Obama, who has the more optimistic vision of trade.

The conventional wisdom labels Mr McCain as a freer trader because he supports three bilateral trade agreements negotiated by the Bush administration. Mr Obama, in contrast, has come out forcefully against these agreements. Moreover, because Mr Obama states that he wants to review the effects of existing trade agreements, the press has found him to be unenthusiastic about trade liberalisation. (It is important to note that the US is already conducting a similar review of the World Trade Organisation.) Finally, Mr Obama has support from many US unions, which traditionally have taken a protectionist stance.

In fact, both men are pro-trade; they each support using trade agreements to open markets and create economic efficiencies. But the two have different perspectives regarding what trade agreements should do, what rules these agreements should include, and whom these agreements should directly benefit.

Mr McCain sees trade as a means to the end of economic growth and trade agreements as simply economic instruments. He has said very little about how he would use trade agreements to address negative side effects of globalisation, such as pollution. Nor has he articulated how the US can ensure that the economic growth stimulated by trade is equitable. Beyond suggesting tax breaks for business, he has not explained how the US can ensure that companies remain in the US and continue to hire US workers, rather than rely on technologies to remain productive. To bolster his freer trade bona fides, he has stated: “Only risks to the security of our vital interests or egregious offences to our most cherished political values should disqualify a nation from entering into a free trade agreement with us.” But Mr McCain’s support for freer trade has limits – especially when important constituents are adamant about trade bans. As an example, he supports continued trade sanctions against Cuba and Iran and enhanced targeted sanctions against human rights abusing nations Zimbabwe and Burma.

Mr Obama, in contrast, is a trade enthusiast as well as a trade agreements reformer. He sees trade as a means to the end of enhancing human welfare. Thus, he has stated: “From financiers to factory workers, we all have a stake in each other’s success.” He recognises that Americans cannot succeed unless globalisation promotes greater access to resources and opportunities for more of the world’s people (our future growth markets). Mr Obama also believes that trade agreements are essential tools of global governance. He recognises that public concerns about trade are really concerns about inadequate governance – instances where our trade partners are unwilling or unable to adopt and enforce rules to protect workers, consumers and the environment. Demanding such standards in bilateral agreements will not alter global market conditions or empower all workers. Nonetheless, trade agreements can, if properly written, improve both the supply and demand for good governance at the national and international level.

Mr Obama also has put forth a consistently positive vision of the potential of trade to promote human rights. Many human rights activists think trade with human rights abusing regimes is a form of complicity that can indirectly perpetuate wrongdoing in countries such as Sudan. But Mr Obama has openly questioned this view, asking whether the US has more or less leverage with less commerce. He has argued that cutting off trade may not be the best (or only) strategy to bring democracy to Cuba or Iran.

Like Mr McCain, Mr Obama’s vision of trade has some inconsistencies. He has yet to reconcile his internationalist and co-operative worldview with his promises to Democratic special interests. In addition, he has relied on jargon such as fair trade, without defining such terms in a global context.

Press coverage and public rhetoric about trade lags reality. Clearly when we talk about trade agreements today we are talking about regulations that can affect productivity, investment levels, prices and other important economic factors. But trade agreements can also ensure that more people have access to more resources such as credit, education, safe food and healthcare as well as greater opportunities. While Mr McCain sees trade agreements as a means of increasing the nation’s riches, Mr Obama sees trade agreements as tools that can both empower individuals and help our trade partners improve governance.

Thursday, June 05, 2008


Senators Sherrod Brown and Byron Dorgan (and allied interests) have put forward a new trade bill seeking to remake how trade policy is made and which branch of government makes it. Most observers have described it as the triumph of Democratic protectionist interests. Instead, I think we should take a more nuanced view of this bill. It can be downloaded at

There are provisions that deserve support among trade liberalization proponents. For example, by requiring that GAO investigate the impact of key trade agreements, Members, staff, and negotiators as well as the public could gain needed insights into trade agreements upon America and Americans. GAO is also required to seek public comment and hold public hearings. Given American interdependence, it is in our interest to expanding the circle of those who influence and understandtrade policy.

At the same time, much of the proposals are troubling....Members are unlikely to approve such a bill given that it essentially requires the President to renegotiate (and therefore abrogate) existing agreements. Rather than keeping the Executive Branch on a tight leash, the bill proposes that Congress put him in a straightjacket.

The strategy underlying the bill is out of date and based on a flawed assumption. The sponsors of the bill ignore the reality that many of our differences with nations (over labor rights or food safety as example) stems from inadequate governance. Many of our trade partners lack the will, funds, or expertise to put in place stronger regulation and enforce it. Moreover, the bill does little to help policymakers abroad build a demand for higher labor or food safety standards. The drafters simply presume that demanding US determined standards will yield higher global standards. It puts forth no incentives to U.S. trade partners to put time, money or expertise towards higher standards.

Finally, in its demands that Congress create a committee comprised of the chairs and ranking members of each committee whose jurisdiction is affected by trade agreements to review the president’s plan for renegotiations; restore Congressional oversight of trade agreements, the bill seeks to alter the shared oversight put forth by the founders.

Simply dissing the bill and calling its proponents "protectionists" will do little to gain broader support for trade agreements or trade liberalization. Instead they should acknowledge that public and Member concerns about trade deserve both respect and additional fact-finding. It would be interesting if advocates of expanded trade picked up its call for GAO to develop further information on the impact of existing trade agreements. Proponents of freer trade should want to let the record of trade agreements speak-- in a comparison of jobs lost and gained, of benefits and costs to workers skilled and unskilled, and benefits and costs to American (and global) health, labor, consumers and taxpayers and to our polity.

I welcome your thoughts.

Sunday, March 02, 2008

There is no magic equation to build support for trade liberalization

In his Washington Post column,"Democrats Off course on Trade," at
Sebastian Mallaby argues that if the Democrats could be honest about trade's effect on jobs and link trade policies to wage insurance, all would be well.

I wrote to him that
share your dismay that the Democrats have become more critical of NAFTA and bilateral trade agreements. But I don’t think if we could provide wage and health insurance, we will have enough of a social compact to ensure support for trade liberalization. I think there is an additional problem, which stems from our failure to be honest about what trade agreements do. They no longer govern simply commercial policies; rather they govern many aspects of policies that were once solely the turf of domestic policymakers from procurement policies to health and safety standards. They are governance agreements (really global regulations) that facilitate trade and limit how and when policymakers can use domestic (and commercial policies) to distort trade. Thus, as you know, some Democrats truly believe that these governance agreements need to be linked to capacity building and strategies that bolster the demand abroad for good governance. Others take advantage of this rubric, but are really protectionist. I do not believe either Obama or Clinton are truly protectionist, but they need this groups support and these candidates remain fearful of being honest about what trade agreements do. If they were honest, they could make a better case for how globalization can be regulated so Americans of all class, education, etc.. can benefit.

Susan Ariel Aaronson, Ph.D.

Associate Research Professor,

Graduate School of Business and the Elliott School of International Affairs

George Washington University

Tuesday, January 29, 2008

the major Presidential candidates on trade and human rights

Summary of the implications:
1. All Democrats want to add labor rights and environmental standards to trade agreements, but have not pushed for such standards as central to WTO negotiations, despite labor rights negotiating mandate in TPA 2002. When candidates talk about trade, they are talking about bilaterals.
2. Despite press reports and description, no candidate can be described as “protectionist” populist, or a nationalist. Not one candidate has stated that trade is not in the interest of Americans or that trade agreements don’t benefit Americans by setting shared rules to govern globalization. These terms are too vague and have a political tint that doesn’t fit a world where protectionist tools can be health and safety standards or procurement rules. Instead, all the Democrats (and Huckabee) have stated they want a different approach and language in trade agreements.
3. Republicans with the exception of Huckabee say little about trade and question less. They do not campaign on trade as an issue.
4. No candidate has questioned/strongly criticized distinction between Bush Administration rhetoric on trade and reality of focusing on small country bilaterals (Korea is of course an exception).
5. Obama is the only candidate to consistently support trade as human rights enhancing—but with caveat that trade rules should be remade to include human rights/labor rights/environmental standards.
6. Each candidate touting fair trade has a distinct definition of what is “fair trade.” One man’s fair is another man’s protectionism.
7. All candidates have broken with Bush hope that trade will export democracy and freedom.
8. The Democrats all oppose Colombia, but they have not clarified when it is appropriate to use a trade agreement as an incentive to promote human rights. With the exception of Obama, all the candidates are quick to ban trade in the interest of promoting human rights. But none appear to have truly examined how to use trade to advance human rights at home or abroad.

email if you want the summary chart

Tuesday, December 04, 2007

Rethinking Trade and Human Rights

In today’s Democratic debate, broadcast on NPR, the moderators asked the candidates how they would use trade to influence human rights in China. The candidates all hemmed and hawed.

The truth is policymakers, like scholars, know very little about the relationship between trade and human rights. They don’t know how to use trade to advance human rights abroad or how to ensure that trade doesn’t undermine human rights at home. The interview below (The Carnegie Institute for Ethics and International Affairs) may provide some insights.

Trade Policy for Humanity

Susan Aaronson, Devin T. Stewart

December 4, 2007

Freedom from forced labor is a core labor
right. Photo by Jon Wiley (CC).

Trade has become increasingly contentious as publics in many countries blame the movement of goods across borders for the effects on human rights associated with the advance of globalization in general. Devin Stewart talks with Susan Aaronson about her new book, Trade Imbalance: The Struggle to Weigh Human Rights Concerns in Trade Policymaking," which she coauthored with Jamie Zimmerman.

Susan, some people believe that trade can hurt human rights, while others believe that trade is the key to lifting people out of poverty and empowering political change in society. Are both sides legitimate?

Public concerns about trade policy and trade agreements are entirely legitimate. I share many of these concerns, but I think that many people tend to talk about trade and trade agreements as if they are the same thing. They are not.

The truth is scholars know very little about the effect of trade on human rights. We know that trade can enhance some rights, while undermining others. Moreover, the effect of trade and a particular trade agreement on human rights changes over time, depending on the type of trade and of course the particular human right in question.

Finally, as the Universal Declaration of Human Rights (UDHR) includes some 30 human rights, we need to be very specific about which rights as well as which trade agreement we are talking about. Although it is difficult to assess the effects of trade in general on human rights, we can assess the impact of particular trade agreements on particular human rights.

Can you give an example of how a particular trade agreement might affect human rights?

The World Trade Organization (WTO) is widely perceived as undermining access to affordable medicines and labor rights. But when the Doha Round of trade talks was first launched in 2001, its members amended WTO rules to ensure that they did not undermine access to affordable medicines in the developing world. While many drugs remain too expensive for the poorest citizens in the developing world, WTO rules are not causing or perpetuating that problem.

The real problem is policymakers ignore their international human rights obligations under international law when they make trade policy. In most countries, policymakers develop trade policies as if they are strictly commercial policies. They weigh the interests of their producers and consumers. They may include national security or political concerns, but these officials rarely introduce the interests of the global community into such deliberations.

As a result, although policymakers are well aware of the human rights consequences of some of their trade decisions, they have few incentives to ensure that trade policies advance the 30 human rights outlined under the UDHR. The right to food provides a good example. No country is explicitly tasked to develop trade compromises that promote humankind's right to food. Policymakers develop their trade positions based on the interests of their agricultural producers and consumers—the people who vote for them or fund their campaigns.

With this book, I hope to change their thinking and encourage these officials to weigh the human rights consequences of their trade decisions—not just for their constituents but for humanity. It won't be easy!

Why should readers be interested in this topic?

There are many reasons: We all have a collective responsibility to uphold human rights. Business, the most important agent of globalization, is often caught between market forces, failure of state actors to protect human rights, and unclear WTO rules. When policymakers fail to coordinate trade and human rights, it undermines achievement of both policy goals.

The book uses stories about AIDS, frogs, chocolate, culture, tires, and other topics to provide readers with new insights into this relationship. It also includes the first study of how South Africa, Brazil, the United States, and the European Union make trade policy, coordinate trade and human rights objectives, and resolve conflicts. Finally, we make recommendations to citizens as well as policymakers to help make trade and human rights policies more coherent.

When did these concerns about trade emerge in the policy debate?

As long as men and women have traded, they have wrestled with questions of human rights. Archaeological evidence shows that ancient civilizations traded at great risk to their freedoms. According to economist Peter Temin, the ancients shipped a wide range of goods, from wheat to wine. But these traders often lived in fear. When they engaged in trade they risked being captured, sold as slaves, or enslaved by pirates. Not surprisingly, the ancients had a bifurcated view of trade. The sea could bring contact with strangers who could enhance national prosperity, but these same strangers might threaten the security of the nation and its people.

Years later, during the age of exploration, theologians, scholars, and royal advisors debated whether they had the right to exploit the land and wealth of indigenous populations. The economic historian Douglas Irwin notes that Francisco de Vitoria, one of the "founders of international law," contended that the right to trade is "derived from the law of nations.… Foreigners may carry on trade, provided they do no hurt to citizens."

In the centuries that followed, policymakers around the globe developed a wide range of approaches to govern the behavior of states and citizens at the intersection of trade and human rights. Often one state would act and challenge or inspire others to follow. For example, after England banned the slave trade in 1807, it signed treaties with Portugal, Denmark, and Sweden to supplement its own ban. After the United States banned goods manufactured by convict labor in the Tariff Act of 1890 (section 51), Great Britain, Australia, and Canada adopted similar bans.

Gradually, these national laws inspired international cooperation. The GATT was supposed to be a temporary measure governing commercial policies—it was to be superseded by an International Trade Organization, which did have significant labor rights language. But Congress never voted on the ITO, and when the United States abandoned it, all other nations did as well. The temporary GATT became the global trade agreement until 1994. (see Aaronson, Trade and the American Dream, 1995).

What do you say to those who have argued that trade policy should not be mixed up with any "causes"?

How people are treated when goods and services are produced is and has always been a trade policy issue. It is not a "cause." The problem lies in how we talk about trade and what trade agreements do. Trade agreements don't free trade. Trade agreements regulate how and when nations can apply trade distorting measures, from border measures such as tariffs to domestic policies such as subsidies or health and safety standards. They regulate protectionism. They make it hard for governments to put in place protectionist measures, whether such measures are designed to protect workers, provide safe and affordable medicines, or to advantage local producers.

Thus, the rules of the WTO and other trade agreements make it harder to discriminate against countries and firms that undermine human rights, but governments can still do so as long as they don't distort trade. The GATT did not include explicit human rights language, although it did include a ban on goods made with forced labor, and it includes exceptions and waivers that many nations have used to ban trade with nations that abuse human rights or to protect domestic human rights. Moreover, modern trade agreements (including the U.S. and EU bilateral pacts) include considerable and growing human rights language. Trade agreements such as the WTO include explicit language regarding property rights, due process rights, and political participation regarding regulations related to trade and economic growth.

In recent years economists such as Hernando de Soto have argued that without property rights, the poor have no recorded assets, and without such assets they can not participate in economic development. Interestingly, my recent research finds that the WTO agreement prods governments to protect a surprising mix of human rights, including personal integrity rights such as freedom from torture and arbitrary imprisonment, political participation, due process rights, and property rights. Over time, these rights may spill over into the polity as a whole. But the agreement itself says little about human rights, and there are no human rights criteria for membership in the 151-member WTO. Burma can remain a member in good standing of this international trade agreement despite its horrible human rights record. Moreover, as some rights are enhanced through trade, others such as labor rights can be undermined.

You spend a chapter writing about the conflicted approach toward trade and human rights in the United States. You argue that U.S. policymakers don't agree with one another on which rights should be protected, and that U.S. policymakers don't behave like their counterparts overseas. How do you see U.S. trade policy playing out in the near future? Will we see a new trade consensus?

Trade is increasingly contentious in the United States. I think policymakers and business leaders bear a huge part of the blame for the failure to communicate the difference between trade and trade agreements, as well as the benefits of trade agreements. The public is protrade, but frightened by trade agreements.

Moreover, this administration used a lot of its political capital on bilateral trade agreements, ignoring and undermining the WTO. I hope that the next U.S. president will change how we talk about trade and work harder to build a consensus between Congress and the Executive, which share authority for trade policymaking.

I also hope they do a better job weighing the human rights implications of their trade decisions. The United States tends to rely on sanctions and bullying to change human rights policies abroad. Sanctions and reduced trade flows are unlikely to help citizens abroad demand human rights. The United States has become less credible as a role model given its own less-than-stellar human rights record of late. Finally, although the United States provides some capacity building assistance, much of that has been cut in recent years.

Let me give you an example of how the United States acts at the intersection of trade and human rights: The United States has just put in place enhanced sanctions against Burma. I'm sure it made policymakers feel good that they were doing "something." But policymakers have not examined whether trade policy is the best tool to achieve human rights objectives or what human rights or whose human rights might be affected by changes to trade. Our officials should ask: Will the United States have more or less leverage with less commerce? Will more people be better off with less trade?

Wednesday, September 12, 2007

Trade Imbalance : Colombia as a Case Study.

Not a day goes by that policymakers don't weigh the human rights impact of their trade decisions. As former President Clinton noted, "our interdependence requires us to find ways to meet the challenges of advancing our values." Congress is about to review a bilateral free trade agreement with Colombia. They should ask whether or not this trade agreement will advance human rights and bring greater policymaker attention as to how that nation can invest in its people, advance its economy and protect its peoples' rights to political participation, freedom of association, and right to work. We found empirical and anecdotal evidence that trade agreements, can, over time, prod policymakers to do a better job of meeting their human rights obligations..... Moreover, trade can be a significant incentive to policymakers to change their behavior. It will be interesting to see how this debate plays out, and perhaps the examples in my new book-cowritten with Jamie Zimmerman, Trade Imbalance, will influence that same debate.