Ensuring Continued Support for the Rules-Based Multilateral Trading System: The Need for a Public–Private Approach

Ensuring Continued Support for the Rules-Based Multilateral Trading System: The Need for a... Abstract The stability and resilience of intergovernmental and supranational institutions is increasingly being tested. The constraints that the WTO Agreement places on executive organs in its Members are being questioned in academia and by politicians. Reform of institutional aspects of the WTO’s dispute settlement process is coupled to the re-appointment of Appellate Body Members. These are interesting times for the rules-based multilateral trading system, to say the least. This think piece raises more questions than it can possibly answer. Yet, a central element that runs as a common thread through this contribution is the question whether trade liberalization, free movement of capital, and the resulting facilitation and emergence of GVCs have resulted in an inability of WTO Members to address domestic problems such as unemployment among workers in the manufacturing industry. Technological innovations such as automation and digitalization have equally contributed to a shift in the labour market from the manufacturing sector to other sectors. This raises questions as to the most appropriate and effective way to address the negative aspects of globalization and to ensure that the support for the rules-based multilateral trading system is not eroded. This contribution addresses the current criticism of the negative side effects of globalization and examines proposals at the bilateral level that are aimed at “conditionalizing” the liberalisation of trade. Thereafter it advocates a “public-private” approach at the domestic level which involves all stakeholders, as it is essential that those “left-behind” by globalisation are actively engaged with. I. INTRODUCTION The stability and resilience of intergovernmental and supranational institutions is increasingly being tested. ‘Brexit’ represents a relatively rare example of withdrawal from a customs union.1 Trade law-making appears to have shifted from the multilateral to the bilateral or regional level. The constraints that the Marrakesh Agreement Establishing the World Trade Organization (‘the WTO Agreement’) places on executive organs in its Members are being questioned in academia and by politicians. Reform of institutional aspects of the WTO’s dispute settlement process is coupled to the re-appointment of Appellate Body Members. These are interesting times for the rules-based multilateral trading system, to say the least. This contribution is a think piece that raises more questions than it can possibly answer. Yet, a central element that runs as a common thread through this contribution is the question whether trade liberalization, free movement of capital, and the resulting facilitation and emergence of Global Value Chains (‘GVCs’) have resulted in an inability of WTO Members to address domestic problems such as unemployment among workers in the manufacturing industry. Similarly, international cooperation in respect of taxation has historically been relatively limited, although recent efforts such as the Organization for Economic Cooperation and Development (OECD)/Group of Twenty (G20) initiative on Base Erosion and Profit Shifting (BEPS) and renewed emphasis on the importance of international rules on taxation aim to address this.2 Technological innovations such as automation and digitalization have inevitably equally contributed to a shift in the labour market from the manufacturing sector to other sectors. Yet, political discontent has been mainly directed at the rules-based multilateral trading system.3 Is the system just a convenient target, or should reform efforts also include considerations on whether, and if so how, to make trade liberalization conditional upon adherence to international norms aimed at protecting workers? Is trade conditionality the answer, or could it also be a guise for domestic inaction? Ultimately, the WTO was created to facilitate the liberalization of international trade in the belief that this would increase global welfare. Undoubtedly, it has contributed successfully to this objective.4 However, the (un)intended consequences of liberalized international trade are felt domestically. Manufacturing jobs in sectors that are prone to outsourcing and automation have been lost and not all workers have been able to make the transition to a high-skilled and services driven economy.5 The WTO, the rules-based multilateral trading system, the European Union (EU), as well as (proposed) free trade agreements, such as the North American Free Trade Agreement (NAFTA), the EU–Canada Comprehensive Economic and Trade Agreement (CETA) and the EU–US Transatlantic Trade and Investment Partnership (TTIP), have become a target of public discontent.6 Moreover, in the European Union (EU), trade unions have expressed strong concerns about both TTIP and Investor–State Dispute Settlement (ISDS).7 This raises questions as to the most appropriate and effective way to address the negative aspects of globalization and ensuring that the support for the rules-based multilateral trading system is not eroded. Arguably, two approaches to remedy the current situation can be identified. The first is the introduction of even more rules at the international level, for example by ‘conditionalizing’ trade liberalization. These additional rules would complement existing rules, which are broadly aimed at preventing governments from engaging in discriminatory behaviour towards imported products and services. The second approach is to advocate more pro-active skills-development and education policies at the national level. These domestic approaches offer an opportunity for effective policy implementation. Close collaboration between governments and private entities is essential in this regard. This article looks deeper into this second approach and provides an overview of new initiatives and ideas aimed at harnessing support for an open and rules-based trading system. It does not purport to provide a ‘silver bullet’ or a ‘cure all’ solution. The contribution observes, discusses and poses questions. It is based on the idea that, generally speaking, in order to safeguard the system against potentially destructive and fatal criticism, the beneficiaries of the multilateral trading system, such as companies benefiting from GVCs, should join the WTO and the governments of its Members in a concerted effort to explain the benefits of the system to citizens, whether in their role of employee or consumer. In other words, a ‘public-private’ approach that involves all stakeholders. A better understanding of the role of the multilateral trading system in maintaining peaceful relations between countries is key to ensuring future support. These efforts should however not be limited to advocating and communicating the virtues of free trade as such. In order to ensure that public support for the rules-based multilateral trading system is maintained, it is essential that those ‘left-behind’ by globalization are actively engaged with. Public institutions and many private actors—especially those benefiting from GVCs—share a common interest in defending and bolstering the system. A collaborative approach is required to restore and ensure continued support for it. This contribution argues that efforts at the domestic level are likely to have the most immediate and direct impact. In this regard, WTO Members should adopt domestic policies that incentivize business to participate in the aforementioned skills development, training and education schemes. The contribution proceeds in three subsections. After this general introduction, Section II addresses the current criticism of what can be broadly described as the negative side effects of globalization. It discusses examples of the expression of that discontent, the changed nature of international trade as a complicating factor to adopt general labour market policies, and the role of the WTO in the ‘trade and labour’ debate. Section III explores proposals at the bilateral level that are aimed at ‘conditionalizing’ the liberalization of trade and, indeed, ensuring better enforcement of such conditionalization. Thereafter Section IV discusses opportunities for action at the domestic level and focuses on joint public–private initiatives that could bolster support for the trading system in the long run, after which conclusions are presented in Section V. II. DISCONTENT WITH … WHAT? GLOBALIZATION? TRADE? TRADE AGREEMENTS? JOB-LOSSES? MIGRATION? A LACK OF INFLUENCE? A. The year of discontent The year 2016 may go down in history as the year in which large sections of the population of developed countries took the opportunity to express their concerns with the negative effects of globalization. However, arguably populism has been on the rise since 2000.8 According to Rodrik (2017), this is unsurprising if one considers the parallelism in the trends between globalization and populism. The economic argument is that the reduction of tariff barriers generally leads to an increase in welfare. Rodrik however submits that ‘the losses incurred by adversely affected groups per dollar of efficiency gain are higher the lower the barrier that is removed’.9 In citing Rosanvallon (2016) he quotes that ‘inequality is felt most acutely when citizens believe that the rules apply differently to different people’.10 However, one could go a step further and argue that citizens will make use of their democratic rights to cast a vote for populist parties when they believe that they have little to no influence over the rule-making process in the first place. Indeed, a vote for what are often considered ‘populist’ ideas is not necessarily a vote against the idea of free trade or the acceptance of a rules-based multilateral trading system. It may very well also reflect other concerns, such as those related to migration, increasing uncertainty in the labour market or general dissatisfaction with government policy, or, a perceived inability of influencing politics through established democratic processes. In other words, fears of a loss of ‘national sovereignty’, whether warranted or not, may equally explain votes for parties or decisions that oppose (further and deeper) economic integration between states. It is important to bear this in mind when assessing ways in which to bolster support for the rules-based multilateral trading system, especially in times where states are exiting deep economic integration agreements (‘Brexit’) or have threatened to do so (‘NAFTA’). Elsewhere in this issue, Rachel Brewster examines the reasons of exiting economic agreements by states. Rodrik’s trilemma posits that democracy, national sovereignty, and global economic integration are mutually incompatible as only two of the three can be combined at any given time, while it is impossible to have all three simultaneously and in full.11 Indeed, ultimately a trade-off between these three concepts seems inevitable. However, that there is a trade-off does not automatically mean that current global rules as provided by the WTO and free trade agreements such as NAFTA constrain the ability of governments to pursue labour market policies. Indeed, as Macklem already observed, ‘international labour standards, international trade law, and the emergence of corporate codes provide international legal authority for states to enact laws conditioning market access on respect for labour rights.12 Moreover, there is nothing that prohibits WTO Members or indeed parties to any Free Trade Agreement (FTA), from pursuing policies that are aimed at providing their citizens with the skills and competences that are necessary to participate in an increasingly globalized and digitalized economy. Nevertheless, it needs to be acknowledged that although global or supranational rules may not necessarily constrain the regulatory autonomy of states that are bound by them, they may serve as a facilitator of economic activity that leads to the relocation of manufacturing activities and hence to job losses in the manufacturing sector in certain countries. In fact, summarily dismissing the broader underlying and systemic concerns that are apparently prevalent among large parts of the population of developed countries risks further alienating those sections of society that have been hardest hit by the unintended consequences of globalization. These concerns are not limited to alleged or perceived ‘unfair’ competition from foreign workers but arguably reflect a disconnect between those who have used their democratic right to vote in order to express their discontent and those who are arguably ‘part of a global elite’. That the issues are interlinked has been recognized for a long time. In 2008, for instance, a Special Seminar of the Trade Committee organized by the Organisation for Economic Co-operation and Development (OECD) concluded that ‘building a strong WTO system for the future’ ‘would require stricter policy coherence within and between governments’ and would ‘need to take into account the significant increase in recent years of inequality in wealth distribution’.13 In this sense, the aim expressed 10 years ago of addressing ‘the problems of very poor countries, and of very disadvantaged parts of society, so that the benefits of globalisation can be more widely shared’, may not have been sufficiently achieved.14 However, assessing these underlying and systemic concerns requires an acknowledgement of the changed nature of international trade as a result of developments that are not solely driven by political choices and preferences. B. The impact of the emergence of global value chains on manufacturing In focusing on the relationship between trade and employment, or labour, it is important to remember some underlying principles as to what import tariffs in particular set out to do. Traditionally, an import tariff is understood as a levy that is due upon the act of importing a good into the territory of a State or customs territory. Indeed, ‘[t]ariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments’.15 In this sense, a tariff is seen as a means to shield domestic production from foreign competition and the application of such measures is older than the multilateral trading system itself. What the definition of a ‘tariff’ does not reveal, however, is what it is precisely that is being ‘taxed’. In order to determine whether a tariff is applicable, and if so, which tariff, ‘rules of origin’ have been created to determine the origin of goods.16 Although rules of origin (ROO) are extremely diverse, there are clear commonalities. The requirement of substantial transformation is universally recognized. However, other agreements and rules may provide for a so called change of tariff classification criterion, whereas others use the ad valorem percentage criterion. Another possibility is the use of the criterion of manufacturing or processing operation. What most of these criteria have in common is that their focus on the final stage of the production process. That is, they confer origin typically on the country of assembly or manufacturing. Therefore it is not difficult to appreciate that an import tariff essentially serves as a tax on foreign manufacturing that is levied on upon the importation of a particular product. Equally, conferring preferential origin upon incorporating a high percentage of regional (or even local) value added content serves as an incentive not to outsource manufacturing. However, it has been observed that in the current day and age of GVCs it is questionable whether determining the origin of a product based on the location of manufacturing or assembly is an appropriate approach.17 Numerous studies have provided evidence of the fact that manufacturing or assembly only accounts for 10–20% of the total value added to any given product.18 Whether it is appropriate to accord origin based on the manufacturing or assembly location is therefore highly questionable. Indeed, ‘[c]urrent ROO date back to the 1950s and determine origin predominantly on the (presumably single) location of manufacturing and assembly. But as the WTO describes it, products are no longer made in a single country, but rather are ‘Made in the World’. Classifying final goods in a world characterized by Global Value Chains (GVCs) proves complicated, as manufacturing and processing occur across vertically integrated companies spanning the globe and intermediate goods for one product might be a final good sold by a subsidiary. Moreover, the steps of R&D, design, development, and marketing increase a product’s value such that as little as 10% of its total value might be added in the country where the ‘end product’ is manufactured’.19 The importance of rules of origin and value added content also becomes apparent from the current NAFTA renegotiations in which the regional value added content requirements are a crucial point of discussion.20 Indeed, efforts at raising regional value content can be seen as an attempt to repatriate manufacturing. That means, however, in essence, relocating a part of the production process that does not add the largest degree of value to a product. Although this may, in theory, lead to an increase of jobs in the manufacturing industry, it is questionable whether these jobs are not exactly the type of jobs that are also most prone to automation. Considering that current ROO—and their underlying premise that the origin of a product is determined by its manufacturing—are almost 70 years old, one can validly ask the question whether it is not time for a re-think. This thinking is reflected, for example, in the ‘Mode-5 initiative’ as developed by Cernat. Indeed, the Mode-5 approach sees the current rules applicable to mode 5 services as an ‘export tax’ on services.21 Antimiani and Cernat observe that: ‘tariff cuts and regulatory cost reductions for goods have a direct positive impact on services trade. However, such benefits can be reaped only if current rules affecting mode 5 services are made more coherent and in line with global value chains. Products are designed in one country, software is produced in another, and assembly may be carried out in a different continent, with engineering and technological solutions belonging to firms registered in multiple countries. In this process mode 5 services are subject to both GATS and GATT-related rules that are not fully adapted to the way in which design, R&D, software, and other business services are embedded in goods traded internationally’.22 All efforts aimed at ensuring continued support for the rules-based multilateral trading system require the explicit recognition that the underlying realities of trade have changed fundamentally over the past 70 years.23 This also means that it is time to think critically about what it is that should be taxed in an international context. Does it make sense to impose a tariff on the full value of a product based on foreign manufacturing operations that account for less than 15% of that value in some instances? Would it make more sense to focus on the value added that serves as the input of so many of today’s products? And indeed, as observed by Cernat, ‘how should GATT and GATS rules operate when it comes to 21st century technology-intensive manufacturing sectors?’24 Thus, acknowledging that what is being taxed is not necessarily the aspect of a production stage that contributes the largest amount of value to a product and that the nature of international trade has changed—and is still changing—immensely as compared to the GATT-era can contribute to a more accurate understanding of what the rules-based multilateral trading system does, and is supposed to do. The fact that trade statistics are based on manufacturing may give rise to the idea that some countries are somehow ‘losing’ at the game of trade. However, considering that a significant part of the value of a finished product being exported is often created domestically in these ‘losing’ countries, modern day trade statistics arguably do not paint a realistic picture. In fact, it has been argued that trade statistics are skewed since the relative share of raw materials, R&D, intellectual property, and marketing are not factored into the total value of the product.25 In thinking about how the rules-based multilateral trading system can be improved in order to ensure that support for the system is ensured, it is therefore essential to also consider the changing nature of international trade. Although trade is an enabler of GVCs, in and of itself it is not the cause of a reduction in manufacturing jobs in any given WTO Member. Jobs are lost as a result of other developments too. Finally, trade also results in job creation. Indeed, ‘[t]rade triggers a reallocation of resources that changes the demand for labor and skills and can affect wages, even in the absence of adjustment costs’.26 Therefore, ultimately, the question is one of ensuring that the skills-set of workers meets the requirements of business. C. #InclusiveTrade #TradeWorks: WTO efforts to address labour issues In an effort to substantially reduce tariffs and other barriers to trade, and to eliminate discrimination in international trade relations, WTO Members agreed to restrict their sovereignty as States and customs territories, by committing themselves to adhere to the rules and obligations laid down in the WTO Agreement. In this regard it is important to remember that the objectives of global economic integration and trade liberalization were never the sole objectives of the WTO. Indeed, the well-known first recital of the preamble to the WTO Agreement provides that the Parties to this Agreement, ‘Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development’.27 Equally important is the fact that in the preamble, the WTO Members explicitly recognize that: ‘there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development’.28 These recitals follows the inclusion of Article 7.1 in the Havana Charter, concluded by the United Nations Conference on Trade and Employment, which already addressed the issue of fair labour standards in the following manner: ‘The Members recognize that measures relating to employment must take fully into account the rights of workers under inter-governmental declarations, conventions and agreements. They recognize that all countries have a common interest in the achievement and maintenance of fair labour standards related to productivity, and thus in the improvement of wages and working conditions as productivity may permit. The Members recognize that unfair labour conditions, particularly in production for export, create difficulties in international trade, and, accordingly, each Member shall take whatever action may be appropriate and feasible to eliminate such conditions within its territory.’ The WTO has clearly recognized the importance of addressing the relationship between trade and labour-related issues. In 2017 alone, the World Trade Report entitled ‘Trade, Technology, and Jobs’, a joint report with the International Labour Organization (ILO) entitled ‘Investing in Skills for Inclusive Trade’, and a joint report with the International Monetary Fund (IMF) entitled ‘Making Trade an Engine of Growth for All – The Case for Trade and for Policies to Facilitate Adjustment’ focused on linkages between trade and labour.29 Key ‘take-aways’ from all three reports are that welfare gains from trade are considerably larger than the costs, that trade opening need not produce net ‘losers’, if individuals are compensated, and that skills development is crucial. Therefore, there is certainly no lack of awareness of ensuring that the initial objective of ensuring full employment is achieved and that trade is not the end in itself, but the means to progress for mankind in a much broader sense. Moreover, these approaches have in common that they focus at the domestic level. Nevertheless, at the same time, and especially in the context of RTAs, there are proposals to further ‘conditionalize’ the preferential liberalization of trade upon adherence to international norms that aim at enhancing labour rights. Moreover, there are also calls for more stringent enforcement of such conditionality. Section III examines some of these proposals and developments. III. MORE GLOBALIZATION AND RULES AT THE INTERNATIONAL LEVEL? OR MORE ACTION AT THE NATIONAL LEVEL? Taking into account the diverging motivations for ‘populist’ votes in different countries across the globe and the way in which the nature of international trade has changed over the past 30–40 years, the question becomes whether it is desirable to equip the multilateral trading system itself with the tools to address the negative consequences of globalization or whether the solution to these problems should initially be sought at the domestic level. This section explores the differing nature of international norms aimed at trade liberalization as traditionally contained in the WTO Agreement and RTAs, and international norms aimed at the protection of labour rights. Subsequently, this section addresses a number of recent proposals that have been made at the international level and which are aimed at ensuring, broadly speaking, that trade is more ‘fair’. Thereafter it discusses several initiatives and proposals that are proposed at the domestic level in order to ensure that workers are ‘better protected’ from ‘unfair’ foreign competition. A. Different types of international norms The rights and obligations arising from the WTO Agreement are aimed at ensuring that trade is not unnecessarily impeded or restricted by domestic measures that may have (un)intended protectionist effects. Therefore, international trade is liberalized by placing constraints on domestic regulation, while permitting the taxation of foreign manufacturing by having a system that is based on bound levels of tariff commitments. The rules-based multilateral trading system thus serves as a framework for controlled liberalization. International norms aimed at the protection of labour and workers rights take on a different form. The norms adopted by the ILO come in the form of international labour standards. These are legal instruments drawn up by the ILO’s constituents (governments, employers, and workers) and they set out basic principles and rights at work. They are either conventions, which are legally binding international treaties that may be ratified by member states, or recommendations, which serve as non-binding guidelines. The eight fundamental conventions of the ILO lay down norms on, inter alia, freedom of association, the right to organize and collective bargaining and the abolition of forced labour. Yet, there is a clear difference between the norms that relate to the liberalization of trade, and those are aimed at the protection of other societal interests. Whereas the rules on trade liberalization can be enforced through the dispute settlement system as provided by the WTO, there is no equally strong mechanism provided for to ensure that signatories live up to their obligations under ILO conventions. This difference in enforceability has led to new proposals that are aimed at further deepening the conditionality between trade liberalization and adherence to social (and also environmental) norms. B. Enforcement of international norms through ‘trade-conditionality’ in FTAs Using trade as an instrument to achieve other societal objectives is nothing new and this development has been subject of academic scrutiny.30 Several large trading blocs have made (preferential) trade liberalization conditional upon adherence to international norms such as ILO conventions. Through this conditionalization, preference granting countries seek to achieve extraterritorial policy change in exporting countries. The argument is often that a level-playing field is required in order to ensure that domestic industries do not suffer competition from imports that are cheaper as a result of a lack of labour rights or a disregard for environmental norms.31 These linkages between trade and other societal objectives are, for example, reflected in the trade policy of, i.e. the European Union (EU). In 2015 the European Commission presented its so-called “Trade for All” strategy which according to EU Trade Commissioner Cecilia Malmström reflects the idea that: ‘Europeans know that trade can deliver jobs, growth and investment for consumers, workers and small companies. And they want more of those results. But they don't want to compromise on core principles like human rights, sustainable development around the world or high quality regulation and public services at home’. It has been posited that the strategy can be seen as an adjustment of trade policy in response to the public debate on high profile trade negotiations such as TTIP and CETA. Indeed: ‘the expression “fair trade” was now used not only to indicate its fairness towards workers in third countries or towards our own consumers, but also and especially to refer to fairness towards producers and workers in our own countries. In short, trade should be fair to the national interest’.32 The aforementioned EU trade for all strategy requires EU ‘to adopt a responsible trade and investment policy as an instrument for the implementation of the Sustainable Development Goals (SDGs) contributing to boosting jobs, sustainable growth and investment in Europe and outside’.33 Thereto, the EU’s approach to Free Trade Agreements (FTAs) includes binding ‘Trade and Sustainable Development’ provisions in an FTA which are subject to a dispute settlement mechanism. These provisions include reference to environmental and social norms, such as conventions adopted under the auspices of the ILO. However, inclusion of provisions on labour and environmental norms in FTAs and subjecting them to dispute settlement provisions is arguably not enough. Indeed, Meyer (2017) argues that ‘governments selectively enforce trade laws in ways that undermine environmental and labor interests’.34 He argues that a ‘multilateral process to coordinate enforcement actions would go a long way towards rebuilding the trade regime’s legitimacy’.35 In this regard, reference should be made to the Final Report of the Arbitral Panel in the matter of Guatemala—Issues Relating to the Obligations Under Article 16.2.1(a) of the Dominican Republic—Central America—United States Free Trade Agreement (CAFTA-DR).36 In 2010 the US had launched a complaint under the Agreement, following labour union complaints made two years prior. It was alleged that by the treatment of Guatemalan workers violated their labour rights and put American workers at an unfair competitive disadvantage. Although the Panel found that the US had established that ‘at eight worksites and with respect to 74 workers Guatemala failed to effectively enforce its labor laws by failing to secure compliance with court orders”, it had failed to establish that ‘these instances constitute a course of inaction that was in a manner affecting trade’.37 Garcia and Meyer have made the argument that a financial transaction tax (‘FTT) should be introduced in the NAFTA’ and in other future free trade agreements FTAs.38 Their proposal includes the introduction of a so-called ‘Economic Development Chapter’ in the FTA that would mandate that ‘states spend a certain amount of money on programs designed to assist those hurt by trade liberalization’ whilst retaining ‘significant flexibility for states in terms of the kinds of programs that would qualify’.39 In order to ensure effective implementation, an international enforcement mechanism would be provided. In their proposal ‘[t]he development obligations should be subject to the same state-to-state enforcement procedures as the rest of a trade agreement, including existing chapters on labor and environmental standards’. Indeed, theirs is a prime example of what they themselves call ‘Internationalizing Domestic Trade Adjustment’. However, there have been numerous studies that question the effectiveness of such Trade Adjustment Assistance programmes (TAA).40 Therefore before including such a far reaching obligation in an FTA and further increasing the linkage between trade liberalization and domestic labour market policies it would be advisable to first examine ways to enhance its effectiveness. Indeed, as one of these studies found, ‘[i]nvesting more in educational or vocational training programs in the disadvantaged areas that currently have few training opportunities may improve the efficacy of the TAA program’.41 Therefore it is suggested that seeking a dialogue and partnership with business at the domestic level may ultimately prove to be an example of low-hanging fruit that could be harvested first. This is not to say that TAA programmes should be rejected completely, rather it means that close collaboration with business is essential in achieving effective outcomes. In this regard the European Globalisation Adjustment Fund (EGF) provides an interesting illustration. It was created in 2006 by the European Union to express ‘solidarity with workers affected by mass redundancies triggered by shifting world trade patterns’.42 The European Commission operates the EGF and has been responsible for approving 134 EGF applications from EU Member States, worth a total of 561.1 million euros and which were aimed to support 122,121 redundant workers.43 The measures implemented by EU Member States with the support of EGF funds include individualized job search assistance, vocational training and upskilling, mentoring, and entrepreneurship promotion and business creation activities. Relatively limited research is available on the effectiveness of the EGF, although Claeys and Sapir have found that there are several ways to improve the programme, notably by decreasing the administrative burden.44 More importantly, it is difficult to assess the EGF’s effectiveness due to a lack of data at the individual level. It is also notable that the EGF does not appear to foresee in a mechanism that enables a better matching of labour supply and demand. In other words, although the EGF allocates funds to Member States, there is no clear incentive to set up a structural dialogue between business, the educational community and policymakers aimed at ensuring that labour supply and demand are more closely aligned in terms of skill-sets. C. Environmental and social norms in trade remedy investigations Further linkages between trade and environmental and social norms can also be seen in the trade remedy field. Whereas initially, the linkage between trade and labour, or trade and sustainable development was made by the inclusion of labour chapters in free trade agreements, there is now a proposal for the amendment of the European Union Basic Anti-Dumping Regulation that includes explicit reference to ‘core ILO and relevant multilateral environmental convention’.45 These references are made in the context of establishing whether there are ‘significant distortions’ in any given market, which would render home market prices unsuitable to serve as ‘normal value’.46 In that regard, if the European Commission were to decide that domestic prices cannot be used as a result of significant distortion, recourse may be had to ‘undistorted prices or benchmarks’, provided that they are obtained from a country ‘with an adequate level of social and environmental protection’.47 In assessing whether significant distortions exist, the European Commission may, inter alia, have regard to ‘wage costs being distorted’.48 Moreover, in the case of anti-dumping investigations on imports originating in countries that are not WTO Members at the point of the initiation of the investigation, normal value shall be determined based on the price or constructed value in an appropriate representative country. In the selection of such an representative country, preference must again be given ‘to countries with an adequate level of social and environmental protection’.49 The idea is to force the internalization of the costs of inadequate social and environmental protection and to prevent trading partners from benefiting from such inadequate protection. Where normal value is to be calculated using an analogue country, such a country must meet these protection standards in order to be eligible. Arguably, this is a means of ensuring that low-wages or lax environmental norms do not result in the ability to sell products below the actual cost of production. The initiatives aimed at ensuring a level-playing field in terms of adherence to labour and environmental norms are however unlikely to ensure continued support for the trading system on their own. In addition, and more critically, other WTO Members may decide to challenge the consistency of the EU’s new anti-dumping methodology with the provisions of the WTO’s Anti-Dumping Agreement.50 Ensuring that they are complemented with an effective approach at the domestic level is therefore crucial. IV. A PUBLIC–PRIVATE APPROACH AT THE DOMESTIC LEVEL Ensuring the continued support for the rules-based multilateral trading system by the domestic constituencies of the states that are part of that system is not a straightforward objective and it is questionable whether trade conditionality alone is capable of delivering the intended outcomes. In light of this consideration, it is essential to assess whether there is scope for ensuring broader support for the system by actively involving those entities that have benefitted from it in the most direct manner possible: businesses. Such involvement should preferably take place at the domestic level and consist of both skills development of workers and a joint effort to explain how the rules-based multilateral trading system enables companies to operate globally. This combined approach is needed as merely improving communication on the benefits of trade will not be sufficient. Simply explaining that the rules-based multilateral trading system enables states to conduct their trade-relations in a manner that is beneficial for everyone is unlikely to convince those who have lost their jobs as a result of off-shoring. Thus, a public-private approach that is aimed at ensuring the effectiveness of active labour market policies by involving business is required. In this regard, this section explores ways in which public and private initiatives can complement each other in a joint effort to support the system. It involves a direct call for action to those companies and businesses that have benefitted directly from the multilateral trading system. That there is an appetite to do so is abundantly clear.51 The challenge is to connect policymakers with business in a manner that leads to long-term partnerships. In this regard it is also important to acknowledge that the influence of traditional labour unions is not as strong as it used to be.52 As a result of the emergence of GVCs and the fragmentation of production processes across the globe, the nature of the skills-set that is required from workers is also changing. The interests of workers are more diverse and are not necessarily reflected by traditional trade unions. Indeed, as has been observed by Owen (2015), ‘hetereogeneity of interests among union members will reduce the ability of labor unions to advocate a single policy position’.53 She calls for attention to the ‘downward pressure on the influence of labor relative to capital’.54 Therefore, in setting-up a public–private approach, it is therefore crucial to devise ways in which the interests of workers are adequately taken into account and that their long-term interests are reflected in the ultimate policy outcome. A. Skills development, education and training It is essential that WTO Members engage in an active and continuous dialogue with business on how to ensure that the skill-set of its citizens matches with the needs of private enterprises that often compete at a global level. Establishing constructive partnerships with those companies that have a positive attitude towards the rules-based multilateral trading system and recognize its benefits may lead to broader support for that system among the public at large. Obviously, countries have different policy priorities and there are no one-size-fits-all solutions. Nevertheless, through collective-learning and experience-sharing the most effective approaches may be identified. Indeed, the role that educational or vocational programmes can play should not be underestimated. That the business community, at least in Europe, is interested in such a public–private approach is evidenced by initiatives that have been implemented by business association such as AmCham EU, the American Chamber of Commerce to the European Union. It is currently in the process of setting up a ‘Future of Work, Education and Skills Task Force’ which will ‘bring industry experiences, expectations and recommendations directly to policy-makers and other stakeholders in the EU and the Member States’.55 Further anecdotal evidence illustrates that companies are willing to engage with governments in education.56 This requires an active role of governments that revisit education policies as well as labour market policies. However, as is often the case, there is a disconnect between policymakers and the private sector. The WTO is well-suited to initiate this dialogue at the global level, but for effective policy implementation it will be up to its Members to develop policies that take into account the input of business.57 Importantly, the cooperation between the WTO and (small)-business is already taking place in the field of e-commerce where MC11 saw the launch of a WTO—World Economic Forum—Electronic World Trade Platform (eWTP) initiative aimed at establishing a ‘public-private dialogue on e-commerce’.58 Moreover, MC11 also saw the first Business Forum being organized on the sidelines of the Ministerial Conference in order to promote ‘open and constructive dialogue on core issues for the multilateral trading system’ between governments and private sector leaders. Establishing strong ties between programmes and the private sector may also alleviate the concern of workers training for jobs that do not exist.59 The initiatives employed at MC11 may serve as the starting point but will need to be accompanied by a dialogue at the domestic level of WTO Members. Needless to say, the importance of obtaining an education is broader than the narrow objective of training for a job and also includes learning to think in order to become a citizen capable of engaging in societal debate. However, the gap between the demand and supply side of the labour market is real and requires action. B. Communication on the benefits of trade Several policy initiatives have been adopted in order to better ‘communicate’ or ‘explain’ the benefits of trade. In fact, business has played an active role in supporting the rules-based system. In the run-up to the 5th WTO Ministerial Conference in Cancún in 2003, the International Chamber of Commerce (ICC) issued a policy statement urging ‘governments to communicate more effectively to the public at large the benefits of trade liberalization for economic growth and development so as to build more solid support for the rules-based multilateral trading system and progressive trade liberalization’.60 Moreover, the ICC indicated that it would ‘continue to contribute the business voice to this effort’.61 Although it is undoubtedly true that, especially in an EU context, policy makers realized too late that the opponents of free trade agreements had managed to capture the narrative, assuming that by merely ‘communicating better’ the concerns of affected citizens will be taken away seems naive. Having said that, the rules-based multilateral trading system would benefit from all the support it can get. In that regard any efforts of business-executives of companies that benefit from the existence of the system should be welcomed and stimulated. V. CONCLUSION Globalization, automation and digitalization are real. Combined, they result in changes in the global labour market that place a heavy burden on those citizens that lack the skills to meet current demands. Those left behind by globalization have used their democratic rights to express their discontent. In making use of their right to vote, they have expressed their discontent with the current situation. Even though one should not generalize as to the reasons for that discontent, trade undoubtedly plays a role in it. The nature of international trade has changed considerably and the system has arguably not kept track. Indeed, one can validly ask the question whether the correct parts of the production process are taxed and whether the trade statistics that are typically used reflect economic realities. However, the political response to current concerns has sometimes targeted the rules-based multilateral trading system that has arguably contributed to a significant reduction of global poverty and an increase in global welfare. One of the underlying assumptions of those criticizing the system is that the constraints imposed on domestic regulation are such that they prevent domestic labour-market policy making. This assumption is incorrect. The real question is rather whether responses to these concerns should be focused at the international level and should involve the conditionalization of trade liberalization and market access on adherence to international labour standards, or whether WTO Members are better served by adopting active labour market policies at the domestic level. This think piece has addressed several initiatives that aim at addressing the aforementioned discontent. It is submitted here that constraints imposed on domestic regulation by international economic law are not of a nature that prevents governments in Western societies from pursuing policies aimed at investing in those groups that are ‘left-behind’ by globalization. Ultimately, a joined and collaborative approach between public and private actors at the domestic level is more likely to ensure that domestic constituencies will continue to support the rules-based multilateral trading system. Thereto it is essential that governments adopt policies and mechanisms that incentivize business to actively participate in programmes aimed at skills development, training and education of their employees. Combined with educational programmes that include explanation as to the operation of the rules-based multilateral trading system and its role within global economic governance, this could contribute to broader support for the system in the long-run. Even though the benefits of such an approach may only be reaped in the long term, and even though it may sound ambitious, there is a clear desire on the part of business operating internationally to ensure that the multilateral trading system that has enabled them to flourish maintains support from the citizens of the countries that are the Members of the system. The WTO could play a role by continuing the dialogue that it has already set-up, but ultimately it will depend on the willingness of Members to engage with business and involve it in domestic policies in order to ensure that education systems equip their citizens with the skills that are needed in a world that is globalized and increasingly automatized and digitalized. In addition, the current situation further illustrates the importance of carefully analysing the nature of 21st century trade as well as the assumptions that underpin it, and the rules that govern it. Footnotes 1 Venezuela withdrew from the Andean Community in 2006, in response to the signing of Free Trade Agreements by other members of the Andean Community, Colombia and Peru, with the United States. Greenland withdrew from the European Economic Community in 1985, when it became part of the ‘Overseas countries and territories’ (OCTs). See Ali M. El-Agraa and Anthony J. Jones, ‘Macroeconomics of Regional Integration: Withdrawal from a Customs Union’, 23 (1) Journal of Economic Integration (2008), 75–90. 2 OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing, 44p. Available at https://www.oecd.org/ctp/BEPSActionPlan.pdf (visited 29 March 2018). 3 In the view of the author, RTAs as foreseen by the regional economic integration exceptions as provided for by Article XXIV of the General Agreement on Tariffs and Trade 1994 (‘GATT 1994’) and Article V of the General Agreement on Trade in Services (GATS) also belong to the rules-based multilateral trading system as they are inherently part of that system. Even though these RTAs or plurilateral agreements are not ‘multilateral’ themselves, they exist within the broader multilateral framework that is rules-based. Admittedly, the question whether RTAs may possibly serve as ‘termites’ in the trading system is a valid one. Nevertheless, the author considers that, to this date, RTAs should be seen as part of the rules-based multilateral trading system. 4 Kym Anderson, ‘Contributions of the GATT/WTO to Global Economic Welfare: Empirical Evidence’, 30 (1) Journal of Economic Surveys (2016), 56–92, at 82–83. 5 Giuseppe Berlingieri, ‘Outsourcing and the Rise in Services’, LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, Centre for Economic Performance (CE) Discussion Paper No 1199, at 35. 6 See for an illustration, Ian Laird, and Flip Petillion, ‘Comprehensive Economic and Trade Agreement, ISDS and the Belgian Veto: A Warning of Failure for Future Trade Agreements with the EU?’, 12 (4) Global Trade and Customs Journal (2017), 167–74, at 167. 7 See, i.e. the Trade Unions positions on CETA and TTIP expressed as part of the ‘Stop-TTIP’ initiative. Available at https://stop-ttip.org/trade-unions-positions-on-ttip-ceta-isds/ (visited 29 March 2018). 8 Dani Rodrik, ‘Populism and the Economics of Globalization’, (2017), at 2. Available at https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/populism_and_the_economics_of_globalization.pdf (visited 29 March 2018). 9 Ibid, at 7. 10 Ibid,at 16. 11 Dani Rodrik, ‘How Far Will International Economic Integration Go?’, 14 (1) Journal of Economic Perspectives (2000), at 177–86. 12 Patrick Macklem, ‘Labour Law Beyond Borders’, 5 (3) Journal of International Economic Law (2002), 605–45, at 643. 13 OECD, Harnessing the Political Economy in Support of an Open Multilateral Trading System – Report on a Special Seminar at the 150th Session of the Trade Committee, (2008), 9, at 8. 14 Ibid, 9, at 8. 15 See https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm (visited 29 March 2018). 16 Edwin Vermulst, ‘Rules of Origin as Commercial Policy Instruments – Revisited’, 26 (6) Journal of World Trade (1992), 61–102, at 61. 17 Dylan Geraets, Colleen Carroll, and Arnoud R. Willems, ‘Reconciling Rules of Origin and Global Value Chains: The Case for Reform’, 18 (2) Journal of International Economic Law (2015), at 287–305. 18 The most well-known being the iPhone study: Kenneth L. Kraemer, Greg Linden, and Jason Derick, ‘Capturing Value in Global Networks: Apple’s iPad and iPhone’, PCIC Papers Value of Innovation (2011). 19 Geraets, Carroll, and Willems, above n 18,at 287–305. 20 See, i.e. Reuters, Vice President Mike Pence meets with U.S. automakers on NAFTA, 27 November 2017. Available at https://www.reuters.com/article/us-usa-autos-pence/vice-president-mike-pence-meets-with-u-s-automakers-on-nafta-idUSKBN1DR1RV (visited 29 March 2018). 21 Alessandro Antimiani and Lucian Cernat, ‘Liberalizing Global Trade in Mode 5 Services: How Much Is It Worth?’, European Commission, DG Trade, Chief Economist Note, July 2017, at 16. Available at http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155844.pdf (visited 29 March 2018). 22 Ibid, at 16. 23 https://www.wto.org/english/news_e/news17_e/gen_30oct17_e.htm (visited 29 March 2018). 24 Antimiani and Cernat above n 22, at 17. 25 Yuqing Xing and Neal Detert, ‘How The iPhone Widens the United States Trade Deficit with the People’s Republic of China’, ADBI Working Paper No. 257 (2011). Available at https://www.adb.org/sites/default/files/publication/156112/adbi-wp257.pdf (visited 29 March 2018). 26 ILO and WTO, Investing in Skills for Inclusive Trade, A joint study of the International Labour Office and the World Trade Organization, (2017), at 24. Available at https://www.wto.org/english/res_e/booksp_e/investinsskills_e.pdf (visited 29 March 2018). 27 First Recital of the Preamble to the WTO Agreement. 28 Second Recital of the Preamble to the WTO Agreement. That the relationship between trade and employment is an intimate one was of course already recognized by the fact that on 18 February 1946, the Economic and Social Council (ECOSOC) passed a resolution for the calling of an ‘International Conference on Trade and Employment’. Indeed, ultimately, the General Agreement on Tariffs and Trade 1947 (GATT 1947) was adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment. See, i.e., Peter Neumann, ‘The Relationship between GATT and the United Nations’, 3 (1) Cornell International Law Journal (1970) 63–78. 29 ILO and WTO, above n 27; IMF, World Bank, WTO, Making Trade an Engine of Growth for All – The Case for Trade and for Policies to Facilitate Adjustment (2017). Available at https://www.wto.org/english/news_e/news17_e/wto_imf_report_07042017.pdf (visited 29 March 2018); WTO, World Trade Report 2017 – Trade, Technology, and Jobs, (2017), at 199. Available at https://www.wto.org/english/res_e/booksp_e/world_trade_report17_e.pdf (visited 29 March 2018). 30 See, for example, Jan Wouters et al. (eds), Global Governance Through Trade – EU Policies and Approaches, Leuven Centre for Global Governance Series (Cheltenham: Edward Elgar Publishing, 2015), at 372. 31 See for an overview, i.e. James Harrison, The Human Rights Impact of the World Trade Organisation (London: Bloomsbury Publishing, 2007), 292, at 77. 32 Mario Damen, ‘European Parliament In-Depth Analysis – Free and fair trade for all’, DG EXPO/B/PolDep/Note/2017_277 EN, 21 November 2017, 13 (emphasis added). Available at http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/570487/EXPO_IDA(2017)570487_EN.pdf (visited 29 March 2018). 33 European Commission, ‘Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements (FTAs)’, Non-paper of the Commission Services, 11 July 2017, at 1. Available at http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf (visited 29 March 2018). 34 Timothy Meyer, ‘Free Trade, Fair Trade and Selective Enforcement’, 118 Columbia Law Review (forthcoming 2018), Vanderbilt University Law School Legal Studies Research Paper Series, Working Paper Number 17 – 45,at 1–69, 1. 35 Ibid, at 69. 36 Final Report of the Arbitral Panel in the matter of Guatemala – Issues Relating to the Obligations Under Article 16.2.1(a) of the Dominican Republic – Central America – United States Free Trade Agreement (CAFTA-DR). The report is available at https://www.trade.gov/industry/tas/Guatemala%20%20%E2%80%93%20Obligations%20Under%20Article%2016-2-1(a)%20of%20the%20CAFTA-DR%20%20June%2014%202017.pdf (visited 29 March 2018). 37 Ibid, para 594. 38 Frank J. Garcia and Timothy Meyer, ‘Restoring Trade’s Social Contract’, 116 Michigan Law Review Online (forthcoming 2017), Vanderbilt University Law School Legal Studies Research Paper Series, Working Paper Number 14 – 51, at 1–25, 18. 39 Ibid, at 15. 40 See, i.e. Dmitry Lysenko, Lisa Mills and Saul Schwartz, ‘Does Canada need Trade Adjustment Assistance?’, 72 (1) International Journal (2017), 91–110, at 98. Noting that trade unions have also referred to TAA programmes as ‘burial insurance’. 41 Kara M. Reynolds and John S. Palatucci, ‘Does Trade Adjustment Assistance Make a Difference?’, 30 (1) Contemporary Economic Policy, (2011), 43–59, at 58. 42 European Commission, Directorate for Employment, Social Affairs & Inclusion, ‘European Globalisation Adjustment Fund’. See http://ec.europa.eu/social/main.jsp?catId=326&langId=en&furtherPubs=yes. (visited 29 March 2018). 43 European Commission, EGF Key Achievements 2013–2014. Available at http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7826&furtherPubs=yes. (visited 29 March 2018). 44 Grégory Claeys and André Sapir, ‘The European Globalisation Adjustment Fund: Easing the pain from trade?’, Bruegel Policy Contribution, Issue No. 5, March 2018, 9–10. Available at http://bruegel.org/wp-content/uploads/2018/03/PC-05_2018_2303.pdf. (Visited 29 March 2018). 45 European Parliament (2017), Protection against dumped and subsidised imports from countries not members of the EU, European Parliament legislative resolution of 15 November 2017 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidies imports from countries not members of the European Union (COM(2016)0721 – C*-0456/2016 – 2016/0351(COD)). 46 Ibid. 47 Ibid, at 12. 48 Ibid, at 6 and at 14. 49 Ibid, at 12. 50 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (‘the Anti-Dumping Agreement’). 51 See, i.e., the communication by the American Chamber of Commerce to the European Union (‘AmCham EU’) entitled ‘Build skills for Europe’s future to kickstart jobs and growth’, 17 July 2014. Available at http://www.amchameu.eu/sites/default/files/press_releases/press_-_juncker_election_as_commission_president_amcham_congratulates.pdf (visited 29 March 2018). Noting that ‘AmCham EU remains deeply concerned about a lost generation of labour that Europe risks if high unemployment rates in many European countries do not abate’. 52 Erica Owen and Noel P. Johnston, ‘Occupation and the Political Economy of Trade: Job Routiness, Offshorability, and Protectionist Sentiment’, 71 (4) International Organization (2017), 665–99, at 698. 53 Erica Owen, ‘The Political Power of Organized Labor and the Politics of Foreign Direct Investment in Developed Democracies’, 48 (13), Comparative Political Studies (2015), 1746–80. 54 Erica Owen, ‘Exposure to Offshoring and the Politics of Trade Liberalization: Debates and Votes on Free Trade Agreements in the US House of Representatives, 2001-2006’, 61 (2) International Studies Quarterly (2017), 297–311, at 308. 55 See http://www.amchameu.eu/committees-groups/future-work-education-and-skills-task-force (visited 29 March 2018). 56 AmCham EU for example mentions the need to ‘[t]rain workers in the skills needed for the new global economy’. Available at http://www.amchameu.eu/sites/default/files/amchameu-trade.pdf (visited 29 March 2018). 57 In this regard it has been correctly pointed out that such a dialogue at the WTO-level will have to be based on principles that ensure conformity with the provisions of the WTO Agreement, notably Article V thereof. See Rob Howse, ‘Is it legal for the WTO to team up with Alibaba and the World Economic Forum to “enable” E-Commerce? Probably not yet’, 13 December 2017 at http://worldtradelaw.typepad.com/ielpblog/2017/12/is-it-legal-for-the-wto-to-team-up-with-ali-baba-and-the-world-economic-forum-to-enable-e-commerce-p.html (visited 29 March 2018). 58 https://www.wto.org/english/news_e/news17_e/ecom_11dec17_e.htm (visited 29 March 2018). 59 ILO and WTO, above n 27, at 31. 60 ICC, World business and the multilateral trading system, ICC policy recommendations for the Cancún Ministerial Conference of the World Trade Organization (10–14 September 2003), at 2. Available at https://www.wto.org/english/forums_e/ngo_e/icc_world_bus_tradsyst_e.pdf (visited 29 March 2018). 61 Ibid, at 2. © The Author(s) 2018. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Economic Law Oxford University Press

Ensuring Continued Support for the Rules-Based Multilateral Trading System: The Need for a Public–Private Approach

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Oxford University Press
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© The Author(s) 2018. Published by Oxford University Press. All rights reserved.
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1369-3034
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1464-3758
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Abstract

Abstract The stability and resilience of intergovernmental and supranational institutions is increasingly being tested. The constraints that the WTO Agreement places on executive organs in its Members are being questioned in academia and by politicians. Reform of institutional aspects of the WTO’s dispute settlement process is coupled to the re-appointment of Appellate Body Members. These are interesting times for the rules-based multilateral trading system, to say the least. This think piece raises more questions than it can possibly answer. Yet, a central element that runs as a common thread through this contribution is the question whether trade liberalization, free movement of capital, and the resulting facilitation and emergence of GVCs have resulted in an inability of WTO Members to address domestic problems such as unemployment among workers in the manufacturing industry. Technological innovations such as automation and digitalization have equally contributed to a shift in the labour market from the manufacturing sector to other sectors. This raises questions as to the most appropriate and effective way to address the negative aspects of globalization and to ensure that the support for the rules-based multilateral trading system is not eroded. This contribution addresses the current criticism of the negative side effects of globalization and examines proposals at the bilateral level that are aimed at “conditionalizing” the liberalisation of trade. Thereafter it advocates a “public-private” approach at the domestic level which involves all stakeholders, as it is essential that those “left-behind” by globalisation are actively engaged with. I. INTRODUCTION The stability and resilience of intergovernmental and supranational institutions is increasingly being tested. ‘Brexit’ represents a relatively rare example of withdrawal from a customs union.1 Trade law-making appears to have shifted from the multilateral to the bilateral or regional level. The constraints that the Marrakesh Agreement Establishing the World Trade Organization (‘the WTO Agreement’) places on executive organs in its Members are being questioned in academia and by politicians. Reform of institutional aspects of the WTO’s dispute settlement process is coupled to the re-appointment of Appellate Body Members. These are interesting times for the rules-based multilateral trading system, to say the least. This contribution is a think piece that raises more questions than it can possibly answer. Yet, a central element that runs as a common thread through this contribution is the question whether trade liberalization, free movement of capital, and the resulting facilitation and emergence of Global Value Chains (‘GVCs’) have resulted in an inability of WTO Members to address domestic problems such as unemployment among workers in the manufacturing industry. Similarly, international cooperation in respect of taxation has historically been relatively limited, although recent efforts such as the Organization for Economic Cooperation and Development (OECD)/Group of Twenty (G20) initiative on Base Erosion and Profit Shifting (BEPS) and renewed emphasis on the importance of international rules on taxation aim to address this.2 Technological innovations such as automation and digitalization have inevitably equally contributed to a shift in the labour market from the manufacturing sector to other sectors. Yet, political discontent has been mainly directed at the rules-based multilateral trading system.3 Is the system just a convenient target, or should reform efforts also include considerations on whether, and if so how, to make trade liberalization conditional upon adherence to international norms aimed at protecting workers? Is trade conditionality the answer, or could it also be a guise for domestic inaction? Ultimately, the WTO was created to facilitate the liberalization of international trade in the belief that this would increase global welfare. Undoubtedly, it has contributed successfully to this objective.4 However, the (un)intended consequences of liberalized international trade are felt domestically. Manufacturing jobs in sectors that are prone to outsourcing and automation have been lost and not all workers have been able to make the transition to a high-skilled and services driven economy.5 The WTO, the rules-based multilateral trading system, the European Union (EU), as well as (proposed) free trade agreements, such as the North American Free Trade Agreement (NAFTA), the EU–Canada Comprehensive Economic and Trade Agreement (CETA) and the EU–US Transatlantic Trade and Investment Partnership (TTIP), have become a target of public discontent.6 Moreover, in the European Union (EU), trade unions have expressed strong concerns about both TTIP and Investor–State Dispute Settlement (ISDS).7 This raises questions as to the most appropriate and effective way to address the negative aspects of globalization and ensuring that the support for the rules-based multilateral trading system is not eroded. Arguably, two approaches to remedy the current situation can be identified. The first is the introduction of even more rules at the international level, for example by ‘conditionalizing’ trade liberalization. These additional rules would complement existing rules, which are broadly aimed at preventing governments from engaging in discriminatory behaviour towards imported products and services. The second approach is to advocate more pro-active skills-development and education policies at the national level. These domestic approaches offer an opportunity for effective policy implementation. Close collaboration between governments and private entities is essential in this regard. This article looks deeper into this second approach and provides an overview of new initiatives and ideas aimed at harnessing support for an open and rules-based trading system. It does not purport to provide a ‘silver bullet’ or a ‘cure all’ solution. The contribution observes, discusses and poses questions. It is based on the idea that, generally speaking, in order to safeguard the system against potentially destructive and fatal criticism, the beneficiaries of the multilateral trading system, such as companies benefiting from GVCs, should join the WTO and the governments of its Members in a concerted effort to explain the benefits of the system to citizens, whether in their role of employee or consumer. In other words, a ‘public-private’ approach that involves all stakeholders. A better understanding of the role of the multilateral trading system in maintaining peaceful relations between countries is key to ensuring future support. These efforts should however not be limited to advocating and communicating the virtues of free trade as such. In order to ensure that public support for the rules-based multilateral trading system is maintained, it is essential that those ‘left-behind’ by globalization are actively engaged with. Public institutions and many private actors—especially those benefiting from GVCs—share a common interest in defending and bolstering the system. A collaborative approach is required to restore and ensure continued support for it. This contribution argues that efforts at the domestic level are likely to have the most immediate and direct impact. In this regard, WTO Members should adopt domestic policies that incentivize business to participate in the aforementioned skills development, training and education schemes. The contribution proceeds in three subsections. After this general introduction, Section II addresses the current criticism of what can be broadly described as the negative side effects of globalization. It discusses examples of the expression of that discontent, the changed nature of international trade as a complicating factor to adopt general labour market policies, and the role of the WTO in the ‘trade and labour’ debate. Section III explores proposals at the bilateral level that are aimed at ‘conditionalizing’ the liberalization of trade and, indeed, ensuring better enforcement of such conditionalization. Thereafter Section IV discusses opportunities for action at the domestic level and focuses on joint public–private initiatives that could bolster support for the trading system in the long run, after which conclusions are presented in Section V. II. DISCONTENT WITH … WHAT? GLOBALIZATION? TRADE? TRADE AGREEMENTS? JOB-LOSSES? MIGRATION? A LACK OF INFLUENCE? A. The year of discontent The year 2016 may go down in history as the year in which large sections of the population of developed countries took the opportunity to express their concerns with the negative effects of globalization. However, arguably populism has been on the rise since 2000.8 According to Rodrik (2017), this is unsurprising if one considers the parallelism in the trends between globalization and populism. The economic argument is that the reduction of tariff barriers generally leads to an increase in welfare. Rodrik however submits that ‘the losses incurred by adversely affected groups per dollar of efficiency gain are higher the lower the barrier that is removed’.9 In citing Rosanvallon (2016) he quotes that ‘inequality is felt most acutely when citizens believe that the rules apply differently to different people’.10 However, one could go a step further and argue that citizens will make use of their democratic rights to cast a vote for populist parties when they believe that they have little to no influence over the rule-making process in the first place. Indeed, a vote for what are often considered ‘populist’ ideas is not necessarily a vote against the idea of free trade or the acceptance of a rules-based multilateral trading system. It may very well also reflect other concerns, such as those related to migration, increasing uncertainty in the labour market or general dissatisfaction with government policy, or, a perceived inability of influencing politics through established democratic processes. In other words, fears of a loss of ‘national sovereignty’, whether warranted or not, may equally explain votes for parties or decisions that oppose (further and deeper) economic integration between states. It is important to bear this in mind when assessing ways in which to bolster support for the rules-based multilateral trading system, especially in times where states are exiting deep economic integration agreements (‘Brexit’) or have threatened to do so (‘NAFTA’). Elsewhere in this issue, Rachel Brewster examines the reasons of exiting economic agreements by states. Rodrik’s trilemma posits that democracy, national sovereignty, and global economic integration are mutually incompatible as only two of the three can be combined at any given time, while it is impossible to have all three simultaneously and in full.11 Indeed, ultimately a trade-off between these three concepts seems inevitable. However, that there is a trade-off does not automatically mean that current global rules as provided by the WTO and free trade agreements such as NAFTA constrain the ability of governments to pursue labour market policies. Indeed, as Macklem already observed, ‘international labour standards, international trade law, and the emergence of corporate codes provide international legal authority for states to enact laws conditioning market access on respect for labour rights.12 Moreover, there is nothing that prohibits WTO Members or indeed parties to any Free Trade Agreement (FTA), from pursuing policies that are aimed at providing their citizens with the skills and competences that are necessary to participate in an increasingly globalized and digitalized economy. Nevertheless, it needs to be acknowledged that although global or supranational rules may not necessarily constrain the regulatory autonomy of states that are bound by them, they may serve as a facilitator of economic activity that leads to the relocation of manufacturing activities and hence to job losses in the manufacturing sector in certain countries. In fact, summarily dismissing the broader underlying and systemic concerns that are apparently prevalent among large parts of the population of developed countries risks further alienating those sections of society that have been hardest hit by the unintended consequences of globalization. These concerns are not limited to alleged or perceived ‘unfair’ competition from foreign workers but arguably reflect a disconnect between those who have used their democratic right to vote in order to express their discontent and those who are arguably ‘part of a global elite’. That the issues are interlinked has been recognized for a long time. In 2008, for instance, a Special Seminar of the Trade Committee organized by the Organisation for Economic Co-operation and Development (OECD) concluded that ‘building a strong WTO system for the future’ ‘would require stricter policy coherence within and between governments’ and would ‘need to take into account the significant increase in recent years of inequality in wealth distribution’.13 In this sense, the aim expressed 10 years ago of addressing ‘the problems of very poor countries, and of very disadvantaged parts of society, so that the benefits of globalisation can be more widely shared’, may not have been sufficiently achieved.14 However, assessing these underlying and systemic concerns requires an acknowledgement of the changed nature of international trade as a result of developments that are not solely driven by political choices and preferences. B. The impact of the emergence of global value chains on manufacturing In focusing on the relationship between trade and employment, or labour, it is important to remember some underlying principles as to what import tariffs in particular set out to do. Traditionally, an import tariff is understood as a levy that is due upon the act of importing a good into the territory of a State or customs territory. Indeed, ‘[t]ariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments’.15 In this sense, a tariff is seen as a means to shield domestic production from foreign competition and the application of such measures is older than the multilateral trading system itself. What the definition of a ‘tariff’ does not reveal, however, is what it is precisely that is being ‘taxed’. In order to determine whether a tariff is applicable, and if so, which tariff, ‘rules of origin’ have been created to determine the origin of goods.16 Although rules of origin (ROO) are extremely diverse, there are clear commonalities. The requirement of substantial transformation is universally recognized. However, other agreements and rules may provide for a so called change of tariff classification criterion, whereas others use the ad valorem percentage criterion. Another possibility is the use of the criterion of manufacturing or processing operation. What most of these criteria have in common is that their focus on the final stage of the production process. That is, they confer origin typically on the country of assembly or manufacturing. Therefore it is not difficult to appreciate that an import tariff essentially serves as a tax on foreign manufacturing that is levied on upon the importation of a particular product. Equally, conferring preferential origin upon incorporating a high percentage of regional (or even local) value added content serves as an incentive not to outsource manufacturing. However, it has been observed that in the current day and age of GVCs it is questionable whether determining the origin of a product based on the location of manufacturing or assembly is an appropriate approach.17 Numerous studies have provided evidence of the fact that manufacturing or assembly only accounts for 10–20% of the total value added to any given product.18 Whether it is appropriate to accord origin based on the manufacturing or assembly location is therefore highly questionable. Indeed, ‘[c]urrent ROO date back to the 1950s and determine origin predominantly on the (presumably single) location of manufacturing and assembly. But as the WTO describes it, products are no longer made in a single country, but rather are ‘Made in the World’. Classifying final goods in a world characterized by Global Value Chains (GVCs) proves complicated, as manufacturing and processing occur across vertically integrated companies spanning the globe and intermediate goods for one product might be a final good sold by a subsidiary. Moreover, the steps of R&D, design, development, and marketing increase a product’s value such that as little as 10% of its total value might be added in the country where the ‘end product’ is manufactured’.19 The importance of rules of origin and value added content also becomes apparent from the current NAFTA renegotiations in which the regional value added content requirements are a crucial point of discussion.20 Indeed, efforts at raising regional value content can be seen as an attempt to repatriate manufacturing. That means, however, in essence, relocating a part of the production process that does not add the largest degree of value to a product. Although this may, in theory, lead to an increase of jobs in the manufacturing industry, it is questionable whether these jobs are not exactly the type of jobs that are also most prone to automation. Considering that current ROO—and their underlying premise that the origin of a product is determined by its manufacturing—are almost 70 years old, one can validly ask the question whether it is not time for a re-think. This thinking is reflected, for example, in the ‘Mode-5 initiative’ as developed by Cernat. Indeed, the Mode-5 approach sees the current rules applicable to mode 5 services as an ‘export tax’ on services.21 Antimiani and Cernat observe that: ‘tariff cuts and regulatory cost reductions for goods have a direct positive impact on services trade. However, such benefits can be reaped only if current rules affecting mode 5 services are made more coherent and in line with global value chains. Products are designed in one country, software is produced in another, and assembly may be carried out in a different continent, with engineering and technological solutions belonging to firms registered in multiple countries. In this process mode 5 services are subject to both GATS and GATT-related rules that are not fully adapted to the way in which design, R&D, software, and other business services are embedded in goods traded internationally’.22 All efforts aimed at ensuring continued support for the rules-based multilateral trading system require the explicit recognition that the underlying realities of trade have changed fundamentally over the past 70 years.23 This also means that it is time to think critically about what it is that should be taxed in an international context. Does it make sense to impose a tariff on the full value of a product based on foreign manufacturing operations that account for less than 15% of that value in some instances? Would it make more sense to focus on the value added that serves as the input of so many of today’s products? And indeed, as observed by Cernat, ‘how should GATT and GATS rules operate when it comes to 21st century technology-intensive manufacturing sectors?’24 Thus, acknowledging that what is being taxed is not necessarily the aspect of a production stage that contributes the largest amount of value to a product and that the nature of international trade has changed—and is still changing—immensely as compared to the GATT-era can contribute to a more accurate understanding of what the rules-based multilateral trading system does, and is supposed to do. The fact that trade statistics are based on manufacturing may give rise to the idea that some countries are somehow ‘losing’ at the game of trade. However, considering that a significant part of the value of a finished product being exported is often created domestically in these ‘losing’ countries, modern day trade statistics arguably do not paint a realistic picture. In fact, it has been argued that trade statistics are skewed since the relative share of raw materials, R&D, intellectual property, and marketing are not factored into the total value of the product.25 In thinking about how the rules-based multilateral trading system can be improved in order to ensure that support for the system is ensured, it is therefore essential to also consider the changing nature of international trade. Although trade is an enabler of GVCs, in and of itself it is not the cause of a reduction in manufacturing jobs in any given WTO Member. Jobs are lost as a result of other developments too. Finally, trade also results in job creation. Indeed, ‘[t]rade triggers a reallocation of resources that changes the demand for labor and skills and can affect wages, even in the absence of adjustment costs’.26 Therefore, ultimately, the question is one of ensuring that the skills-set of workers meets the requirements of business. C. #InclusiveTrade #TradeWorks: WTO efforts to address labour issues In an effort to substantially reduce tariffs and other barriers to trade, and to eliminate discrimination in international trade relations, WTO Members agreed to restrict their sovereignty as States and customs territories, by committing themselves to adhere to the rules and obligations laid down in the WTO Agreement. In this regard it is important to remember that the objectives of global economic integration and trade liberalization were never the sole objectives of the WTO. Indeed, the well-known first recital of the preamble to the WTO Agreement provides that the Parties to this Agreement, ‘Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development’.27 Equally important is the fact that in the preamble, the WTO Members explicitly recognize that: ‘there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development’.28 These recitals follows the inclusion of Article 7.1 in the Havana Charter, concluded by the United Nations Conference on Trade and Employment, which already addressed the issue of fair labour standards in the following manner: ‘The Members recognize that measures relating to employment must take fully into account the rights of workers under inter-governmental declarations, conventions and agreements. They recognize that all countries have a common interest in the achievement and maintenance of fair labour standards related to productivity, and thus in the improvement of wages and working conditions as productivity may permit. The Members recognize that unfair labour conditions, particularly in production for export, create difficulties in international trade, and, accordingly, each Member shall take whatever action may be appropriate and feasible to eliminate such conditions within its territory.’ The WTO has clearly recognized the importance of addressing the relationship between trade and labour-related issues. In 2017 alone, the World Trade Report entitled ‘Trade, Technology, and Jobs’, a joint report with the International Labour Organization (ILO) entitled ‘Investing in Skills for Inclusive Trade’, and a joint report with the International Monetary Fund (IMF) entitled ‘Making Trade an Engine of Growth for All – The Case for Trade and for Policies to Facilitate Adjustment’ focused on linkages between trade and labour.29 Key ‘take-aways’ from all three reports are that welfare gains from trade are considerably larger than the costs, that trade opening need not produce net ‘losers’, if individuals are compensated, and that skills development is crucial. Therefore, there is certainly no lack of awareness of ensuring that the initial objective of ensuring full employment is achieved and that trade is not the end in itself, but the means to progress for mankind in a much broader sense. Moreover, these approaches have in common that they focus at the domestic level. Nevertheless, at the same time, and especially in the context of RTAs, there are proposals to further ‘conditionalize’ the preferential liberalization of trade upon adherence to international norms that aim at enhancing labour rights. Moreover, there are also calls for more stringent enforcement of such conditionality. Section III examines some of these proposals and developments. III. MORE GLOBALIZATION AND RULES AT THE INTERNATIONAL LEVEL? OR MORE ACTION AT THE NATIONAL LEVEL? Taking into account the diverging motivations for ‘populist’ votes in different countries across the globe and the way in which the nature of international trade has changed over the past 30–40 years, the question becomes whether it is desirable to equip the multilateral trading system itself with the tools to address the negative consequences of globalization or whether the solution to these problems should initially be sought at the domestic level. This section explores the differing nature of international norms aimed at trade liberalization as traditionally contained in the WTO Agreement and RTAs, and international norms aimed at the protection of labour rights. Subsequently, this section addresses a number of recent proposals that have been made at the international level and which are aimed at ensuring, broadly speaking, that trade is more ‘fair’. Thereafter it discusses several initiatives and proposals that are proposed at the domestic level in order to ensure that workers are ‘better protected’ from ‘unfair’ foreign competition. A. Different types of international norms The rights and obligations arising from the WTO Agreement are aimed at ensuring that trade is not unnecessarily impeded or restricted by domestic measures that may have (un)intended protectionist effects. Therefore, international trade is liberalized by placing constraints on domestic regulation, while permitting the taxation of foreign manufacturing by having a system that is based on bound levels of tariff commitments. The rules-based multilateral trading system thus serves as a framework for controlled liberalization. International norms aimed at the protection of labour and workers rights take on a different form. The norms adopted by the ILO come in the form of international labour standards. These are legal instruments drawn up by the ILO’s constituents (governments, employers, and workers) and they set out basic principles and rights at work. They are either conventions, which are legally binding international treaties that may be ratified by member states, or recommendations, which serve as non-binding guidelines. The eight fundamental conventions of the ILO lay down norms on, inter alia, freedom of association, the right to organize and collective bargaining and the abolition of forced labour. Yet, there is a clear difference between the norms that relate to the liberalization of trade, and those are aimed at the protection of other societal interests. Whereas the rules on trade liberalization can be enforced through the dispute settlement system as provided by the WTO, there is no equally strong mechanism provided for to ensure that signatories live up to their obligations under ILO conventions. This difference in enforceability has led to new proposals that are aimed at further deepening the conditionality between trade liberalization and adherence to social (and also environmental) norms. B. Enforcement of international norms through ‘trade-conditionality’ in FTAs Using trade as an instrument to achieve other societal objectives is nothing new and this development has been subject of academic scrutiny.30 Several large trading blocs have made (preferential) trade liberalization conditional upon adherence to international norms such as ILO conventions. Through this conditionalization, preference granting countries seek to achieve extraterritorial policy change in exporting countries. The argument is often that a level-playing field is required in order to ensure that domestic industries do not suffer competition from imports that are cheaper as a result of a lack of labour rights or a disregard for environmental norms.31 These linkages between trade and other societal objectives are, for example, reflected in the trade policy of, i.e. the European Union (EU). In 2015 the European Commission presented its so-called “Trade for All” strategy which according to EU Trade Commissioner Cecilia Malmström reflects the idea that: ‘Europeans know that trade can deliver jobs, growth and investment for consumers, workers and small companies. And they want more of those results. But they don't want to compromise on core principles like human rights, sustainable development around the world or high quality regulation and public services at home’. It has been posited that the strategy can be seen as an adjustment of trade policy in response to the public debate on high profile trade negotiations such as TTIP and CETA. Indeed: ‘the expression “fair trade” was now used not only to indicate its fairness towards workers in third countries or towards our own consumers, but also and especially to refer to fairness towards producers and workers in our own countries. In short, trade should be fair to the national interest’.32 The aforementioned EU trade for all strategy requires EU ‘to adopt a responsible trade and investment policy as an instrument for the implementation of the Sustainable Development Goals (SDGs) contributing to boosting jobs, sustainable growth and investment in Europe and outside’.33 Thereto, the EU’s approach to Free Trade Agreements (FTAs) includes binding ‘Trade and Sustainable Development’ provisions in an FTA which are subject to a dispute settlement mechanism. These provisions include reference to environmental and social norms, such as conventions adopted under the auspices of the ILO. However, inclusion of provisions on labour and environmental norms in FTAs and subjecting them to dispute settlement provisions is arguably not enough. Indeed, Meyer (2017) argues that ‘governments selectively enforce trade laws in ways that undermine environmental and labor interests’.34 He argues that a ‘multilateral process to coordinate enforcement actions would go a long way towards rebuilding the trade regime’s legitimacy’.35 In this regard, reference should be made to the Final Report of the Arbitral Panel in the matter of Guatemala—Issues Relating to the Obligations Under Article 16.2.1(a) of the Dominican Republic—Central America—United States Free Trade Agreement (CAFTA-DR).36 In 2010 the US had launched a complaint under the Agreement, following labour union complaints made two years prior. It was alleged that by the treatment of Guatemalan workers violated their labour rights and put American workers at an unfair competitive disadvantage. Although the Panel found that the US had established that ‘at eight worksites and with respect to 74 workers Guatemala failed to effectively enforce its labor laws by failing to secure compliance with court orders”, it had failed to establish that ‘these instances constitute a course of inaction that was in a manner affecting trade’.37 Garcia and Meyer have made the argument that a financial transaction tax (‘FTT) should be introduced in the NAFTA’ and in other future free trade agreements FTAs.38 Their proposal includes the introduction of a so-called ‘Economic Development Chapter’ in the FTA that would mandate that ‘states spend a certain amount of money on programs designed to assist those hurt by trade liberalization’ whilst retaining ‘significant flexibility for states in terms of the kinds of programs that would qualify’.39 In order to ensure effective implementation, an international enforcement mechanism would be provided. In their proposal ‘[t]he development obligations should be subject to the same state-to-state enforcement procedures as the rest of a trade agreement, including existing chapters on labor and environmental standards’. Indeed, theirs is a prime example of what they themselves call ‘Internationalizing Domestic Trade Adjustment’. However, there have been numerous studies that question the effectiveness of such Trade Adjustment Assistance programmes (TAA).40 Therefore before including such a far reaching obligation in an FTA and further increasing the linkage between trade liberalization and domestic labour market policies it would be advisable to first examine ways to enhance its effectiveness. Indeed, as one of these studies found, ‘[i]nvesting more in educational or vocational training programs in the disadvantaged areas that currently have few training opportunities may improve the efficacy of the TAA program’.41 Therefore it is suggested that seeking a dialogue and partnership with business at the domestic level may ultimately prove to be an example of low-hanging fruit that could be harvested first. This is not to say that TAA programmes should be rejected completely, rather it means that close collaboration with business is essential in achieving effective outcomes. In this regard the European Globalisation Adjustment Fund (EGF) provides an interesting illustration. It was created in 2006 by the European Union to express ‘solidarity with workers affected by mass redundancies triggered by shifting world trade patterns’.42 The European Commission operates the EGF and has been responsible for approving 134 EGF applications from EU Member States, worth a total of 561.1 million euros and which were aimed to support 122,121 redundant workers.43 The measures implemented by EU Member States with the support of EGF funds include individualized job search assistance, vocational training and upskilling, mentoring, and entrepreneurship promotion and business creation activities. Relatively limited research is available on the effectiveness of the EGF, although Claeys and Sapir have found that there are several ways to improve the programme, notably by decreasing the administrative burden.44 More importantly, it is difficult to assess the EGF’s effectiveness due to a lack of data at the individual level. It is also notable that the EGF does not appear to foresee in a mechanism that enables a better matching of labour supply and demand. In other words, although the EGF allocates funds to Member States, there is no clear incentive to set up a structural dialogue between business, the educational community and policymakers aimed at ensuring that labour supply and demand are more closely aligned in terms of skill-sets. C. Environmental and social norms in trade remedy investigations Further linkages between trade and environmental and social norms can also be seen in the trade remedy field. Whereas initially, the linkage between trade and labour, or trade and sustainable development was made by the inclusion of labour chapters in free trade agreements, there is now a proposal for the amendment of the European Union Basic Anti-Dumping Regulation that includes explicit reference to ‘core ILO and relevant multilateral environmental convention’.45 These references are made in the context of establishing whether there are ‘significant distortions’ in any given market, which would render home market prices unsuitable to serve as ‘normal value’.46 In that regard, if the European Commission were to decide that domestic prices cannot be used as a result of significant distortion, recourse may be had to ‘undistorted prices or benchmarks’, provided that they are obtained from a country ‘with an adequate level of social and environmental protection’.47 In assessing whether significant distortions exist, the European Commission may, inter alia, have regard to ‘wage costs being distorted’.48 Moreover, in the case of anti-dumping investigations on imports originating in countries that are not WTO Members at the point of the initiation of the investigation, normal value shall be determined based on the price or constructed value in an appropriate representative country. In the selection of such an representative country, preference must again be given ‘to countries with an adequate level of social and environmental protection’.49 The idea is to force the internalization of the costs of inadequate social and environmental protection and to prevent trading partners from benefiting from such inadequate protection. Where normal value is to be calculated using an analogue country, such a country must meet these protection standards in order to be eligible. Arguably, this is a means of ensuring that low-wages or lax environmental norms do not result in the ability to sell products below the actual cost of production. The initiatives aimed at ensuring a level-playing field in terms of adherence to labour and environmental norms are however unlikely to ensure continued support for the trading system on their own. In addition, and more critically, other WTO Members may decide to challenge the consistency of the EU’s new anti-dumping methodology with the provisions of the WTO’s Anti-Dumping Agreement.50 Ensuring that they are complemented with an effective approach at the domestic level is therefore crucial. IV. A PUBLIC–PRIVATE APPROACH AT THE DOMESTIC LEVEL Ensuring the continued support for the rules-based multilateral trading system by the domestic constituencies of the states that are part of that system is not a straightforward objective and it is questionable whether trade conditionality alone is capable of delivering the intended outcomes. In light of this consideration, it is essential to assess whether there is scope for ensuring broader support for the system by actively involving those entities that have benefitted from it in the most direct manner possible: businesses. Such involvement should preferably take place at the domestic level and consist of both skills development of workers and a joint effort to explain how the rules-based multilateral trading system enables companies to operate globally. This combined approach is needed as merely improving communication on the benefits of trade will not be sufficient. Simply explaining that the rules-based multilateral trading system enables states to conduct their trade-relations in a manner that is beneficial for everyone is unlikely to convince those who have lost their jobs as a result of off-shoring. Thus, a public-private approach that is aimed at ensuring the effectiveness of active labour market policies by involving business is required. In this regard, this section explores ways in which public and private initiatives can complement each other in a joint effort to support the system. It involves a direct call for action to those companies and businesses that have benefitted directly from the multilateral trading system. That there is an appetite to do so is abundantly clear.51 The challenge is to connect policymakers with business in a manner that leads to long-term partnerships. In this regard it is also important to acknowledge that the influence of traditional labour unions is not as strong as it used to be.52 As a result of the emergence of GVCs and the fragmentation of production processes across the globe, the nature of the skills-set that is required from workers is also changing. The interests of workers are more diverse and are not necessarily reflected by traditional trade unions. Indeed, as has been observed by Owen (2015), ‘hetereogeneity of interests among union members will reduce the ability of labor unions to advocate a single policy position’.53 She calls for attention to the ‘downward pressure on the influence of labor relative to capital’.54 Therefore, in setting-up a public–private approach, it is therefore crucial to devise ways in which the interests of workers are adequately taken into account and that their long-term interests are reflected in the ultimate policy outcome. A. Skills development, education and training It is essential that WTO Members engage in an active and continuous dialogue with business on how to ensure that the skill-set of its citizens matches with the needs of private enterprises that often compete at a global level. Establishing constructive partnerships with those companies that have a positive attitude towards the rules-based multilateral trading system and recognize its benefits may lead to broader support for that system among the public at large. Obviously, countries have different policy priorities and there are no one-size-fits-all solutions. Nevertheless, through collective-learning and experience-sharing the most effective approaches may be identified. Indeed, the role that educational or vocational programmes can play should not be underestimated. That the business community, at least in Europe, is interested in such a public–private approach is evidenced by initiatives that have been implemented by business association such as AmCham EU, the American Chamber of Commerce to the European Union. It is currently in the process of setting up a ‘Future of Work, Education and Skills Task Force’ which will ‘bring industry experiences, expectations and recommendations directly to policy-makers and other stakeholders in the EU and the Member States’.55 Further anecdotal evidence illustrates that companies are willing to engage with governments in education.56 This requires an active role of governments that revisit education policies as well as labour market policies. However, as is often the case, there is a disconnect between policymakers and the private sector. The WTO is well-suited to initiate this dialogue at the global level, but for effective policy implementation it will be up to its Members to develop policies that take into account the input of business.57 Importantly, the cooperation between the WTO and (small)-business is already taking place in the field of e-commerce where MC11 saw the launch of a WTO—World Economic Forum—Electronic World Trade Platform (eWTP) initiative aimed at establishing a ‘public-private dialogue on e-commerce’.58 Moreover, MC11 also saw the first Business Forum being organized on the sidelines of the Ministerial Conference in order to promote ‘open and constructive dialogue on core issues for the multilateral trading system’ between governments and private sector leaders. Establishing strong ties between programmes and the private sector may also alleviate the concern of workers training for jobs that do not exist.59 The initiatives employed at MC11 may serve as the starting point but will need to be accompanied by a dialogue at the domestic level of WTO Members. Needless to say, the importance of obtaining an education is broader than the narrow objective of training for a job and also includes learning to think in order to become a citizen capable of engaging in societal debate. However, the gap between the demand and supply side of the labour market is real and requires action. B. Communication on the benefits of trade Several policy initiatives have been adopted in order to better ‘communicate’ or ‘explain’ the benefits of trade. In fact, business has played an active role in supporting the rules-based system. In the run-up to the 5th WTO Ministerial Conference in Cancún in 2003, the International Chamber of Commerce (ICC) issued a policy statement urging ‘governments to communicate more effectively to the public at large the benefits of trade liberalization for economic growth and development so as to build more solid support for the rules-based multilateral trading system and progressive trade liberalization’.60 Moreover, the ICC indicated that it would ‘continue to contribute the business voice to this effort’.61 Although it is undoubtedly true that, especially in an EU context, policy makers realized too late that the opponents of free trade agreements had managed to capture the narrative, assuming that by merely ‘communicating better’ the concerns of affected citizens will be taken away seems naive. Having said that, the rules-based multilateral trading system would benefit from all the support it can get. In that regard any efforts of business-executives of companies that benefit from the existence of the system should be welcomed and stimulated. V. CONCLUSION Globalization, automation and digitalization are real. Combined, they result in changes in the global labour market that place a heavy burden on those citizens that lack the skills to meet current demands. Those left behind by globalization have used their democratic rights to express their discontent. In making use of their right to vote, they have expressed their discontent with the current situation. Even though one should not generalize as to the reasons for that discontent, trade undoubtedly plays a role in it. The nature of international trade has changed considerably and the system has arguably not kept track. Indeed, one can validly ask the question whether the correct parts of the production process are taxed and whether the trade statistics that are typically used reflect economic realities. However, the political response to current concerns has sometimes targeted the rules-based multilateral trading system that has arguably contributed to a significant reduction of global poverty and an increase in global welfare. One of the underlying assumptions of those criticizing the system is that the constraints imposed on domestic regulation are such that they prevent domestic labour-market policy making. This assumption is incorrect. The real question is rather whether responses to these concerns should be focused at the international level and should involve the conditionalization of trade liberalization and market access on adherence to international labour standards, or whether WTO Members are better served by adopting active labour market policies at the domestic level. This think piece has addressed several initiatives that aim at addressing the aforementioned discontent. It is submitted here that constraints imposed on domestic regulation by international economic law are not of a nature that prevents governments in Western societies from pursuing policies aimed at investing in those groups that are ‘left-behind’ by globalization. Ultimately, a joined and collaborative approach between public and private actors at the domestic level is more likely to ensure that domestic constituencies will continue to support the rules-based multilateral trading system. Thereto it is essential that governments adopt policies and mechanisms that incentivize business to actively participate in programmes aimed at skills development, training and education of their employees. Combined with educational programmes that include explanation as to the operation of the rules-based multilateral trading system and its role within global economic governance, this could contribute to broader support for the system in the long-run. Even though the benefits of such an approach may only be reaped in the long term, and even though it may sound ambitious, there is a clear desire on the part of business operating internationally to ensure that the multilateral trading system that has enabled them to flourish maintains support from the citizens of the countries that are the Members of the system. The WTO could play a role by continuing the dialogue that it has already set-up, but ultimately it will depend on the willingness of Members to engage with business and involve it in domestic policies in order to ensure that education systems equip their citizens with the skills that are needed in a world that is globalized and increasingly automatized and digitalized. In addition, the current situation further illustrates the importance of carefully analysing the nature of 21st century trade as well as the assumptions that underpin it, and the rules that govern it. Footnotes 1 Venezuela withdrew from the Andean Community in 2006, in response to the signing of Free Trade Agreements by other members of the Andean Community, Colombia and Peru, with the United States. Greenland withdrew from the European Economic Community in 1985, when it became part of the ‘Overseas countries and territories’ (OCTs). See Ali M. El-Agraa and Anthony J. Jones, ‘Macroeconomics of Regional Integration: Withdrawal from a Customs Union’, 23 (1) Journal of Economic Integration (2008), 75–90. 2 OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing, 44p. Available at https://www.oecd.org/ctp/BEPSActionPlan.pdf (visited 29 March 2018). 3 In the view of the author, RTAs as foreseen by the regional economic integration exceptions as provided for by Article XXIV of the General Agreement on Tariffs and Trade 1994 (‘GATT 1994’) and Article V of the General Agreement on Trade in Services (GATS) also belong to the rules-based multilateral trading system as they are inherently part of that system. Even though these RTAs or plurilateral agreements are not ‘multilateral’ themselves, they exist within the broader multilateral framework that is rules-based. Admittedly, the question whether RTAs may possibly serve as ‘termites’ in the trading system is a valid one. Nevertheless, the author considers that, to this date, RTAs should be seen as part of the rules-based multilateral trading system. 4 Kym Anderson, ‘Contributions of the GATT/WTO to Global Economic Welfare: Empirical Evidence’, 30 (1) Journal of Economic Surveys (2016), 56–92, at 82–83. 5 Giuseppe Berlingieri, ‘Outsourcing and the Rise in Services’, LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, Centre for Economic Performance (CE) Discussion Paper No 1199, at 35. 6 See for an illustration, Ian Laird, and Flip Petillion, ‘Comprehensive Economic and Trade Agreement, ISDS and the Belgian Veto: A Warning of Failure for Future Trade Agreements with the EU?’, 12 (4) Global Trade and Customs Journal (2017), 167–74, at 167. 7 See, i.e. the Trade Unions positions on CETA and TTIP expressed as part of the ‘Stop-TTIP’ initiative. Available at https://stop-ttip.org/trade-unions-positions-on-ttip-ceta-isds/ (visited 29 March 2018). 8 Dani Rodrik, ‘Populism and the Economics of Globalization’, (2017), at 2. Available at https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/populism_and_the_economics_of_globalization.pdf (visited 29 March 2018). 9 Ibid, at 7. 10 Ibid,at 16. 11 Dani Rodrik, ‘How Far Will International Economic Integration Go?’, 14 (1) Journal of Economic Perspectives (2000), at 177–86. 12 Patrick Macklem, ‘Labour Law Beyond Borders’, 5 (3) Journal of International Economic Law (2002), 605–45, at 643. 13 OECD, Harnessing the Political Economy in Support of an Open Multilateral Trading System – Report on a Special Seminar at the 150th Session of the Trade Committee, (2008), 9, at 8. 14 Ibid, 9, at 8. 15 See https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm (visited 29 March 2018). 16 Edwin Vermulst, ‘Rules of Origin as Commercial Policy Instruments – Revisited’, 26 (6) Journal of World Trade (1992), 61–102, at 61. 17 Dylan Geraets, Colleen Carroll, and Arnoud R. Willems, ‘Reconciling Rules of Origin and Global Value Chains: The Case for Reform’, 18 (2) Journal of International Economic Law (2015), at 287–305. 18 The most well-known being the iPhone study: Kenneth L. Kraemer, Greg Linden, and Jason Derick, ‘Capturing Value in Global Networks: Apple’s iPad and iPhone’, PCIC Papers Value of Innovation (2011). 19 Geraets, Carroll, and Willems, above n 18,at 287–305. 20 See, i.e. Reuters, Vice President Mike Pence meets with U.S. automakers on NAFTA, 27 November 2017. Available at https://www.reuters.com/article/us-usa-autos-pence/vice-president-mike-pence-meets-with-u-s-automakers-on-nafta-idUSKBN1DR1RV (visited 29 March 2018). 21 Alessandro Antimiani and Lucian Cernat, ‘Liberalizing Global Trade in Mode 5 Services: How Much Is It Worth?’, European Commission, DG Trade, Chief Economist Note, July 2017, at 16. Available at http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155844.pdf (visited 29 March 2018). 22 Ibid, at 16. 23 https://www.wto.org/english/news_e/news17_e/gen_30oct17_e.htm (visited 29 March 2018). 24 Antimiani and Cernat above n 22, at 17. 25 Yuqing Xing and Neal Detert, ‘How The iPhone Widens the United States Trade Deficit with the People’s Republic of China’, ADBI Working Paper No. 257 (2011). Available at https://www.adb.org/sites/default/files/publication/156112/adbi-wp257.pdf (visited 29 March 2018). 26 ILO and WTO, Investing in Skills for Inclusive Trade, A joint study of the International Labour Office and the World Trade Organization, (2017), at 24. Available at https://www.wto.org/english/res_e/booksp_e/investinsskills_e.pdf (visited 29 March 2018). 27 First Recital of the Preamble to the WTO Agreement. 28 Second Recital of the Preamble to the WTO Agreement. That the relationship between trade and employment is an intimate one was of course already recognized by the fact that on 18 February 1946, the Economic and Social Council (ECOSOC) passed a resolution for the calling of an ‘International Conference on Trade and Employment’. Indeed, ultimately, the General Agreement on Tariffs and Trade 1947 (GATT 1947) was adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment. See, i.e., Peter Neumann, ‘The Relationship between GATT and the United Nations’, 3 (1) Cornell International Law Journal (1970) 63–78. 29 ILO and WTO, above n 27; IMF, World Bank, WTO, Making Trade an Engine of Growth for All – The Case for Trade and for Policies to Facilitate Adjustment (2017). Available at https://www.wto.org/english/news_e/news17_e/wto_imf_report_07042017.pdf (visited 29 March 2018); WTO, World Trade Report 2017 – Trade, Technology, and Jobs, (2017), at 199. Available at https://www.wto.org/english/res_e/booksp_e/world_trade_report17_e.pdf (visited 29 March 2018). 30 See, for example, Jan Wouters et al. (eds), Global Governance Through Trade – EU Policies and Approaches, Leuven Centre for Global Governance Series (Cheltenham: Edward Elgar Publishing, 2015), at 372. 31 See for an overview, i.e. James Harrison, The Human Rights Impact of the World Trade Organisation (London: Bloomsbury Publishing, 2007), 292, at 77. 32 Mario Damen, ‘European Parliament In-Depth Analysis – Free and fair trade for all’, DG EXPO/B/PolDep/Note/2017_277 EN, 21 November 2017, 13 (emphasis added). Available at http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/570487/EXPO_IDA(2017)570487_EN.pdf (visited 29 March 2018). 33 European Commission, ‘Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements (FTAs)’, Non-paper of the Commission Services, 11 July 2017, at 1. Available at http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf (visited 29 March 2018). 34 Timothy Meyer, ‘Free Trade, Fair Trade and Selective Enforcement’, 118 Columbia Law Review (forthcoming 2018), Vanderbilt University Law School Legal Studies Research Paper Series, Working Paper Number 17 – 45,at 1–69, 1. 35 Ibid, at 69. 36 Final Report of the Arbitral Panel in the matter of Guatemala – Issues Relating to the Obligations Under Article 16.2.1(a) of the Dominican Republic – Central America – United States Free Trade Agreement (CAFTA-DR). The report is available at https://www.trade.gov/industry/tas/Guatemala%20%20%E2%80%93%20Obligations%20Under%20Article%2016-2-1(a)%20of%20the%20CAFTA-DR%20%20June%2014%202017.pdf (visited 29 March 2018). 37 Ibid, para 594. 38 Frank J. Garcia and Timothy Meyer, ‘Restoring Trade’s Social Contract’, 116 Michigan Law Review Online (forthcoming 2017), Vanderbilt University Law School Legal Studies Research Paper Series, Working Paper Number 14 – 51, at 1–25, 18. 39 Ibid, at 15. 40 See, i.e. Dmitry Lysenko, Lisa Mills and Saul Schwartz, ‘Does Canada need Trade Adjustment Assistance?’, 72 (1) International Journal (2017), 91–110, at 98. Noting that trade unions have also referred to TAA programmes as ‘burial insurance’. 41 Kara M. Reynolds and John S. Palatucci, ‘Does Trade Adjustment Assistance Make a Difference?’, 30 (1) Contemporary Economic Policy, (2011), 43–59, at 58. 42 European Commission, Directorate for Employment, Social Affairs & Inclusion, ‘European Globalisation Adjustment Fund’. See http://ec.europa.eu/social/main.jsp?catId=326&langId=en&furtherPubs=yes. (visited 29 March 2018). 43 European Commission, EGF Key Achievements 2013–2014. Available at http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7826&furtherPubs=yes. (visited 29 March 2018). 44 Grégory Claeys and André Sapir, ‘The European Globalisation Adjustment Fund: Easing the pain from trade?’, Bruegel Policy Contribution, Issue No. 5, March 2018, 9–10. Available at http://bruegel.org/wp-content/uploads/2018/03/PC-05_2018_2303.pdf. (Visited 29 March 2018). 45 European Parliament (2017), Protection against dumped and subsidised imports from countries not members of the EU, European Parliament legislative resolution of 15 November 2017 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidies imports from countries not members of the European Union (COM(2016)0721 – C*-0456/2016 – 2016/0351(COD)). 46 Ibid. 47 Ibid, at 12. 48 Ibid, at 6 and at 14. 49 Ibid, at 12. 50 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (‘the Anti-Dumping Agreement’). 51 See, i.e., the communication by the American Chamber of Commerce to the European Union (‘AmCham EU’) entitled ‘Build skills for Europe’s future to kickstart jobs and growth’, 17 July 2014. Available at http://www.amchameu.eu/sites/default/files/press_releases/press_-_juncker_election_as_commission_president_amcham_congratulates.pdf (visited 29 March 2018). Noting that ‘AmCham EU remains deeply concerned about a lost generation of labour that Europe risks if high unemployment rates in many European countries do not abate’. 52 Erica Owen and Noel P. Johnston, ‘Occupation and the Political Economy of Trade: Job Routiness, Offshorability, and Protectionist Sentiment’, 71 (4) International Organization (2017), 665–99, at 698. 53 Erica Owen, ‘The Political Power of Organized Labor and the Politics of Foreign Direct Investment in Developed Democracies’, 48 (13), Comparative Political Studies (2015), 1746–80. 54 Erica Owen, ‘Exposure to Offshoring and the Politics of Trade Liberalization: Debates and Votes on Free Trade Agreements in the US House of Representatives, 2001-2006’, 61 (2) International Studies Quarterly (2017), 297–311, at 308. 55 See http://www.amchameu.eu/committees-groups/future-work-education-and-skills-task-force (visited 29 March 2018). 56 AmCham EU for example mentions the need to ‘[t]rain workers in the skills needed for the new global economy’. Available at http://www.amchameu.eu/sites/default/files/amchameu-trade.pdf (visited 29 March 2018). 57 In this regard it has been correctly pointed out that such a dialogue at the WTO-level will have to be based on principles that ensure conformity with the provisions of the WTO Agreement, notably Article V thereof. See Rob Howse, ‘Is it legal for the WTO to team up with Alibaba and the World Economic Forum to “enable” E-Commerce? Probably not yet’, 13 December 2017 at http://worldtradelaw.typepad.com/ielpblog/2017/12/is-it-legal-for-the-wto-to-team-up-with-ali-baba-and-the-world-economic-forum-to-enable-e-commerce-p.html (visited 29 March 2018). 58 https://www.wto.org/english/news_e/news17_e/ecom_11dec17_e.htm (visited 29 March 2018). 59 ILO and WTO, above n 27, at 31. 60 ICC, World business and the multilateral trading system, ICC policy recommendations for the Cancún Ministerial Conference of the World Trade Organization (10–14 September 2003), at 2. Available at https://www.wto.org/english/forums_e/ngo_e/icc_world_bus_tradsyst_e.pdf (visited 29 March 2018). 61 Ibid, at 2. © The Author(s) 2018. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)

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Journal of International Economic LawOxford University Press

Published: May 7, 2018

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