A failure to cater for those excluded by globalisation is damaging the prospect of megaregional trade agreements such as the TPP and TTIP, according to a senior World Bank figure.
In an interview with GTR, Anabel González, former Costa Rican Trade Minister and current senior director in the World Bank, says that the lack of safety net policies has led to a rise in domestic inequality, alongside technological advancements and global trade growth.
González says that integrating developing world countries into the global trading system has helped lift billions of people out of poverty and reduce global inequality since the turn of the century, but domestic inequality has risen in many developed countries.
In large part, the respected figure says, such countries have failed to offer requisite education, skills, healthcare and “well-targeted social policies” that can help raise the income of those poor and middle-class citizens that have been dislocated by the “unintended effects” of globalisation.
This perceived failure has fuelled a popular uprising against trade and globalisation, particularly the lightning rod trade agreements in the US, the TPP and TTIP.
She says: “Those policies are of a domestic nature. One important caveat is that there’s no one size fits all approach to tackle inequality. But most of these policies are of a domestic nature. I have to say though that most developed countries have the human resources and the economic resources to develop and implement these policies.”
At another point in the conversation, González adds:: “You need to go back to the idea of how do you address the concerns of those that may be dislocated by trade? They need to put in place very strong policies that regard education, skills… how can you address the policies of those that have been excluded? You need a safety net. How do you address the issue that the pain is stronger in an economy that is not growing sufficiently enough? So how can you put in place pro-growth policies?”
The interview took place in the week that a succession of senior European politicians sounded the death knell for the TTIP – a trade agreement between the EU and US – and when the future of the TPP, the massive Asia Pacific trade deal, is in jeopardy.
“Throughout history we’ve seen that it’s sometimes easier for policymakers to put the blame of domestic problems on foreigners,” Anabel González, World Bank
German Vice-Chancellor Sigmar Gabrel told Deutsche Welle that negotiations had collapsed, saying: “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it. Nothing is moving.”
This was followed by the French Trade Minister Matthias Fekl taking to Twitter to suggest Brussels should withdraw from TTIP negotiations, echoing previously expressed views of France’s President François Hollande.
Meanwhile, in the US, both presidential candidates have publicly said they will not support the TPP, despite the incumbent US government expending huge political capital on its conclusion.
While the TTIP has never looked close to conclusion, the TPP has been signed by the member states. However, both Hillary Clinton and Donald Trump have come out in opposition to the agreement, bowing to popular opinion that globalisation and previous trade agreements such as Nafta are responsible for hollowing out America’s manufacturing sector.
Some are still predicting that TPP will be concluded in President Obama’s lame duck phase in office, or if not then, by 2018 during an expected Hillary Clinton presidency (many are convinced that her role in developing the US participation in TPP during her time as Secretary of State shows that her opposition is not exactly sincere).
However, many trade experts are now admitting that TTIP is doomed.
González implies that certain statements could be bargaining chips, but that based on historic evidence, the fragmentation predicted by many will not arise.
“We seem to be at a turning point in terms of megaregionals, one must recognise and I can speak from experience as former trade minister of Costa Rica, trade agreements, particularly those that are very impactful, are difficult to negotiate and approve in Congress. There’s normally a big political discussion that surrounds them,” she says.
She adds: “There are different actors and stakeholders in the public discussion in each country. But I think that first it’s important to have negotiations follow their course. There are different points of the negotiating process, some of them are difficult and different stakeholders position themselves in different ways in the course of the negotiating process to get their desired result: it’s normally a negotiating process.”
Asked whether the prospective failures of TTIP and TPP proved that the appetite for multilateralism has diminished, González says: “If we focus on our day-to-day discussions, that can be the case. But if we look in a broader economic timeline, you’ll see there have been discussions of this sort throughout history.
“At the end of the day, mankind always opts for greater co-operation, for economic integration. As we know, and history has shown us important lessons, this is indispensable for world peace.”
In a wide-ranging interview with GTR, the transcript of which will be published at a later date, the senior official in the World Bank’s Global Practice on Trade and Competitiveness also called for governments to show more openness in trade negotiations, to engage better with the stakeholders of society and to not fall for the “quick fixes” of isolationism and protectionism.
She says: “I think that throughout history we’ve seen that it’s sometimes easier for policymakers to put the blame of domestic problems on foreigners. That’s the tendency that underpins protectionism or isolationism. But the reality is that any quick measure that’s aimed at keeping foreigners at bay, be it growth or services or ideas or people, it’s a bit like attempting to find a quick fix.
“There are no quick fixes. There are difficult and important questions that need to be answered – how to better deal with the real and painful dislocation costs that may be related to trade but increasingly to technological advances. What processes are put in place to empower people to reach the benefit of globalisation, how to proffer high levels of productivity-led growth.”
*The headline of this article was updated on September 2 2016 to remove the words “World Bank”. The word “multilateral” was also changed to “megaregional” to better reflect the nature of the TPP and TTIP.