Binding measures intended to directly address economic inequality into trade agreements would create political coalitions in favor of continued efforts to liberalize trade. Tying measures intended to directly address economic inequality into trade agreements would create political coalitions in favor of liberalized trade.
THE POLITICAL CONSENSUS IN
10 President Trump plans to renegotiate NAFTA as part of his strategy to bring jobs back to the United States. In short, advocates of liberalized trade continue to argue that trade policy and domestic policies to address economic inequality should be separate.
Debating International Trade
HILLMAN, supra note 12, at 25 ("[O]ne might support liberalization if one believes that the trading system is an inappropriate way of redistributing the gains from trade."). Bernanke, supra note 18; see also Bhagwati, supra note 19 ("the culprit is not globalization but labor-saving technical change that puts pressure on the wages of the unskilled.").
The Domestic Political Economy of Trade
EFFORTS TO COPE WITH TRADE-BASED INEQUALITY
The drafters of the General Agreement on Tariffs and Trade ("GATT"), negotiated in 1947, realized that trade liberalization was at least as much about politics as economics. For example, the GATT contains a set of rules on so-called "trade remedies".54 Trade remedies essentially allow governments to use trade policy to protect their domestic producers by raising tariffs on imports, thereby raising the price for citizens. Theirs. to pay for the goods. As an economic matter, trade remedies (like other forms of protectionism) effect a transfer of wealth from domestic consumers to domestic producers.
15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, Results of the 147th Uruguay Round, https://www.wto.org/english/does elegal-e/19-adp.pdf [https: //perma .cc/M7CZ-98GV] [hereinafter Anti-Dumping Agreement] (discussing the implementation of anti-dumping measures); Agreement on Subsidies and Countervailing Measures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, Results of the Uruguay Round 231, https://www.wto.org/english/docs-e/egaLe/ 24 -scm.pdf [https://perma.cc/. If, as a result of unforeseen developments and the effect of obligations assumed by a Contracting Party under this Agreement, including tariff concessions, any product is imported into the territory of that Contracting Party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of similar or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for so long as may be necessary to prevent or remedy a such damage, suspend in whole or in part the obligation or withdraw or modify the concession.
As Alan Sykes has argued in relation to safeguards, trade remedies create a political safety valve.5 9 Domestic producers, such as the steel industry, tend to be more politically influential than consumers, largely because they are better organized. Trade remedy rules may have been among the first efforts to offer some degree of protectionism as the price of trade liberalization, but they have hardly been the last.
Labor and Environment Chapters
To allay these concerns, President Clinton negotiated what are known as the NAFTA Side Agreements (or more formally, the North American Agreements on Environmental and Labor Cooperation).63 The NAFTA Side Agreements essentially required NAFTA parties to enforce their existing labor and environmental conditions. laws.64 They also established consultation processes for labor and employment issues and allowed dispute settlement that could result in monetary penalties if a country did not "effectively enforce its occupational safety and health, child labor, or technical minimum wage standards."6 5 Most labor. however, rights, including freedom of association, the right to strike, and collective bargaining, were limited to advisory review and ministerial oversight.6 6 With these agreements in hand, Congress agreed to pass legislation implementing NAFTA. Bush began pushing for a series of new free trade agreements with Panama, Korea, Colombia and Peru, advocates and their congressional allies argued that labor and environment chapters should contain stricter requirements. First, the labor and environment chapters in trade agreements will in future contain material standards that all parties must comply with.
The trade representative was quick to clarify that they would not: "We [the United States] have nothing to fear from also taking on FTA commitments [based on international labor and environmental standards] and subjecting those commitments to the FTA dispute settlement process trade The labor and environment chapters in free trade agreements were still intended for non-developed countries. These compliance plans, even if set aside in the TPP itself, are state-of-the-art for labor and environment provisions. Unlike the generally applicable labor and environmental chapters, these compliance plans are not even nominally reciprocal and create obligations only for developing countries.
The existence of substantive labor and environmental obligations, and especially the consistency plans, also challenge the idea advanced in the context. As Senator Elizabeth Warren has pointed out, the labor and environmental provisions still have weaker enforcement provisions than the investment chapters of preferential trade agreements.7 9 Foreign investors can challenge government action that violates investor rights under the investment chapters of trade agreements such as the TPP or NAFTA.s0 In contrast, only governments can enforce the labor and enforce environmental chapters through state-to-state dispute settlement.
Trade Adjustment Assistance
TOWARD AN ECONOMIC DEVELOPMENT
In this part, I propose a new chapter on economic development that should be included in all future trade agreements. In Section A, I argue that the Economic Development Chapter should contain commitments to spend a certain amount of funding per year on programs that redistribute the gains from trade. These fiscal obligations would be indexed so that they rose and fell with the losses created by trade agreements.
Although nations need flexibility in the types of programs they can choose to satisfy this commitment, the Economic Development Chapter should at least push states to use their economic development programs to invest in public education and infrastructure. The obligations proposed here are therefore only an extension and deepening of soft norms already found in the most recent generation of trade agreements. The Economic Development Chapter will require countries to collect data on the domestic winners and losers of liberalized trade and to report that data, along with measures taken to redistribute the gains from trade domestically, to an Economic Development Committee.
By linking domestic policies that help people who suffer or think they will suffer from international trade with rules that liberalize trade, trade agreements can offer something for everyone. They focus on improving labor and environmental standards in trade agreements and removing ISDS provisions.
Economic Development Obligations
A new Economic Development Chapter, negotiated by the Trump administration as part of NAFTA's renegotiation, could limit a country's economic development obligations to fifty percent of annual gains from trade. In other words, if trade does not cause economic harm, the economic development obligations will naturally lapse. For example, an economic development chapter in a renegotiated NAFTA could impose a minimum spending requirement of $50 billion per year for ten years, indexed as described above.
The expenditure requirements form the backbone of the economic development obligations that states will undertake. Countries have different needs and different capacities, and the chapters on economic development should be aware of this fact. Although states would have discretion in the types of programs they choose, an economic development chapter could still push member states toward certain categories of spending.
To somewhat disentangle these two categories, Economic Development Chapters should direct countries to significantly increase their spending on public education in negatively affected communities. Finally, beyond the obligations contained in an Economic Development chapter, we must ask how feasible such commitments are.
Monitoring and Enforcement
For example, if the United States or Canada failed to spend the required amount, another country would have the right to refer a dispute to an international tribunal. 9 ("The Committee... may make suggestions and general recommendations based on the examination of reports and information received from States Parties."); ID card. 11 ("If a State Party considers that another State Party is not giving effect to the provisions of this Treaty, it may bring the matter to the attention of the Committee.").
It could be argued that the rules of the economic development chapters are unlikely to ever be enforced against developed countries such as the United States or the EU. The United States could consider filing a lawsuit challenging Mexico's implementation of the economic development chapter as a kind and humane method of dealing with illegal immigration from Mexico to the United States. In the same way, Mexico could file a claim against the United States to protect Mexicans or Mexican Americans working in the United States.
For example, India indicated that it would file a trade case challenging the legality of government support for the renewable energy sector in the United States since the US could also argue that private parties such as the AFL-CIO should be able to directly apply the conditions of the labor and environment chapters.
The New Political Economy
142 Private enforcement of economic development obligations, however, differs from private enforcement of investment commitments because the private party most likely to seek enforcement of economic development obligations would do so against its own state (ie, the AFL-CIO, which wants the United States to meet its economic development obligations development). Second, a binding dispute settlement system could deal with private claims along the lines of the European Court of Human Rights. Since one of the main purposes of the economic development chapter is to rebuild a broad coalition in favor of international trade agreements, the economic development chapter itself should not directly involve a private right of action that can lead to binding penalties.
In light of these factors, the traditional economic and sovereignty arguments for leaving questions of the distribution of trade gains to domestic policy are no longer tenable. Most importantly, the chapters on economic development will tie the hands of national lawmakers by linking trade liberalization to domestic policies that share the gains from trade. In exchange for this loss of flexibility, trade negotiators and the business interests that favor liberalized trade will receive additional support from unions and domestic constituencies that can benefit from the economic development chapter.
Countries, and especially individual constituencies in developed countries, should also advocate for a robust chapter on economic development, making agreement and implementation politically possible. Developing countries should advocate an expanded economic development chapter because it will create stability in the process of ratifying and implementing trade agreements.
