International Trade: What Does Justice Demand?

On April 5, 2006, the Carnegie Council's Global Social Justice program brought together five distinguished panelists and asked them to give their views on the question of justice with respect to international trade. The following is a summary of their remarks.

• What Are Debates about Justice in International Trade Really about?
  Christian Barry, Editor, Ethics & International Affairs
• International Trade and Democratic Legitimacy
  Todd Tucker, Research Director, Global Trade Watch, Public Citizen
• Justice in International Trade-Liberalization: A Proposed Framework for Analysis
  Robert Hockett, Cornell Law School
• Promoting Human Development through Trade
  Kamal Malhotra, Senior Adviser on Inclusive Globalization, UNDP
• Assessing the Complexities of the World Trading System
  Sanjay Reddy

What are debates about justice in international trade really about?
Christian Barry, Editor Ethics and International Affairs Journal

The WTO ministerial meeting in Hong Kong—the most recent of the Doha development round talks—confirmed the salience of the debate on trade, which has focused on the question of whether the evolving WTO system, which aims to liberalize trade in goods, capital, ideas, and (to a lesser extent) people within a multilateral and market-oriented framework, is fair or just. Some activists, academics, and policy makers have increasingly voiced concerns that the trade system is seriously unjust, or at the very least not as just as it might be. Others have rushed to its defense, arguing that even if this system is not the best of all possible trading systems, it is certainly the best that can be feasibly realized in the present world.

Disagreements about the justice of the WTO system are sometimes purely empirical, concerning only the best means to achieve shared ethical objectives. In such cases, advocates of opposing positions agree on the considerations that are relevant for determining the justice of these rules—they share the same conception of justice in trade—but nevertheless disagree about how these considerations apply to a particular case because they disagree on relevant facts. That is, we can have purely empirical disagreements about the justice of the World Trade Organization's agreement on intellectual property rules (the TRIPS agreement) because of divergent predictions of how TRIPS will serve the shared goals of ensuring access to life-saving medical treatments and protecting the property rights of those who create socially beneficial products such as life-saving medical treatments.

However, the debate is often underlined by divergent views on more fundamental questions of principle. In such cases, advocates of opposing positions may agree on all the relevant facts but disagree about whether some arrangements are just. We may thus agree completely in our predictions of the likely effects of the TRIPS agreement, yet still disagree about its justice. This might happen because we attach different importance to the goals of ensuring access of poor people to life-saving drugs and and protecting the property rights of those who create .

It is often very difficult in practice to determine what kind of disagreements are really at issue. Consider, for example, two statements on the outcome from Hong Kong. Oxfam's spokesman Phil Bloomer commented: "Rich country interests have prevailed yet again and poor countries have had to fight a rearguard action simply to keep some of their issues on the table." In contrast, WTO's director-general, Pascal Lamy, described the WTO as a "healthy and democratic common institution" in which decision-making is "burdensome and cumbersome" yet "remains the best way to take decisions that impact directly the lives of billions of people." Lamy's refusal to denounce the HOng Kong meeting may be due either to the fact that he feels that rich country interests did not indeed prevail, or because their having prevailed is part and parcel of a healthy democratic institution, and therefore cannot be viewed as a serious ethical problem.

Even when it seems that fundamental disagreements of principle are at stake, their precise nature often remains unclear. This is in part because debates about global trade have been riddled with accusations of bad faith, and also because both sides have often opportunistically invoked principles that support their side of the argument, without thinking through their argument's broader implications—and perhaps purposefully ignoring them.

There is therefore great need for reasoned debate about the principles that might be deemed relevant for evaluating the justice of global trade, and the modifications of the trading system (if any), that a plausible conception of justice in trade would demand.

The aim of this panel is diagnostic—attempting to identify correctly the true nature of the value-based disagreements about the justice of the emerging system of international trade—and constructive—to clarify the nature of the questions that a plausible account of justice in trade must minimally address and provide some (often tentative) answers to them.

What might be some of the different issues at stake in discussions of justice in trade?
(Here I draw on joint work with Sanjay Reddy)

The first issue is that of the appropriate objects of trade. That is, what kinds of goods and services should be considered tradable? ? It is widely held that some goods and services—services provided by assassins, for example—should not be traded at all. And it is also often claimed that while some goods and services can be traded, they can only be traded for certain other types of things.Hence, it might be argued that a legislator may permissably help another legislator (or legislators) by offering to lobby for and support an initiative that he might otherwise disfavor, on the understanding that the favor will be returned someday. However, he may not offer such support in exchange for financial reward.

The second issue is that of the process considerations relevant to trade. Three types of process considerations may be deemed important:

• The first focuses on the nature of particular trades (exchange of goods and/or services) themselves. A conception of justice in trade may claim that to be legitimate, trades must not involve bullying, coercion, or various forms of deception.
• The second focuses on the potential relevance of prior trading activity to present trades. However free of bullying, coercion, or deception a trade of some good may be, it may be deemed illegitimate if this good was previously stolen from its rightful owner, or if past transfers of this good involved just such bullying, coercion, or deception.
• The third focuses on the nature of the production process by which some good or service is produced. Goods that are produced through the use of slavery or the worst forms of child labor, or which arose from a process that caused grave harms to the environment, for example, might be deemed ineligible for legitimate trade.

The first two types of these process considerations may be relevant not only to trades, but to systems of trade rules. That is, whether international trading rules have been agreed to as a result of bullying, coercion, or various forms of deception may be deemed relevant to their legitimacy. And even if some rules have indeed been agreed to in a way that has not involved such interactions, an account of justice in trade may nevertheless maintain that the legitimacy of these rules is seriously called into question if past interactions between countries making such agreements involved bullying, coercion, and so on.

The third issue relates to what kinds of agents can engage in trade or in making agreements on trade rules. It might be maintained, for example, that children or mentally incapacitated persons cannot engage in trades even of those goods that they rightfully own.Those who affirm that prostitution should be legalized (and who thus consider the provision of such services to be a legitimate object of trade), typically also affirm that children cannot enter such markets either as buyers or sellers. It might also be claimed that certain types of governments, notably those that fail even to be minimally representative of the interests of their people, are not at liberty to trade its natural resources. Similar considerations may apply to the making of trade agreements. The rules of international trade are decided or agreed to by particular governments, and that particular government's decision is binding on all people in the country that live at present, as well as those who will live in the future. Because of that, we may wish to ask whether these governments ought to meet requirements in order to be deemed legitimate rule-making agents in international trade.

The fourth issue relates to terms of exchange. A conception of justice in trade may claim that, to be legitimate, an exchange of goods and services must not involve one of the trading partners getting less than fair value for what they provide to the other. Of course, conceptions most often differ because they employ different notions of what consists of fair value. Some maintain that there is no coherent notion of the value of goods and services aside from the maximum bids they would receive in an auction. But others, notably those presently demanding that coffee producers in developing countries (and others) receive a fair price for the goods that they are exchanging, clearly reject this notion. Why, they ask, should it be considered fair that coffee producers, for example receive prices that barely allow them to maintain their basic needs while those bringing such goods to market enjoy record breaking profits?

All actors' positions with regard to international trade involve, implicitly at least, views about these four issues. Yet they rarely realize that it is with respect to their views about these issues and the principles informing them in which their disagreements are rooted. Taking a step back and revisiting these questions is where the greatest potential lies for moving the debate forward in a more constructive way.

Back to top

International Trade and Democratic Legitimacy
Todd Tucker, Research Director, Global Trade Watch, Public Citizen

What goods should be allowed to be traded?
Public Citizen's Global Trade Watch would point out three things that should not be in trade agreements. It is just an introductory list for the purpose of illustration: investment, services, and government procurement.

Investment Rules. Trade agreements should not cover the broad variety of investment rules that are currently covered through the North American Free Trade Agreement (NAFTA). The attempt to get NAFTA-style rules into the World Trade Organization (WTO) through the Multilateral Agreement on Investment (MAI) in the 1990s was defeated through a widespread global civil society coalition that was in opposition to the MAI's terms.

There are numerous reasons we have come to our conclusions on investment rules:

NAFTA's Chapter 11 details an investor/state mechanism whereby corporations, even though they are not party to a treaty, are given special rights and special standing to sue governments, in violation of sovereign immunity and a number of other precedents. It was a relatively new thing to include these types of investment rules in a "free trade" agreement, but it has been replicated in most of the trade agreements that the United States has signed since NAFTA. Through it, corporations are claiming special rights and standing, even though they aren't a party to it, and they sue governments for regulatory actions which displease them. Their claims go far beyond the takings limitations in U.S. law that set out parameters for under what conditions a corporation would be able to sue a government or claim expropriation. Takings limitations have a long history in U.S. law, and they have been fought out over a long time in court battles that have tried to achieve the right balance between corporate and public interests.

This type of investment chapter is a recipe for abuse, and it has been abused. One example is the case of Metalclad, a U.S. corporation that in 1993 purchased a toxic waste dump in the state of San Luis Potosi in Mexico. They bought what had been a Mexican firm and were going through the process of trying to obtain a permit to further expand this toxic waste dump. In 1994, the local state government put a cease order on this expansion. In 1997, the final denying of the expansion permit was brought into a NAFTA tribunal by Metalclad, where Metalclad sued not the state government, but the federal government of Mexico, and claimed that the denial of a permit was tantamount to expropriation. In 2000, a NAFTA tribunal— which is not accountable either to the United States or the Mexican public—awarded $16 million to Metalclad. Subsequently, the Mexican federal government tried to get the government of the state of San Luis Potosi to cough up the bill. There was a real struggle over that.

This case illustrates several of the reasons why this type of investment rules should not be in trade agreements:

(a) They undermine local-land use laws. In the United States, local municipalities and state governments have all sorts of zoning regulations, which can be used to achieve all sorts of important public-interest objectives, such as environmental objectives. Having NAFTA be able to go around these processes is a real problem.

(b) They expand the definition of "takings" from what we have under U.S. law. As I said, the U.S. domestic political and legal process allows for some of these political struggles to be had out and a balance achieved between competing interests. This is important for the cause of justice. Clearly, in NAFTA, a lot of the balance that had been constructed in the U.S. Constitution was eroded.

Essential Services. Trade agreements should not cover services, and especially essential services which are highly regulated by governments for public interest purposes. I would put water and health care on the "essential" list. That list could be, certainly, expanded. But the WTO's services agreement, the General Agreement on Trade in Services (GATS), is a mechanism whereby water and health care and other essential services are in effect regulated at the level of the WTO.

This creates many problems. In the United States it is the states that are responsible for the regulation of most service sectors, and states were not meaningfully consulted with when the Uruguay Round was being negotiated. One example where the WTO rules conflict with U.S. rules is in higher education. Currently, the United States is proposing at the ongoing GATS negotiations that higher education be put on the table for GATS coverage, and is looking for other countries to also make similar offers in higher education. U.S. state officials, state schools, other higher education officials were not consulted on this. We see that as a problem.

Institutions like Harvard might see that there would be some benefits of having GATS coverage of higher education, since it could make it easier to expand and have overseas facilities and international educational operations. But as most of us know, schools all around the United States have been engaging in international education opportunities for quite a long time. So it's not clear that they actually needed a trade agreement to do what they are already successfully doing. On the other hand, one implication that this could have for the United States is that the distinction between in-state and out-of-state tuition, which is a strong incentive of educating the state population, could become GATS-illegal in future rounds of negotiation. We see that as a problem.

Procurement. Trade agreements should not cover government procurement. Similar to services, we see procurement as a development issue. Developing countries, especially their state sectors, should be able to favor local providers as a way of building up industrial and service infrastructure in the country, and capacity.

The growing unpopularity of some of these kinds of provisions, especially as they relate to procurement, can be seen most recently in that only 19 U.S. states signed up for the procurement provisions of the Central America Free Trade Agreement (CAFTA). The rest asked to be withheld before CAFTA was negotiated or during the process of the CAFTA negotiations. In these instances, governors and/or state legislatures asked to be taken off of the procurement provisions.

Another instance of these kinds of procurement rules conflicting with local development: 33 states in the United States have introduced anti-offshoring/ local preference bills, where local contractors are favored for state development purposes. These kinds of preferences are also GATS-illegal. This also seems to be in opposition to the public interest.

We think that, essentially, the World Trade Organization needs to be pared back to what it was when it was the GATT, and even the GATT, in some instances, would require reforms.

Through what processes should goods be produced in order to be allowed to be traded internationally?
One way to interpret this question is whether labor rights should be added to the list of things that the WTO enforces. I would say that we accept Christian Barry and Sanjay Reddy's proposition, which they advance in their monograph "Just Linkage," that it is feasible and desirable to link trade to labor rights enforcement. Furthermore, we believe in the principle of subsidiarity—that decisions should be made at the lowest level possible—so that the people most directly affected can have the most say.

Global trade does need global rules, although we differ about what is considered "trade" under the current WTO mandate and what the rules should be. We believe, as a political and substantive matter, that the WTO is the wrong body to be enforcing labor standards. It is mixing two very different kinds of things.

For instance, to use a U.S. example, we don't set child welfare and food safety rules in the context of a tax bill. That is primarily because there are different constituencies that seek to lobby and that are active on these various issues. There is an expertise question as well. People writing a tax bill may not be the best people to be enforcing or designing child welfare or food safety policy. If you look on the inside of the WTO or some of the international financial institutions, the people interacting at the table are trade ministers and finance ministers. You don't have the labor minister at the table; you don't have the food safety minister at the table. It has been that way and that seems to be a fairly entrenched culture.

If the WTO was just the GATT, that wouldn't be a problem. But the WTO is trying to do a lot more than just regulate pure "trade." So we certainly see the limitation of the representativity of the constituencies that is most directly involved in the WTO as being a problem. The effort to have labor rules enforced at the WTO is akin to a fight between a lion of trade and a bull of labor in the lion's den. Such a match-up wouldn't be fair, even though the bull is strong. You need a neutral territory to discuss the interlinking of trade and labor law.

In fact, there are various easy ways to design a cohesion between the two separate spheres. Some of them are proposed in "Just Linkage." I would just add another one. For instance, the TRIPS agreement, the WTO's treaty on intellectual property rights, has a provision requiring that countries adhere to certain aspects and provisions of the World Intellectual Property Organization (WIPO). To be in violation of that provision is to be in violation of TRIPS, and sanctions can be levied in the event of non-compliance. This doesn't mean that the WTO administers the WIPO. It is just a WTO requirement that can lead to a state-to-state challenge.

It is also very important to have universal rights. Many of these have been already negotiated and have come to agreement in the context of the United Nations. If revisions need to be made, they could certainly be made there as well, and UN provisions could be tucked into a reformed and downsized GATT.

In our view the real issue is power. At the WTO there is a way of doing things currently, an entrenched culture. How would we make a transition to enforcing labor standards? From what we have seen, as a matter of how to get labor standards more quickly enforced as a real matter in trade agreements, it would be a lot easier to reduce the power of the WTO than to build other mechanisms. But certainly a linkage is possible between trade and labor rights, and we know some of the criteria for evaluating the efficacy of different potential institutional arrangements. I think that is also very well laid out in "Just Linkage."

Going forward, I think one of the challenges is about getting an adequate "floor" in place to protect labor rights. But I would also say that removing the "ceiling" to development that certain aspects of the WTO currently represent, is an equal if not greater priority.

This is so for empirical reasons. During the time that we have had the WTO, NAFTA, and other trade agreements, global growth has been quite a bit slower than previously. In1980-2000, per-capita growth has been about half that in 1960-80. So there seem to be empirical reasons to doubt that we live in the best of all worlds.

There are also historical reasons. The sort of development model encapsulated in restrictions of the WTO doesn't have any track record of actually achieving development. Today's rich countries, such as the United States, used vigorous industrial policy, used a variety of policies that would now be WTO-illegal.

On what terms should goods be exchanged? For example, should countries be permitted to protect their own industries when doing so harms workers elsewhere?
I don't think that we necessarily need to be justifying whether it's acceptable to make interventions—industrial policy or otherwise—on behalf of special interests. Interventions are already happening. It is just that they are happening more for the benefit of the powerful rather than for the benefit of those that most need justice.

The WTO's agreement on intellectual property, the TRIPS, this is a form of protectionism—a form of state intervention to protect the monopoly profits of patent holders. That's not a free market. So people interested in justice, perhaps, don't need to worry about how to justify an intervention in the market for workers or disadvantaged people. My colleague Dean Baker, of the Center for Economic and Policy Research, has a forthcoming book, The Conservative Nanny State, which looks at eight different ways in which, in this case, the powerful interests in the United States use state interventions as a way of protecting their financial and economic advantages. The question is really about power, how we use it, who is benefiting, how we design rules that allow us to address the needs of working people, of disadvantaged people, and so on.

Back to top

Justice in International Trade-Liberalization: A Proposed Framework for Analysis
Robert Hockett, Cornell Law School

I am going to talk at a somewhat higher level of abstraction than Todd just did, which might strike some as surprising since I am a lawyer and might accordingly be expected to concern myself more with the finer grain of institutional detail. But I think that it might be more helpful for present purposes to try to diagnose a difficulty that I myself experience when trying to think about the justice or the propriety of global trade liberalization, including the WTO process; and to offer, in connection with that diagnosis, what I think might be a useful framework that will enable us to get out of a particular cognitive difficulty that seems to me to afflict efforts at assessing the justice-significance of global trade liberalization.

Here is what seems to me the basic problem, the "cognitive difficulty," stated intuitively: when I hear Todd and likeminded people who work very hard on behalf of labor standards, regulatory standards, and the like, speak, I find I am invariably quite sympathetic and moved by their efforts. "I'm with them," I think. But then, by what seems to be nearly the same token, I sometimes hear others say, "But what about all of the global poor who are benefited by trade liberalization? Isn't it quite infeasible to expect certain labor standards and regulatory standards, to which we have become accustomed within the United States, to be met by other countries that are much less developed? And thus, insofar as we want to impose similar standards on these other jurisdictions as a condition for liberalizing trade, aren't we, in effect, demanding the impossible, and thus retarding global trade liberalization, and thus condemning the non-American poor to continuing lives of desperation and misery?"

When I hear that kind of argument, I think, "well, they have a point too." So now what to do? What to think? That is what I am calling "the cognitive difficulty." It is a sort of quandary, or "paradox," which seems to afflict my ethical cognition or "processing," so to speak, of arguments that I hear about trade-liberalization under the aspect of justice. So what I am going to do is to try to diagnose this difficulty—to trace it back to what I think might be its source. And in doing that I will be offering, in effect, a framework for thinking about the matter which will both dissolve the quandary and offer a perhaps useful means actually of assessing the justice-significance of trade-liberalization.

Some Implicit but Generally Unarticulated Background Assumptions. There are, I think, a number of assumptions that lurk in the background of debate over trade-liberalization. Drawing them out is a first step in diagnosing and overcoming the quandary I've noted. The first assumption is that there is, just out there, a global stock of something that we might call "ethically exogenous resources"—that is, "stuff," material, like gold and copper and petroleum and various other materials—to describe things intuitively—to which initially nobody has more claim than anybody else. Some portion, then, of anybody's wealth-holding presumably is traceable back to that initial stock. If we wanted to make the description of these ethically exogenous resources more rich (and more strictly complete rather than simply immediately intuitively appreciable), we would of course have to include public-domain cultural deposits—knowledge, language, things that have been left us by our forebears that none of us actually has produced, and thus that none of us has a prior claim to. But for present purposes it will suffice to think of ethically exogenous resources simply as "stuff" upon which all of us have equal claim.

Now if there is such a stock of ethically exogenous stuff that nobody has a prior claim to over anybody else, it seems fair to think that every person, everybody who is an appropriate subject of moral concern, is entitled, in justice, to an equal pro rata share of this stock. And this is the second working assumption that I think many people operate under. We tend intuitively to think of each other as bearing equal claims on what ever is out there that nobody currently living has created or is responsible for the existence of.

The third implicit assumption is that this endowment of "stuff," these initial resources, is not actually distributed in such equal manner, is not spread out equally in a pro rata manner. It's just not the case that every person actually has her rightful pro rata share of the ethnically exogenous resources.

Now the fourth assumption is that we can partition the class of all persons who are entitled to equal ethical or justice concern into the following four subclasses: I am going to call the first class the "Ones." The Ones have more than their equal pro rata shares. They have more than what they actually have a right to of this initial ethically exogenous "stuff." The second class is that of those I call the "Twos." They have precisely their rightful pro rata shares—no more, no less. Then there is another class, the Threes, who have less than their shares. And finally there are the Fours, the desperately poor who have much less than their rightful shares.

Finally I think that there are three further assumptions under which many of us tend to operate. One is that the class of Ones is roughly coextensive with the class of residual claimants on firms—that is, shareholders or holders of significant debt securities that are issued by firms. The next assumption is that the classes of Twos and Threes, together, are roughly coextensive with the class of non-shareholding, union wage-earning and salary-earning laborers in countries with advanced economies. And then the final assumption is that the class of Fours is roughly coextensive with the class of very low-wage earners and the unemployed, by far the greater part of whom inhabit economically underdeveloped countries.

Now, if the last several assumptions are correct, then global trade liberalization will tend most immediately to benefit the Ones and the Fours, and it will tend to do so at the immediate expense of the Twos and the Threes. (I am ignoring long-term "rising tides lift all boats" type claims for the moment.) But then this means that global trade liberalization is afflicted with a kind of ethical ambiguity, and possibly a kind of ethical indeterminacy, which I think is ultimately responsible for the difficulty that some of us sometimes experience when we try to decide whether trade liberalization is a good thing or not, and what kinds of conditions should be attached as conditions for acquiescence in further global trade liberalization. This ambiguity, I think, accounts for the "cognitive difficulty" that I mentioned in opening my remarks.

A Value-Ambiguity Raised by the Assumptions, and How to Resolve It. Here, more precisely, is the ambiguity (which I don't think in the end is going to be terribly surprising): Insofar as we restrict our comparison to the Ones, on the one side, and the Twos and/or Threes, on the other, there is a clear justice-loss in the case of global trade liberalization, at least in the short term and probably longer than that in view of personal "retooling" costs and the relatively short length of a working life. That is, if we forget about the Fours—if we ignore the desperately poor, most of whom, by far, are outside of advanced economies, outside of the United States in particular—it's pretty clear that trade liberalization is a bad thing, because we are benefiting the Ones at the expense of the Twos and the Threes. The Ones are already overendowed; the Twos are at best properly endowed; the Threes are underendowed. And so redistributing from the Twos and Threes to the Ones constitutes a justice-loss.

On the other hand, if we restrict the comparison to the Twos and/or the Threes, on the one hand, and the Fours, on the other, leaving the Ones out of account, then we have the possibility that there is a sort of justice gain that comes with trade liberalization. The degree of global injustice—the justice-shortfall, so to speak—might be viewed as being now partly made up; "stuff" is more nearly equalized between members of the Twos, Threes, and Fours. Alternatively we might conclude that we have a simple justice indeterminacy in respect of the changed relations among Twos, Threes and Fours, because it's not clear that we legitimately ought to be comparing the Twos and Threes, on the one side, and the Fours on the other, without paying attention to the Ones. It's not clear that we should even be ethically interested in the comparative injustice suffered, say, by the Threes on the one hand and the Fours on the other. Possibly we shouldn't even be spending our time worrying about that. Perhaps we ought instead to be ensuring that we keep the Ones in view rather than simply considering the relative holdings of Twos, Threes and Fours alone.

Possible Weak Points in the Proposed Analysis. Now it seems to me that it's the Ones whom we oftentimes forget, when those who advocate trade liberalization say, "Well, think about all those desperate global poor." Those advocates are of course partly right; we should be thinking about the desperate global poor. But the Ones are being left out of it, and they shouldn't be. On the other hand, people are also right when they say, "Well, what about the local Threes, who would be Fours had it not been for the great gains that we've made in regulatory development, in labor legislation, and the like, ever since the mid-19th century in the United States? And the fact that both sides are right, but that we are ignoring ethically relevant persons when assenting to either side alone, is the cause of the cognitive difficulty.

That is my diagnosis of the quandary that I have experienced, and that I think others have experienced, in trying to decide what to make of the justice significance of continued trade liberalization. And if I am right about this, then the way to dissolve to quandary presumably is to keep all relevant parties—the Ones, Twos, Threes and Fours—in view both when assessing the justice or otherwise of proposed trade-liberalizing measures (including further WTO rounds), and when considering what sorts of conditions we ought to impose upon further liberalization if the latter looks unlikely to be unambiguously justice-inoffensive absent such conditioning. I'll turn to one proposed condition in a moment, but first I should quickly note a few possible flaws in the diagnosis and associated analytical framework that I've just run through.

So, there are a number of places at which I might be wrong in what I have just proposed:

First, it could of course be that nobody else thinks about the problem of trade-liberalization and its justice-significance in the way that I have described, or experiences any sort of quandary in thinking about these matters. What I have just done, that is to say, might amount simply to an autobiographical report that is of no use or significance to anybody. I am, of course, hoping that that is not the case.

Second, of course, there might be some conceptual confusion, some incoherence, in the first couple of assumptions that I have reported that I think are lurking in the background. Maybe it makes no sense to talk about the idea of a "global exogenous endowment" of resources, of "stuff" to which we all enjoy equal pro rata claims, in the first place. And even if that's not the case, so that it is not incoherent to speak of such an endowment, maybe there is something nonetheless inherently indeterminate about that quantum, something that renders it practically neither measurable nor even approximatable. Relatedly, maybe there just is no way practically to measure what everybody's rightful share of the global endowment would be.

Third, there might be something factually wrong about any number of the many empirical assumptions that I specified—about the Ones, Twos,and so on, and about what their income-sources are and where they are located, or about the income-distributive effects of trade-liberalization.

I think that what I have listed are plausible empirical claims, of course. I think there are reasons that many people walk through the world with those assumptions in the backs of their minds, and I think these people are probably right. But I just don't know at this point with any certainty. Further research, one hopes, will enable us to determine whether the empirical assumptions are right. And perhaps somebody will now be able to come up with a reasonable measurement of the value of the global stock—the ethically exogenous "stuff"—too, if what I have offered amounts to a coherent formulation.

Some Implications for Collective Action. Now if I am right and what I have just offered really amounts to a useful framework for thinking about the justice of global trade liberalization, then this raises the question: What do we do, then? If my proposed way of thinking about the matter is actually useful, presumably it's going to recommend some course of action, or some menu of such courses of action. Now I am not going to get into much detail about those kinds of courses of action right now, partly because there is a bit more detail along these lines in my contribution to the book whose release we're now marking, Global Institutions and Responsibilities: Achieving Global Justice, but also because there is very little time left to me for speaking right now. So I am going to close with one possibility that I have recently been exploring in some of my scholarly work, and which it seems to me might be worth further exploring.

So here is the idea: If it is indeed the case that it is the owners of—i.e., shareholders in—firms who are, by and large, the Ones, as I have hypothesized above, and if these folk are indeed overendowed relative to the baseline of the initial share of resources (ethically exogenous "stuff") that each person is entitled to initially, then might there not be some way that we might, in justice, condition further global trade liberalization upon a broadening of the class of shareholders? What I am getting at is: Might there not be a way to guarantee that, as a condition of liberalizing trade, those who might be harmed locally—say, the Threes or perhaps even the Twos—must be given ownership shares in the firms themselves that are thought to benefit by dint of global trade liberalization? We might, for example, require benefitting firms to issue new shares for the benefit of those who are dislocated as their own jobs are lost. That would dilute the values of shares held by Ones, of course, but that is only another way of saying that benefitting ones would have to share some of their winnings with the losers—the Threes and perhaps some of the Twos. And that is simply to say, in turn—at least if the assumptions stated before are correct—by way of a tentative answer to that question which forms the title of today's panel discussion, that this, or some functional equivalent, is what just trade-liberalization will require of us. And so I will leave things, for the present, on that perhaps somewhat provocative note.

Back to top

Promoting Human Development through Trade
Kamal Malhotra, Senior Adviser on Inclusive Globalization, UNDP

I speak in my individual capacity, and nothing I say here is the official position of the United Nations.

Principles of Justice. When I think of justice from the framework that I work with, I think of enhancing human development as an outcome of justice. When I look at that goal and I look at a vision for the future in terms of a trade regime which is friendly to human development, there are four simple principles of international trade that I would like to highlight.

The first would seem to be acceptable to most people, at least rhetorically, but has very profound implications if you actually follow it through: that trade is simply a means to an end; it's not an end in itself. A lot of people would agree with that statement at the level of principle or rhetoric, but if you look at what it actually means in practice, among other things it means that you should not be trying to maximize trade volumes-you should be trying to maximize a quality of trade that contributes to human development or to justice, more broadly. The two are quite different things.

A second key principle is that trade rules must allow for diversity in national institutions, development strategies, and standards. There is no one-size-fits-all, and trade rules should not be geared to a one-size-fits-all approach, especially if that "one size" doesn't fit the vast majority of the member states.

Third, countries should have the right to protect their own institutions and their development priorities.

Last but not least, no country should have the right to impose its institutional preferences on others.

Implications for Practice. These four principles have many operational implications. I would like to focus on four.

First, designing a trade regime which respects these principles in a serious manner would mean that you will need to have human development assessments which are ex ante, not just ex post. These assessments should entail research, calculation of costs, and analysis of human development implications of multilateral, regional, and bilateral agreements before such agreements are actually entered into.

Second, the trade regime should not unify and harmonize national policies, but instead should allow for diversity in development strategies.

Third, trade rules must be asymmetric. The principles of reciprocity and non-discrimination should be linked to the economic capacity of countries and restricted to groups of countries at similar levels of human development.

Fourth, we need a mindset shift from what is essentially a market-access approach, which guides the current global trade regime, to what I would call a human development perspective. Such a shift means that the trade regime should stop being evaluated in terms of whether it maximizes trade in goods and services. Instead, the question should be whether trade arrangements, current and proposed, maximize the possibilities for human development at the national level. Making such a shift will require that developing countries articulate their needs, not primarily in terms of market access, but in terms of the policy autonomy they will need to allow them to implement institutional innovations and human development-friendly strategies.

What kinds of goods should be allowed to be traded?
I will address this question in terms of what sorts of goods should not be traded. I will focus on two types of goods that pose quite complex questions in terms of trade.

The first are agricultural goods which directly impinge on food security and livelihood security, particularly with respect to the poorest people in the world—or the "Fours," in Robert Hockett's terms. This Fours exist in all parts of the world: the global South, as we know, is not limited to developing countries. I think there are serious questions about trading in goods which will have negative consequences for the food and livelihood security of a large part of a population, particularly in developing countries, because so many developing countries have such large numbers of their populations in the rural sector.

The second set of goods are public goods, or goods which relate to basic social services, such as health, education, water, and some might put energy into this category. If you look at these basic social services, I have argued that there is a policy incoherence in the international system.

The Millennium Development Goals seek to achieve targets related to health, education, water. At the same time, these kinds of goods have been placed into a system where the rule is market access and progressive liberalization. The empirical evidence on privatization or liberalization of water services is mixed at best. Indeed there was a recent conference which seemed to provide a consensus that water should be put back in the public realm. The same can be said about health. We only have to look at the health system in the United States. We don't have to go very far. The same can be said about education. So there appears to be policy incoherence when we have a services agreement which is based on a framework of progressive liberalization and the Millennium Development Goals, which have been translated into the Millennium Declaration which was signed by the largest-ever gathering of heads of state in world history—and these are the same countries that are responsible for agreeing to both.

Through what processes should goods be produced in order to be allowed to be traded internationally?
This is the question of the link between trade and labor standards, but it can be used in the context of production and process methods, in terms of environmental goods.

There are some ways in which Christian Barry and Sanjay Reddy's proposal for linking trade with labor standards, which they advance in their very thoughtful monograph "Just Linkage," is problematic. The institutional context matters a lot; the choice of forum where labor rights and trade are to be linked matters a lot. I think the institutional context of the WTO is not one which is conducive to a just linkage. Also, the carrot-and-stick incentives and sanctions linking trade and labor are problematic. One of the "carrots" would probably violate one of the more fundamental principles of the WTO, the most-favored-nation status, whereas one of the "sticks," which is essentially trade sanctions, as I have argued separately, has moral problems and is also very ineffective. Indeed, in the WTO context, there is an inherent asymmetry in the use of trade sanctions. It is hard to imagine that a small country, for example Bangladesh, will bring trade sanctions against the United States, but it is easier to understand that the United States might bring trade sanctions against a developing country, as it is proposing to do even with China at the moment. So there is an inherent asymmetry in the use of trade sanctions as a disciplining stick. In the context of the WTO, using trade sanctions will perhaps result in reinforcing existing asymmetries rather than counterbalancing them.

I would also like to give one example from the trade and environment linkage. There was the very famous shrimp-turtle dispute some years ago between the United States and a number of Southeast Asian countries. I think, if you go back to the principles I enunciated, it is alright for the United States to say that it will not import shrimp if it's made in a certain way—but it's not alright to tell Thailand or Malaysia that they can only make shrimp in a certain way. This is the fundamental dilemma in the trade-environmental linkage. It is not surprising to me that the largest number of trade disputes brought before the Dispute Settlement Understanding of the WTO have been on trade and environment. If you were to put labor into that same framework, the only thing that can possibly be said is that the number of labor disputes might overtake environmental disputes in the WTO. I think this shows the difficulty of addressing the trade-labor linkage in this manner.

On what terms should goods be exchanged?
I have already indicated that there should be asymmetric rules. The asymmetry must favor development. It is not a question of favoring one country over another or certain workers over others. But there must be, if you like, positive discrimination in favor of human development. If the rules need to be asymmetric or different for different countries to enable that outcome, then so be it.

It would seem to me that the current discussions, particularly on industrial tariffs, the nonagricultural market access issue, provide a good illustration of where the rules need to be very different, because if developing countries give up the possibility of using tariffs for selective infant industry protection, you are effectively saying to late industrializers, You will never industrialize. I think this is a case where you cannot argue that industrialized countries that have had 200 to 300 years to develop, under high industrial tariffs till very recently, should ask for symmetry with developing countries. But there are many other examples.

Through what procedures should the rules of the international trade system be decided?
With respect to the consensus process, as opposed to the one-country-one-vote process, I have argued that in a formal sense, the WTO is the most democratic of all international economic governance organizations, because it has a one-country-one-vote system. Unlike the United Nations, it has no equivalent of the Security Council. In that sense, the WTO is formally more democratic than the United Nations.

But the real issue here isn't about formal democracy. It's about the consensus process by which decisions are reached, which is essentially an informal process. It's an informal process that is less than transparent, and it's an informal process that can only benefit the strong vis-à-vis the weak.

So the proposition, "Should consensus be regarded as even more democratic than majority rule," because no decision is taken until everyone agrees, I think is fundamentally flawed because of the way consensus works in practice. If you look at the rules of consensus in a lot of the international institutions, not just in the WTO, they imply that a country would have to actively oppose something to not be counted as part of the consensus. Once again, I don't see many poor or vulnerable countries getting up to actively oppose many things, even if they don't agree with them, for a variety of reasons that I don't need to go into.

Does justice demand that reciprocal concessions be made on all sides during intercountry bargaining?
I think the answer is clearly no. I think, in fact, justice demands the opposite, which is that countries at different levels of development need to be treated differently. The asymmetry in the rules needs to respect this. Otherwise, you are not respecting a country's right to development.

Back to top

Assessing the Complexities of the World Trading System
Sanjay Reddy, Barnard College, Columbia University

It is not possible to talk about what fairness in trade demands, or what a just world trading system would look like, without reference to a broader theory of global justice. Ultimately, we draw upon moral intuitions concerning the obligations of the developed countries to the developing countries, and of more advantaged persons to less advantaged persons in the world, in making sense of arguments concerning fairness in trade or the justice of the world trading system. So I think we have to keep in mind that dependence and continually refer to those more basic, or perhaps more general, conceptions. Trade, after all, is but one instrument among many for achieving particular consequences, and we should think about it in that light and ask ourselves whether trade is indeed the best instrument to achieve the goals that we desire to achieve.

Trade is one instrument for achieving development goals—increases in economic advantage in developing countries, and on the part of poor persons in developing countries. Trade is also a process of interaction between persons and between countries. There are moral issues that arise both in regard to the consequences that trade brings about and in regard to trade as a process.

The economist Paul Samuelson (and subsequently Avinash Dixit and Victor Norman) have pointed out that under certain "pure" conditions the distribution of goods and of incomes that would arise in a global free trade system—that is, a system in which there are no barriers to trade of any kind between countries—would, be the same as would arise in what they called "an integrated world equilibrium." That is to say, if one thinks of the world as one single country—an "integrated world"—and asks what outcomes would arise if there were no barriers to trade within such a world then those would be the outcomes that would arise under free trade, which is surprising in that free trade presupposes the mobility of goods and services across borders but not the mobility of capital or labor. Of course, the standard theorems about what one would expect to be the outcomes of a market economy would hold in that integrated world equilibrium. In particular, all of the imperfections that one might expect to arise within a national economy, in the absence of particular government interventions, could also potentially emerge in that world free-trade equilibrium.

The outcome might be "efficient," in the particular sense that economists understand that term, but it might, nevertheless, be one that falls short of our particular normative ends. For example, the distribution might be one that is quite unfair, and any attempt to correct that unfair distribution might be constrained by practical problems. Although global free trade would give rise to significant gains from trade, those gains might not be redistributable easily unless efficient—or so-called lump-sum—tax-and-transfer instruments exist, which, of course, they often do not, for a variety of reasons, therefore example that there are disincentives that are created by the attempt to redistribute resources. There are also political economy considerations. We know that even within the domestic economy, many forms of redistribution that we might think desirable to implement are not undertaken because there are a variety of interests that militate against them.

So the gains from trade that emerge in theory in an integrated world equilibrium under global free trade may or may not actually advance the normative ends that we have, for reasons that are exactly the same as the reasons that the elimination of all restrictions to trade within a domestic economy may not achieve those ends. Within a domestic economy, we think that it is necessary to have a variety of complementary policies, whether to bring about improved income distribution or to regulate the processes that take place within firms—for example, by ensuring that workers have rights of free association and collective bargaining, or that they are protected by occupational safety and health regulations and so on. In short, the problems of achieving justice in a global economy under free trade parallel those of achieving justice within an individual country in this particular respect.

What should be the criterion that we use to assess the global economy? As in the case of a national economy, there might be multiple criteria that could plausibly be advanced, but certainly one of those most often advanced, on newspaper op-ed pages and in academic debates, is that of improving the circumstances of the least advantaged in the world through, for example, poverty reduction. Martin Wolf in the Financial Times, for example, regularly claims that the case for freer trade is that it reduces poverty and brings about improvements in the circumstances of the least advantaged. I too am going to take that this is a central criterion for assessing the justice of the world trading system.

Does justice demand a particular level of market access for developing countries to the developed country markets, as is often suggested, for example, by Oxfam in its work on what it calls "rigged rules and double standards"? Here there is a real issue that the single-minded focus on a consequentialist account of improving the circumstances of the least advantaged can sometimes lead to a rather unnuanced treatment of the issues.

I am personally not unsympathetic, for example, to the French or the Japanese farmers who are concerned that their way of life may be harmed by agricultural trade liberalization. I think that it would be useful, at least partially, to integrate legitimate concerns, such as theirs, into a picture of what justice demands. But one also has to weigh the demands that different persons, with very different levels of advantage, can have—and one may wish to give much more weight to cotton farmers in West Africa than to those in the United States, for example. One may also wish to give special consideration to particular kinds of claims—for example, the cultural claims that Japanese farmers may have in support of restrictions on the import of rice that agribusiness interests in the United States may not have in support of subsidies on the production of cotton. By doing so, we can get a lot further in achieving realism and a sense of nuance in the debate, while also recognizing the overriding significance of the claims of the less advantaged in the world.

What about the question of whether trade, and in particular rights of market access, should be used as an incentive to bring about particular outcomes? Kamal Malhotra approached the problem of linking trade and labor rights as a practitioner and very much as somebody who is keen to see real advances for the citizens of developing countries in the short term. He pointed to the importance of realistically assessing the present political feasibility of specific reform proposals. Indeed, there are many considerations of feasibility that must be taken into account when considering concrete proposals for the reform of any system. Nevertheless, it may be important to advocate a system of rules which can potentially be described as just, even if it is not viewed as immediately feasible, if only because, by doing so, we can better recognize the specific respects in which the present world system falls short of that just arrangement and what the obstacles are to achieving it. For example, if we arrive at the conclusion that the reason why a particular linkage proposal is not desirable is that powerful interests would not agree to it, we will at least have clarified the present source of the obstacles to achieving arrangements that may, in principle, be desirable to have— which can in turn provide a basis for moral evaluation and a focus for transformative action.

Two economists, Kyle Bagwell and Robert Staiger, have pointed out that the WTO system creates a very strong incentive to undertake what they call "a regulatory chill," or what in other contexts has been called "a race to the bottom" in social and environmental standards. The reason that the WTO system does this is that it puts in place "tariff bindings," or ceilings on the extent to which countries can raise tariffs in particular areas. The idea of having tariff bindings is to guarantee mutual market access to different countries. However, there is another way of ensuring greater market access for one's own producers relative to producers in other countries, which is to push down the labor or environmental standards which affect costs of production.

In the WTO system, since tariffs are bound and cannot be raised as a way to protect one's domestic producers, there is only one other way to protect one's producers or to give them competitive advantage: to push down environmental and social standards. So the WTO system, as an inbuilt logical consequence, generates a degree of competition among countries to lower social and environmental standards. The consequence of recognizing this, of course, is to see that a more logically consistent and people-friendly world trading system should have not only ceilings, but also floors. It should not only possess bindings on tariffs, but also require minima in terms of environmental and social standards, so as to save countries from the sorry outcome of the multi-country prisoner's dilemma that they otherwise face.

The developing countries have rightly worried that any attempt to introduce environmental and labor standards considerations into the architecture of the world trading system would lead to a very unrealistic level of expectations as to the laws and policies that they should implement domestically and would ultimately have the effect of effectively excluding developing countries from the world trading system. In response to this concern, we could imagine that, rather than there being a single standard for all countries, there should be a graduated ladder of expectations, with the level of expectations set for countries very much depending on the capacities of the state in that country to bring about certain forms of enforcement, and with the orientation being more promotive than punitive.

Ultimately, whether this type of a system can really be achieved and implemented in a manner that serves the interests of workers in developing countries will, of course, depend on the extent to which certain procedural guarantees can be put in place that will ensure that the system is context-sensitive in its demands, rule-based and transparent in its rules and in its functioning (perhaps resolving problems through by a quasi-neutral adjudicative body such as that employed by the WTO to credibly guarantee mutual market access).

A central prerequisite for any such system to emerge may be to have a greater degree of procedural fairness in the process by which the rules of the world trading system come to be formed. Kamal Malhotra pointed to the formal egalitarianism of the WTO system, its consensus requirement, its nominal provision of equal rights to all countries. However, we know that in practice the consensus system has typically been used to railroad countries—in particular, developing countries—into accepting quite a lot that they would not have otherwise been willing to accept, since they have typically been provided a fait accompli after a great deal of work has been done in "green rooms," or in restricted club-like settings by the countries which were perceived to have a larger stake in the world trading system. Countries have been perceived to have a "larger stake" in world trade when they have accounted for a larger share or volume of world trade—typically, richer countries—not countries that had a larger stake in the sense of having, for example, larger numbers of persons who would potentially be affected. This is a very particular sense of what it means to have a larger stake.

In light of this, the demand of developing countries not only to have a larger seat at the table and more of a substantive role in decision-making in a much more transparent way than has been the case, but also to have a more extensive system of special and differential rights, and on the whole to make the world trading system more development-oriented, makes a great deal of sense.

Let me give a very particular example, which involves the importance of the agricultural sector as a source of livelihoods. The position of India and of other countries in the World Trade Organization has been that there is a need to recognize the special role of agriculture because of its centrality in providing livelihoods in developing countries. Of course, other developing countries, such as Brazil or Argentina, have had somewhat different interests because of the greater role of export-oriented agribusiness in those countries. So it has been difficult to formulate a single developing country position on this issue. But certainly the claim of particular developing countries that, for reasons of promoting the interests of the mass of people, it should be allowable for them to have special protections in regard to agriculture, seems very difficult to reject. Certainly the experience of Mexican farmers under NAFTA, which has been quite deleterious because of massive increases in exports from the United States of agribusiness-produced food grains, is a cautionary tale in that regard.

The most important point is that discussions of justice in regard to the world trading system, I think, have to go beyond the narrow horizon of what is immediately achievable in light of the present interests of the parties concerned. We need to consider what kind of world trading system we could imagine that is animated by appropriate ideals. The institutional changes we identify as desirable may not be possible to arrive at immediately , but that is not a reason to put aside reflection on what these changes may be. There are things that can only be achieved on the day after tomorrow.

Back to top