Speech by Jürgen Maier, German NGO Forum Environment & Development, at the C20 Summit in Tokyo, 23 April 2019.
Trade has become one of the more controversial issues of the G20, but also of the G7 and international politics in general: You remember the battles in G7 or G20 summits in recent years about “protectionism” vs “free trade”. The notion so carefully nurtured by the G20 governments over the last decades that globalization is a one-way street, that it can never be turned back, is now openly exposed as what it has always been: wishful thinking. Indeed, for a lot of people, globalization has gone too far. Today, in most democratic countries, you don’t win elections by promising more free trade, more globalization – such promises are vote-losers. Let us look at the reasons.
Since the establishment of the WTO in 1995, global trade has been growing faster than the global GDP, that means we have seen a rapid internationalization of production. It is only logical that this could only be a temporary phenomenon. This was accompanied and promoted by trade agreements, investment protection agreements and policies that have massively reduced tariffs for industrial goods. These policies also have encouraged corporations to internationalize their so-called “value chains”. At the same time, governments have dramatically cut taxes for multinationals and created myriads of possibilities for them to avoid paying taxes altogether. Tariffs were also cut, trade barriers removed in agricultural markets and the services sectors, but not to the same extent as in industrial goods.
These policies have not benefitted ordinary people. In Germany and in many other countries, 25 years ago you could feed a family with one average income. Today, you need two average incomes for a family to survive. In the same time, our GDP has doubled. We should be twice as rich compared to 1995, but in reality we work twice as much. Obviously, something has gone wrong. People are asking: where has all the money gone? And then they read the reports about growing inequality, about a handful of billionaire men owning as much as half of humanity, about half of England owned by just 1% of the population, about a growing low-wage sector and so on.
So in a globalized economy, what we are talking about is not just trade policies, we are talking about the economic and fiscal policies of the G7 nations of the EU, the US and Japan. The neoliberal model of deregulation and globalization has benefitted multinational corporations based in these countries, at the expense of working people. When you have voters now rejecting these policies, politicians often think voters have become crazy, they vote for Trump, for Brexit, for populists. But voters have not become crazy, they are angry.
Politicians now promise to listen to these angry voters, yet economic and trade policies in Europe have remained the same. The EU has about 20 more free trade agreements in the pipeline, along the same political principles as all their previous trade agreement. This agenda was blocked in the WTO already 20 years ago: developing countries have been successfully blocking further market opening of their markets and further agreements limiting their ability to regulate their economies. The proposals of the G7 nations in the WTO are stalled since almost 20 years now. Western media call that the “paralysis” of the WTO, when in fact it is just successful resistance of developing countries against the EU and US policies.
The industrial nations have since then focused on bilateral and regional trade agreements to pursue the same policies that have been stuck in the WTO. More market opening for their services corporations, more market opening for their agricultural sectors, more investor protection agreements. The EU has quite openly stated it in their “Global Europe” strategy from 2006, which states that the EU wants to become the “most competitive economic area” in the world, and therefore it has a vital interest to open markets all over the world by bilateral agreements. You could have called it “Make Europe Great Again”, and what it did not mention is that other parts of the world, those that are not so competitive, would probably benefit not as much from such agreements as the EU.
Nothing illustrates that better than a look at Germany’s trade statistics. In 2017, Germany had a record trade surplus of $300 bn – higher than far more populous countries such as China ($260bn) and Japan ($170bn). The true dimension becomes obvious when you look at the per capita figures – for Germany it is a per capita surplus of $3875, for China a mere $190. Germany’s trade surplus corresponds to 8% of its GDP, and this export success is increasingly turning out to be an extreme vulnerability to external factors.
A trade surplus in one country, however, automatically means a trade deficit somewhere else. The world as a whole always has balanced trade, we don’t trade with the moon. 107 out of 170 countries with reliable statistics today have a trade deficit, and we should not be surprised that a new debt crisis of developing countries is on the horizon.
All that means we cannot continue the old trade and economic policies. But all the free trade agreements currently negotiated, not only those of the EU, follow exactly the same old discredited policies and will, no surprise, yield the same results. The intention of these agreements is to globalize further agricultural markets, to globalize further the whole services sector, and their benefits will be as unevenly distributed as in the past and will produce the same losers as in the past. These policies follow outdated neoliberal ideologies that are rejected by people all over the world, but governments and corporations still believe in these ideologies. What are the consequences?
Around 130 countries today are net food importers, Japan is one of them. Last year, the world had a shortfall in the global grain harvest of 30m tons, because of climate change. Climate change is going to become worse, because we refuse to stop it, so we have to prepare for smaller harvests. In such a situation, any reasonable government in a net-food importing country would understand: we have to strengthen our farmers, our agriculture, we cannot be dependent on imports from a global market. But what happens? All FTAs aim at opening agricultural markets to imports, meaning opening agriculture everywhere to international price competition, and family farms all over the world are the losers. But they feed 70% of the world’s population. The global competition of agribusiness vs family farms destroys the basis of regional and local agriculture in vast parts of the world. Japan is one of the world’s biggest food importers, yet with its new free trade agreement with the EU it has exposed its farmers to the EU’s heavily subsidized food export businesses. Is that a good idea to become even more import-dependent, just for a few benefits for Toyota or Toshiba? Free trade in agriculture is a direct attack on regional, on family farming, it is a fundamental error. A global market for smartphones makes sense, a global market for dairy and meat is nonsense.
Similarly, the further globalization and deregulation of the services sector is not a good idea. The result of the already existing deregulation and globalization of the services sector is cutthroat competition, expanding low-wage sectors, profits for shareholders at the expense of workers and consumers. What used to be a nonprofit government service has become a business model for global investors. Often, people in the service sector today cannot survive – despite having a job. That was different before neoliberalism. Developing countries are right to oppose opening their markets even more to multinational corporations. Why would you need German parcel delivery companies in Africa, Swiss insurance companies in Latin America, or US media corporations owning radio stations in Asia, or German supermarket chains in India?
People want something else, and they are right. Multinationals have enough market shares, we don’t have too little globalization, we have too much. For 25 years, we have abolished trade barriers and created barriers to justice and sustainability. The next 25 years we have to abolish barriers to justice and sustainability, and let me be very clear: this will be at the expense of those that have become richer over the last 25 years. We need a Green New Deal, a project making our economies more just and more sustainable, at the same time. Essentially it means the unravelling of the neoliberal revolution of the last 30 years. It will turn billionaires back into millionaires, and it will give back working people the social security they deserve. In other words, we should stop lamenting about growing inequality and rather do something about it. The transition to a sustainable economy, respecting the planetary boundaries, respecting the natural environment can only be successful if it is based on social justice. Otherwise it will fail.
Never in history societies were stable where a handful of old men own the majority of the wealth. A Green New Deal, a social and ecological transformation, call it as you like it, will also re-define globalization and international trade. We will always have trade, the question is how much. In a sustainable economy, we will have more regional value chains, reducing the surreal amount of global transport, and it will also allow countries to protect themselves against unfair competition. And we will have international trade where it makes sense. Whether that will happen within a reformed WTO, in a new structure, or in a web of bilateral treaties is an open question, but it is also not important – these are structures, we don’t need a debate about structures, we need a debate about the political substance that any structure should serve.
Ladies and gentlemen, the issue is not “protectionism vs free trade”, the issue is whether we have an environmentally sustainable and socially just economy or not. We cannot change trade policies independent of our economic policies. The vast majority of people are against today’s neoliberal economic policies because they are losing out in it, and want alternatives that benefit them. Civil society must push for these alternatives, for an economy for all of us rather than for the privileged few, an economy beyond the outdated growth ideology. Thank you very much.