A Defense of Slowbalization
June 29, 2017
Jun 29, 2017
14 Min read time
When it comes to globalization, slowing down is the best way forward.
Last month, I met with a group of labor inspectors in Tunja, Colombia, about two hours east of Bogotá. The workers were on strike for better pay at the time, but that didn’t stop them from readily admitting how much things had been improving of late, both in Tunja and in the country as a whole. The inspectors are charged with a host of responsibilities, including the prevention of child labor, protection of safety and health, administration of payroll taxes, enforcement of wage and hour laws, and resolution of workplace conflict. Their numbers have grown in recent years from about 100 to 800, making them better able to reach worksites, take testimony, resolve disputes, and—where necessary—process cases against rogue employers. Furthermore, they’re better-equipped and, despite the strike, better-paid than they used to be. When I asked the inspectors what was behind these gains, they answered uniformly and without hesitation: “el TLC” (Tratado de Libre Comercio)—that is, the U.S.-Colombian Free Trade Agreement (FTA) of 2012.
What if Americans did not have to choose between mercantilism and ‘more of the same,’ but could instead split the difference with slowbalization—or gradual market opening?
Like all recent U.S. FTAs, the Colombian agreement includes labor standards designed, at least in part, to ensure that workers would gain rather than lose from market opening. In the run-up to the North American Free Trade Agreement in the early 1990s, these standards were portrayed as a largely symbolic sop to Congressional Democrats (as well as their allies in the labor and human rights movements) but they have grown increasingly serious over time, and the Colombian agreement includes what some have described as the most forceful versions of such standards to date. They not only demand the protection of labor rights established by the ILO (e.g. freedom of association and non-discrimination) and the enforcement of domestic labor law more generally (minimum wages, occupational safety and health, etc.) but they also subject violations of these commitments to interstate dispute settlement mechanisms up to and including binding arbitration.
For all of their obvious merits, however, these standards have been unable to keep up with the pace of globalization, which has occurred at breakneck speed in recent decades. This was a point that was underscored for me when I met with a group of Colombian trade unionists. In their view, the FTA was not the source of high-quality jobs promised by its proponents, but instead an unmitigated disaster marked by layoffs, labor repression, and widespread destitution. While they acknowledged the growth of the labor ministry and the recruitment of new inspectors, they doubted the inspectors’ independence and efficacy—and interpreted their strike for better pay and protection as evidence to that effect.
Of course, it isn’t necessary to go to Colombia to hear such complaints. Over the past two decades, I’ve heard similar fears and frustrations expressed in Mexico and Central America, not to mention in the U.S. itself. Donald Trump’s success against Hilary Clinton, for example, was in large part due to his casting of her as an architect of unfettered globalization and turning the election into a referendum on her record. But what if the debate were framed differently? What if Americans didn’t see the issue as a choice between mercantilism and “more of the same,” to invoke Trump’s favorite meme, but could instead split the difference by embracing slowbalization—or gradual market opening? Developing democracies could then build the institutions and infrastructure they need to take advantage of the opportunities engendered by the expansion of free trade. This is in essence what the European Economic Community did between the Treaty of Rome, in 1957, and the Maastricht Treaty, almost four decades later. And it wasn’t just countries like Ireland, Italy, and Spain that benefited—the entire continent reaped the rewards. Everybody knows that the Italian economy grew rapidly between 1960 and 1990, for example, but how many remember that the French economy did so as well? In both countries, the average growth rate was 4 percent per year.
The labor standards of trade agreements, designed to protect workers, have been unable to keep up with the pace of globalization.
The globalization debate is currently framed, however, as a stark choice between discrete alternatives: the constant negotiation of new trade agreements, or the immediate abandonment of their forebears. This is in keeping with the “bicycle theory” of international trade, which holds that opening markets is like riding a bike: if you don’t keep moving forward, you fall down. But the bicycle theory is just that: a theory. There is little or no evidence for the claim that halting—let alone slowing the pace of—international integration would undermine existing agreements. The Doha Round has been on life support for years, for example, and the World Trade Organization (WTO) carries on nonetheless.
The U.S. could therefore avoid both the Scylla of globalization and the Charybdis of isolation by pursuing slowbalization, or a more gradual opening to international markets.
• • •
In practice, this would entail a number of concrete actions:
First, a moratorium on new FTAs that would give workers and communities at home and abroad the time they need to adapt to existing agreements. While in theory the gains from trade will leave both parties better off, in practice there is no guarantee that they will precede the losses—let alone be distributed in an equitable fashion. Free trade could destroy jobs in one region and create jobs in another, destroy jobs held by people with one skill set and create jobs for people with another, or perhaps even generate net job loss if, for example, it fosters imports in industries that are employment-intensive and exports in industries that are highly automated. A decade-long moratorium on the negotiation or entry into new FTAs would give workers and communities a chance to catch up.
Second, an outright ban on FTAs with authoritarian countries that are unable to commit to credible labor standards. If a regime refuses to guarantee the rights of any of its citizens, after all, how can it guarantee the rights of its workers? The United States has signed FTAs with a number of authoritarian countries, including Bahrain, Jordan, Morocco, and Singapore. And it was until recently on the cusp of entering a Trans-Pacific Partnership with several more—in effect rewarding authoritarian regimes for their repression and punishing both their democratic competitors and American producers for their efforts to respect labor and human rights.
‘Around here, we have a saying. Too much protection leads to no protection at all.’
Third, assistance for democracies that want and need to build protective institutions. Many policymakers in developing democracies want to establish institutions that will shield workers and their families from the perils of market competition: schools, safety nets, regulatory agencies, and the like. But they often lack the human and material resources they need to do so. If their U.S. counterparts would not only block the proverbial “low road” by linking market access to improved labor standards, but also pave the “high road” by helping their trading partners live up to their obligations, they could go a long way toward building a more humane world order.
Fourth, a willingness to link trade and migration in a deliberate and forthright manner. Migration implies open labor markets, just as trade implies open commodity markets—and both processes are fraught with peril. While they tend to yield long-run benefits to both importing and exporting countries, they often entail short-run disruption, especially if pursued rapidly. Rather than ignoring the dilemma, however, the U.S. should confront it head-on by rewarding democratic countries deemed worthy of trade agreements with enhanced migration quotas as well. For example, a number of existing FTAs are linked to special visas for skilled professionals, but they tend to exclude less skilled workers who are simultaneously more numerous and more discomfiting to American voters and politicians. When Donald Trump rails against immigrants for “bringing drugs” and “bringing crime” into the country, he’s referring to undocumented immigrants at the lower end of the U.S. labor market, most of whom come from Mexico and Central America and live in understandable fear of the authorities. Skilled professionals on NAFTA visas, on the other hand, are almost certainly invisible to most of Trump’s voters.
If the authorities were to regularize the status of low end laborers as part of revamped FTAs, such workers could finally come out of the shadows. Their American neighbors would come to realize that most migrants are law-abiding and want to come here not to settle, but to earn enough money to help their families back home buy land, start a business, or pay for school—that is, to contribute to the very development efforts our revamped FTAs would be encouraging. In this sense, migration is a win-win proposition, as long as it is undertaken gradually.
Once again, the EEC provides an example. Scholars have long puzzled over the relative paucity of permanent migration within Western Europe, despite the absence of internal border controls. Part of the answer involves the leveling effects of the EEC more generally. When integration occurs gradually and creates a more level playing field, workers from poor countries need not resettle in rich countries to improve their life chances, and workers in rich countries are less likely to resent the migrants who do arrive. It is worth noting that, Brexit notwithstanding, populism has recently been defeated by voters in Austria, Finland, France, Italy, and the Netherlands, and that the leaders of the continent’s biggest economies—France, Germany, Italy, and Spain—have endorsed a “multi-speed” Europe in which “unity does not equal uniformity.”
The merits of slowbalization are apparent in Colombia as well. In addition to meeting with labor inspectors and workers, I spoke to employers in a number of different sectors about their own efforts to cope with the deluge of trade and labor standards. Their reactions depended in part on their age. One older gentleman, who employed about a hundred workers in a heavy manufacturing plant, was gravely concerned. He felt trapped between low-cost competition and protective regulations and worried that his business would not survive the pressure. “Around here, we have a saying,” he explained. “Too much protection leads to no protection at all.”
The abandonment of FTAs and globalization is likely to prove as devastating to U.S. workers and communities as their creation.
But a younger employer offered a very different, and decidedly more heartening, take on things. Having spent more than thirty years in the mining industry, he believed that the labor ministry had simply changed with the changing times. In the early years, he suggested, most of his workers were farmers or artisans who sought temporary or part-time work in the mines in an effort to supplement their meager cash incomes. Labor relations were personal and informal, if not necessarily peaceful, and the ministry therefore played a mostly passive role—so much so that he could not remember a single visit from an inspector in his first two decades of operation.
By the early twenty-first century, however, things had changed dramatically. His operation was growing and diversifying, labor relations were becoming less personal and more formal, and the ministry’s role was growing in turn. While inspectors had started to come by more frequently, always in an effort to resolve or prevent conflict, he seemed to view their visits less as a threat to his bottom line than an inevitable—and perhaps even helpful—byproduct of a shift from a traditional “social equilibrium,” marked by repression, inequality, and conflict, to a new equilibrium marked by respect for labor rights and justice. His real complaint, in fact, was not with the labor ministry at all; it was with rival mining operations that failed to respect their legal and contractual obligations, and thus forced him to confront “unfair competition” that could potentially put his business at risk. Insofar as the labor inspectors could help expedite the broader transition from an outdated social equilibrium to a new one, therefore, they were more likely to be friend than foe.
This is certainly how the inspectors thought of themselves. When discussing their campaign against child labor, for example, they were quick to point out that the problem is as much cultural as it is economic. Most underage workers are employed by their families, noted one inspector, and their impoverished parents are simply reproducing their own experiences. “You can’t just fine them for this,” she continued. “It’s part of their culture. You have to change the culture.”
By some measures, moreover, these efforts to change the culture, or to establish a new social equilibrium, are paying off. For instance, the inspectors have collaborated with the ILO to combat underground employment and formalize the Colombian labor force. The ILO notes that the rate of underground employment is falling, and that more workers are being covered by the country’s growing pension and health care systems. There have been improvements on the child labor front as well, with youth labor force participation falling.
But the move from one social equilibrium to another is not without costs, and those costs are likely to be defrayed when the process plays out slowly—giving employers and workers the time they need to confront new challenges and opportunities, families and communities the time they need to adapt to new norms, and governments the time they need to smooth the process. This is no less true in the U.S. than in Colombia or any other country. Americans may be wealthier, on average, than their southern neighbors, but they are no better able to re-train, move, or adopt new norms and values.
In this regard, though, Americans are unlikely to receive any support from the Trump administration, which is threatening to cut the few federal programs that are designed to ease such transitions. Trump is promoting a return to “Fortress America,” and he captured the White House in large part by promising to build walls and abandon trade agreements. In late April, he signed an executive order calling for a review of all U.S. trade agreements and preference schemes, including membership in the WTO, in an effort to curb “large and persistent trade deficits, a lack of reciprocal treatment of American goods and investment, the offshoring of factories and jobs, the loss of American intellectual property and reduced technological innovation, downward pressure on wage and income growth, and an impaired tax base.”
If you drive it too fast, you’ll run out of gas or crash before reaching your destination.
Before they abandon any actual agreements, however, Trump and his allies should consider two risks. The first, and perhaps most important, is that a retreat from trade in the near future would be as costly to the U.S. as the embrace of trade in the recent past. Whatever one thinks of FTAs and globalization, they are already underway. Much of the adjustment has already occurred, and their abandonment is therefore likely to prove as devastating to U.S. workers and communities as their creation. Trade barriers are unlikely to revitalize the steel industry in Pittsburgh, for instance, but they could easily threaten jobs in precision manufacturing or information technology. And, second, Fortress America would lose leverage over nascent (or non-) democracies overseas. The powers that fill that gap are likely to be significantly less worried about human rights and social justice than the United States.
The result could be the worst of both worlds: While American workers and communities would pay a steep price for their sudden isolation, autocracies like Russia and China would reap the rewards of U.S. withdrawal, and workers in the Global South might well see their wages and working conditions decline in a “race-to-the-bottom” scenario.
The point is not to portray FTAs as benign, let alone altruistic, endeavors. They are complicated products of domestic and international negotiations, and the powerful—at home and abroad—almost invariably have more say in their construction than do the poor. But for all of their myriad problems, FTAs are subject to congressional approval. As a result, they include not only labor provisions but human rights and environmental standards that are likely to foster values we cherish—values that are unlikely to be imposed by autocracies like Russia and China.
This is especially true if standards are raised, aid is provided, and integration is slowed. The U.S., for example, could effectively block the low road of labor repression by making access to the world’s largest market contingent on efforts to protect labor and human rights. And by offering developing democracies support in their efforts to meet these conditions, the U.S. could effectively pave a high road marked by freedom and social justice. And by slowing the pace of globalization, more generally, the U.S. could ensure that American workers and their families also have the time they need to adjust to new challenges and opportunities.
If trade really were like a bicycle, of course, there might still be an argument for getting off. The costs might simply outweigh the benefits. But trade is less like a bicycle than a car. It is an all-but-necessary element of prosperity in the modern world, but if you drive it too fast, you’ll run out of gas or crash before reaching your destination. If you pace yourself, however, and perform scheduled maintenance, you are likely to get where you want to go.
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June 29, 2017
14 Min read time