EconoMatters, Future of Globalization

A Better CETA: One Big Cheer for Wallonia

While the rest of Europe ducked, one region stood up for important principles of responsible globalization.

The Walloon Rooster

Takeaways


  • Wallonia’s lonely stand raised vital themes about the insecurity many feel today in a global economy. #CETA
  • Investor-State Dispute Settlement raises suspicions in theory & practice and is hopelessly outdated.
  • A new trade deal model is needed to address public concern over firms running roughshod over society.
  • Governments that do not guard against MNC overreach will find themselves without democracy or sovereignty.

An 11th hour and 59th minute resolution was reached to the recent standoff between Wallonia (the French-speaking, devolved southern half of Belgium) and Europe over CETA – the trade agreement between the European Union and Canada.

The little guy that stood firm

To their credit, the political leaders of Wallonia insisted on more assurance – as well as insurance – that the CETA was not going to be another step down the path of unraveling the sovereignty of democratically-elected governments.

Their brave standoff raised fundamental questions that need a lot more discussion and resolution before they can be satisfactorily incorporated into trade agreements.

Why it mattered to stand firm

The pressure on tiny Wallonia and its politicians was immense, as it was being blamed for making the EU a laughingstock before its Canadian partners and the world.

Leading Canadian government figures, as well as media outlets like the Financial Times, Wall Street Journal and others, complained loudly about the diminished stature of a European “union” that cannot prevent a smallish region in one member state from scuppering a trade agreement that was seven years in the making.

That narrow interpretation has a ring of truth, but it also is overly simplistic and reveals how little has been learned from the ongoing debate over the “winners and losers of globalization.”

But think about it this way: Clearly, the CETA deal is going to be the baseline deal from which all future trade deals the EU will entertain or pursue will flow from.

The ultimate CETA deal is thus the benchmark for a revised TTIP deal as well. That’s why Wallonia taking a stance is so crucial.

How is the public’s concern still going unheeded?

Wallonia’s lonely stand raised important themes about the interplay of national sovereignty and responsible globalization. It also concerns the personal insecurity that many feel today, amidst the immense, corporate-driven tidal wave of the global economy.

In the current climate so many sectors of the public have lost their trust and faith in political leaders. Time and again, they have rolled over in front of corporations. No wonder those leaders now have to go the extra kilometer or mile to soothe public anxieties.

What was missing in the “old” CETA?

It seems to me that the CETA agreement did not go far enough in that direction. This agreement would have been perfectly fine 10 years ago – but now? Not nearly enough.

It is telling that the EU gets tagged from both directions:

  • UK isolationists see the EU as a left-wing plot to strangle them with regulations and immigrants.
  • Meanwhile, others in Europe see the EU as a right-wing plot to impose US-style wild-west capitalism on them.

Neither view is entirely accurate, but the fact that both contradictory views can exist simultaneously is a result of the lack of trust. That’s what both views have in common.

A valid trust deficit

In an era in which $20 trillion in corporate profits is stashed in overseas tax havens, robbing the public treasuries of governments around the world, a treaty for “free trade” can easily look like another type of deregulation. The core issue to be dealt with is this: Will it simply allow corporations to get away with more than they already do?

The European Commission has charged that Apple owes €14.5 billion in back taxes. That is about the size of the economies of Iceland and Cyprus and means it paid a corporate income tax of about 0.005%. It’s understandable why sizable sectors of the public feel that the system is rigged against them.

Given that, I’m puzzled that the designers of CETA and other free trade agreements (like TTIP) apparently don’t comprehend how little credibility they have.

For example, giving multinational corporations the legal ability to sue sovereign governments — the so-called Investor-State Dispute Settlement (ISDS) — not only raises suspicions, both in theory as well as in practice, but seems hopelessly outdated.

An outdated trade model

Much as its proponents want to defend it and use it in the future, this concept really is a leftover from the far too sweeping free trade agreements of the 1990s, such as the North American Free Trade Agreement (NAFTA).

At almost every instance when this clause has been invoked, it has created one uproar after another and been discredited. It is the opposite of what responsible globalization is. In today’s climate, including such provisions is a poison pill for any trade agreement.

ISDS in CETA? Canadians should know better:
They’ve been at the shorter end of the ISDS stick. Learn more about these disputes.

ISDS lawsuits have been deployed by hundreds of corporations, both domestic and foreign, against sovereign governments who have passed laws that these businesses claimed infringed on their “rights.” This has resulted in billions of dollars in damages assessed against the taxpayers of these nations.

But what rights do these artificial entities, which are after all themselves creatures of the state – chartered and regulated by the state – have that should somehow supersede the popular will of democratically-elected governments?

Moreover, it is a historical figment of the imagination to see corporations as individual persons with inalienable rights. They are entities whose needs and interests must be balanced with the needs and interests of society.

Corporate ISDS attacks in obscure and unaccountable tribunals feed into a public fear that the biggest corporations are themselves becoming sovereign governments that are unrestrained by democratic accountability.

Wallonia’s understandable battle

All of this is the context that helps us understand the stubbornness of Wallonia. Sure, one can argue – it was indeed argued – this is a trade deal with Canada, for heaven’s sake. One of the more progressive nations on the planet is hardly likely to be a practitioner of the ruthless Wall Street capitalism that dominates south of its border.

One could argue – and it was argued – that Wallonia’s fears were overblown, and there’s probably a degree of truth to that. But the point is, it’s hard to know what kind of laws or politicians to trust in the current climate. That’s how many in the public feel today. (See Donald Trump.)

It seems like the experts needs to write a template for a “new free trade agreement” – one that is better geared for today and not 10 years ago.

Needed: A new model treaty

Such an updated FTA would be able to win popular support because it would include the appropriate safeguards, as well as the right values that project a global vision of what trade in the 21st century ought to look like.

Such a new trade agreement should include some kind of “code of ethics” for how corporations should act.

It would include rules for how to regulate overseas tax havens, and how to ensure that these powerful economic entities can’t run rampant across the globe, cherry picking laws and regulations that enhance their profits even as they undermine our societies.

If the trade negotiators put half as much effort into crafting rules to crack down on overseas tax havens as they put into so-called “free trade”, it would have a beneficial effect on the things that matter.

Somehow the negotiators always seem to be keenly focused on lifting barriers on companies. This of course has value for the macro-economy as well as for individual companies. But today that needs to be balanced with attempts at cracking down on various corrupt corporate practices.

How can political leaders expect to do one and not the other, and still retain public trust?

Half-baked treaties

In that light, any kind of free trade agreement that would have passed muster 10 years ago, today looks like only half a loaf. It’s too loaded on one side.

Here is what the public sees on trade negotiations: Lift barriers on corporations, OK… create more trade, OK…that’s going to create more jobs, hmmm, OK, possibly, hopefully. But…what about some rules around corporate behavior?

That’s what is missing from CETA and other free trade agreements. Perhaps it would be too much to negotiate all of that in a single agreement. But corporations already appear to many in the public like they are tax-dodging, lawsuit-waging, money-grubbing badasses that are becoming so big that they can challenge the sovereignty of governments.

That’s the context that free trade agreements are entering into. If public leaders don’t deal with that context in a trust-building fashion, free trade agreements look like another tool of wild-west capitalism.

The mouse that roared

So I confess, I watched the conflict play out between tiny Wallonia, the EU and Canada, day after day, with very mixed emotions. I saw the temperatures rising and the exasperation building, and like many I found myself shaking my head and thinking, “What? This is crazy. A small, poor region in Belgium can hold up the entire mighty EU?”

But increasingly my heart was overruling my head, saying, “Go Wallonia! Show these thickheaded politicians that a half a loaf isn’t good enough anymore!”

I’m glad that cooler heads prevailed and that finally an agreement was stitched together to move forward. Too much was at stake to leave the whole agreement drowning in a cesspool of trans-Atlantic paralysis.

But political leaders have been forewarned (yet again): Democratically-elected governments that do not safeguard their own interests, and those of their residents, against continued overreach by multinational corporations may soon find themselves without either democracy or any sovereignty worth its salt.

The role of government in globalization

The turbulent centrifugal forces of globalization are such that they require governments, on behalf of the people, to put a firm hand on the tiller of trade negotiations and rules governing corporate behavior.

It is not that the governments who do not simply roll over are against globalization. But they are very much, and very correctly, aware that the real battle is over what kind of globalization.

Much is at stake in this battle, and tiny Wallonia deserves gratitude for shining a glaring spotlight where it is needed.

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About Steven Hill

Steven Hill is a journalist and author of the recently published book Die Startup Illusion: Wie die Internet-Ökonomie unseren Sozialstaat ruiniert (www.Startup-Illusion.com). Find him at www.Steven-Hill.com and @StevenHIll1776

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