One of the main drivers of neoliberalism has been the removal of barriers to international trade. It is now in serious trouble.
The establishment of the World Trade Organisation (WTO) in 1995 was meant to unleash a wave of trade liberalisation. But even though the WTO has greater powers than its predecessor, the General Agreement on Trade and Tariffs, it has been much less successful.
The Doha round of trade talks, launched in November 2001 with great fanfare as part of Western capitalism’s riposte to the 9-11 attacks, went nowhere. Its failure reflected the relative decline in the economic power of the US and Europe.
The so-called Brics—Brazil, Russia, India, China, and South Africa—had become too strong for the US and the European Union (EU) to ride roughshod over them. A global agreement that would satisfy everyone proved impossible.
But the neoliberal politicians and bureaucrats and their corporate allies didn’t give up. Eventually they came up with two huge regional deals—the Trans-Pacific Partnership (TPP) for the Asia-Pacific region and the Transatlantic Trade and Investment Partnership (Ttip) covering the US and the EU.
The US was the common factor to both. But Barack Obama was always more interested in the TPP. This deal includes 12 Asia-Pacific states, but not China.
You might think this strange, since China is the biggest Asian economy and the world’s largest producer and exporter of goods. But excluding China was the whole point of the deal, which is about geopolitics more than economics.
Obama gave the game away when he said, “If we don’t pass this agreement—if America doesn’t write those rules—then countries like China will.” In other words, TPP is about entrenching US hegemony in Asia. It’s also probably toast.
Ttip was already in trouble before the EU referendum, but Brexit will remove one of the strongest supporters of trade liberalisation in the EU
Even though the TPP was signed last February, Hillary Clinton, under pressure from Donald Trump’s campaign against international trade deals, has reversed her initial support for the deal. Whoever makes it to the White House, the TPP is very unlikely to be ratified by the US.
Ttip was always more pushed by the EU than by the US, as a way of re-launching the European economy after the eurozone crisis. It was already in trouble before the British referendum, but Brexit will remove one of the strongest supporters of trade liberalisation in the EU.
The recent mess over the Comprehensive Economic and Trade Agreement (Ceta) between the EU and Canada underlines the difficulties Ttip faces. Negotiated over five years, the deal almost collapsed after the parliament of Wallonia, the French-speaking region of Belgium, blocked it.
A last-minute compromise allowed Ceta to be signed off at the weekend. Jean-Claude Juncker, president of the European Commission, tweeted, “Ceta is as of today the new golden standard in trade agreements.”
Even by Juncker’s standards, this is an unusually stupid statement. Ceta isn’t out of the woods yet.
What the Walloon parliament objected to was the part investor-state dispute settlement (ISDS) mechanism that would let transnational corporations sue signatory states that they claim have damaged their economic interests.
Under the compromise that saved Ceta, Belgium and Wallonia have only allowed the treaty to be implemented in part and reserve their opposition to ISDS.
ISDS is also included in TPP and Ttip. It is controversial because it gives corporations power over elected governments. The Ttip version has been a big factor in arousing opposition to the US-EU deal in Germany.
Meanwhile, the growth in international trade has slowed sharply.
Financial Times columnist Martin Wolf pointed out, “Between 1960 and 2015, world trade increased at an average rate of 6.6 percent, in real terms, while output grew at an average rate of 3.5 percent. Between 2008 and 2015, however, average annual growth of world trade was 3.4 percent in real terms, while world output grew at 2.4 percent.”
None of this means that neoliberalism is finished. But the economic stagnation of global capitalism since the crash of 2007-8 has weakened it badly.