The Role of Free Trade Agreements in a Globalizing World
Impact on Societies, Economies, and the Environment
Referat / Aufsatz (Schule) 2016 25 Seiten
Free Trade Agreements (FTAs) have beenon political agendas around the world for decades. Yet, the speed at which theyare implemented into the global economy is strongly increasing. Since the end of World War II, “International trade [has been] one of the fastest-growing bridges established between countries”. FTAs are usually characterized as agreements between two (bilateral) or more (multilateral) countries (or blocs) designed to reduce barriers to international trade such as tariffs and quotas. They are not to be mistaken with the many other possible measures to expand free trade. Customs unions, for instance, are similar to FTAs with the exception of an additional Common External Tariff (CET). Common markets do not only encourage the flow of goods, services, and capital but also the flow of people within member countries. Lastly, economic unions, such as the Euro-zone, include a common currency and require “supranational laws and institutions that govern the entire region bound by the agreement”.
This document will solely discuss the role of FTAs and pay less attention to the other methodsof free tradeexpansion mentioned above. Nonetheless, most arguments, correlations and findings concerning FTAs can also be mentioned when discussing these other measures. They do not only apply to FTAs. The importance of the issue presented in this introduction becomes clear as one takes a closer look at the phenomenon of globalization.
The UNESCO defines globalization as a process characterized by “the acceptance of a set of economic rules for the entire world designed to maximize profits and productivity by universalizing markets and production, and to obtain the support of the state with a view to making the national economy more productive and competitive”. The idea of free trade thus is an integral part of globalization. World leaders and scientists have repeatedly deemed the phenomenon unstoppable as the idea of a world in “which the peoples […] are incorporated into a single world society, global society” appears to be the next logical step in global history.
During his opening address to the fifty-third annual DPI/NGO Conference, Kofi Annan, the seventh Secretary-General of the United Nations, stated that it had “been said that arguingagainst globalization is like arguing against the law of gravity.”. He then brought forward the argument that globalization can be used as a tool against poverty and inequality. Through this powerful statement, Annan shaped the common understanding of globalization. His quote is often used to underline the argument that globalization is neither desirable nor influenceable, though Annan intended to express the opposite.
To further understand the meaning of Annan’s words and to understand why globalization is viewed as such a highly powerful force, one has to deconstruct the process itself and all of its roots. “Globalization is not one process but multiple processes - economics, politics, and culture. And these processes are not new. They have deep historical roots. And they overlap and influence one another through time”. This citation of Jack Lule, a professor in the journalism department at Lehigh University, demonstrates the complexity of the issue. It shows that the power of globalization largely originates from global history and thus explains why the process seems impossible to halt. Lule proves that globalization is not part of a global political agenda forced onto society but rather a natural process in human development.
Consequently, no doubt shall be expressed when referring to the significance of globalization. Instead, world leaders are required to recognize different types of changes within the global community and act accordingly. New political conditions call for sustainable solutions.
The base of the thesis expressed in this document consists of the conclusion that free trade, as part of globalization, is inevitable and being implemented at increasing speed. Thus, the analysis of the impact of free trade on societies, economies, and the environment is crucial to the understanding of future developments. This document covers all of the above aspects and aims at providingan outline of global trends.
As the world globalizes, societies change. In order to evaluate the influence FTAs have on the world, one must understand why people or governments want freer trade, and how FTAs influence them.
As mentioned earlier, FTAs first became popular after World War II. For obvious reasons, politicians and journalists praised their overwhelming economic advantages. Free trade helped rebuild cities and economies that had been damaged during the war. Interestingly, reconciliation happened during the same time period as FTAs became popular. For this reason, most historians see a link between trade agreements and reconciliation.
The European Coal and Steel Community (ECSC) treaty was proposed in 1950 and signed one year later. It started as an economic union between France, Germany, Italy, Belgium, The Netherlands and Luxembourg. Though several European countries were participating, the treaty was mostly considered a symbol of the new Franco-German union. Even apart from economic benefits, the project turned out as a success for all member countries. Not only did the ECSC help the struggling European economies, but the treaty was also an important action “ensuring a lasting peace”. Before the ECSC, the people of France and Germany were hesitant to approach one another. According to different historians, the treaty was a national expression of the desire to reconcile, and a measure to do so.
Even though the motive of reconciliation might currently not be of international interest, different cultures are trying to connect with each other more than ever before in human history. Through the spread of the internet across the world, the approximation of cultures is being accelerated. Culturally, this spread of high-speed communication devices and free trade leads to the returning idea of the “global village”.Shaped by Marshall McLuhan with his book Understanding Media, the term “global village” describes a world where all cultures live closely together. “Our specialist and fragmented civilization of center-margin structure is suddenly experiencing an instantaneous reassembling of all its mechanized bits into an organic whole. This is the new world of the global village”. The concept of trade liberalization enabling a “global village” is based on the idea of the “global society”, mentioned earlier in the introduction to this document. Martin Albrow and Elizabeth King state that “since the Second World War there has been an increasing recognition among sociologists that the world's population is enveloped by a single world social system” in their publication on international sociology. Thus, there is empirical evidence that FTAs connect states and cultures, and that the public desire for trade liberalization translates into a human fascination for the concept of a united society.
Furthermore, this type of unity is unique. All throughout history, different countries have been trying to unite based on religion, regionalism, culture and ideology. The Soviet Union exemplifies this process exceptionally well. The new ideas of unity through free trade, however, are based on economic interests which have less potential for conflict than controversial subjects like religion and ideology. Accordingly, trade unions are more stable and sustainable than all other types of international unions before. Free trade is also a sign of a culture of rationalization. States choose to cooperate with states that benefit them economically, ignoring all “subjective” factors. FTAs are continuously leading states to a new type of societal unity. This unity is characterized by the absence of war and of international conflicts between governments. Following this trend, the notion of nationality would be distorted as all societies would live detached from national restrictions.
FTAs are not only changing the way we see the future. In fact, they are already affecting our current societies. Even though the economic aspect of FTAs has not yet been covered by this document, it can generally be said that FTAs enrich all social classes. However, most economists agree that wealthy people and wealthy companies have more capacities to tap the full potential of free trade, leading to even more enrichment in higher economic classes. Hence, poverty decreases while inequality increases. This obviously has some impact on societies.
For instance, a 2012 working paper by the Research Institute of Industrial Economics found a link between poor health and inequality. According to the researchers, the higher the national economic inequality is, the more likely citizens are to report poor health. Though the scientists concluded that this could have a wide variety of reasons, the numbers suggest that an increase in inequality could be detrimental to healthcare systems.
A different study by the IZA concluded that “the level of inequality in a school system seems to be related to the educational institutional structure in a society”. Students experiencing inequality were more likely to perform bad academically. On the other hand, a good educational system was found to increase national equality. Though these studies might not be suitable for developing a clearoutline of the societal impact of inequality through FTAs, they do show the intricacy of the issue and the underlying risks of FTAs.
FTAs help unite different cultures and states. It is to be understood that they are part of the globalizing process towards a “global society”. Their dangers or disadvantages in the short run must be considered before implementing an FTA. In order to fully understand the impact Free Trade Agreements have on our society, their effects on other political sectors, like the economy and the environment, shall be analyzed.
Shortly after the idea of universal free trade emerged, serious concerns about the environment began to arise. Nowadays, the issues of climate change, pollution of air and water and the loss of animal and plant species play a highly important role in political decision-making. As it seems, there is an ongoing conflict between supporters of free trade and environmental activists.
The recent debate around the trade partnership “TTIP” illustrates this conflict.“TTIP”, as a “comprehensive and high-standard free trade agreement (FTA) between the United States and the EU”, “aims to enhance market access through the elimination of barriers to trade and investment in goods, services, and agriculture”. While these citations from a publicCongressional Research Service report shed a rather positive light on the project, a large amount of initiatives by European and U.S.-American citizens absolutely oppose it. The British website www.waronwant.org states “TTIP” would “cost at least 1 million jobs, undermine our most treasured public services [and], lead to a ‘race to the bottom’ in food, environmental and labour standards”.
This “race to the bottom” refers to “a lowering of standards tothe least common denominator” and is often used in the context of FTAs. The fear of such a race derives from the common method used by governments when discussing an FTA. In the past, the harmonization of standards between countries has often led to lower standards on both sides. This happens as nations rarely impose their own strict regulations on nations with looser ones in order to avoid overstraining, frustration or even a cancellation of FTA talks. Moreover, transnational companies usually support low standards. Their influence on politicians through economic pressureand lobbying can add to the loosening of standards as well as cultural differences between states and blocs. If, for instance, one country has particularly low standards for a specific type of product or service due to its culture, another country negotiating an FTA is likely to adopt these same standards in order to show respect for the foreign culture. The same kind of respect towards the other negotiating country could lead to lower standards in many other scenarios. Whenever a wealthy country negotiates an FTA with an underdeveloped nation, for example, the probability of a common diminishing of regulations is high. The underdeveloped nation does not have the financial capacities to support strict standards and will presumably be granted its prior regulations. Thus, the developed nation lowers its own standards in order to facilitate trade and maintain a peaceful relation between the states.
Both possible situations mentioned above would cause a “race to the bottom”. There are extremely few imaginable situations, however, in which the harmonization of standards during FTA negotiations would provoke better and stricter standards on both sides. Obviously, low standards always represent a threat to the environment and the “race to the bottom” could directly affect ecological systems around the Earth. This partially explains why FTAs are often viewed as solely detrimental to the environment.
During the public debate around TTIP, the example of past developments in the Chilean mining sector has been used to argue against the FTA. The following case study is based on a UN synthesis report named “Trade Liberalisation and the Environment. Lessons learned from Bangladesh, Chile, India, Philippines, Romania and Uganda”. It raises concerns about the environmental impact of trade liberalization and, thus, is relevant to the analysis of FTAs.
In the case of the Chilean mining industry, trade liberalization occurred through a new political order rather than the implementation of FTAs, RTAs or similar agreements. “Since the 1930s Chile had pursued a highly restrictive foreign trade regime” that limited the export of mining products. The 1973 Chilean coup d'état changed the economic structures within the nation. In 1976, the military government established a new set of neo-liberal policies. These policies were designed to increase the Chilean economic growth, aiming for short-term gains instead of sustainable economic development. To this day, there “are no standards for the decommissioning and/or rehabilitation of mining installations” and “transport of dangerous wastes is not subject to any regulation other than that stipulated by the 1992 Basel Convention”, resulting in an elevated risk of natural disaster.
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 Ibid., 31
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