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Sketch of a new trading order

by William McGaughey


The first order of business is to defeat the Trans-Pacific Partnership. The U.S. Congress needs flatly to vote it down. Drive a stake through the heart of this blood-sucking vampire so it will never again be introduced.

The second order of business is to propose a new trading order. The purpose of this article is to suggest what I think ought to be adopted by the community of nations.

First, let me establish some parameters. The governments of importing nations have an absolute right to restrict imported products from other nations. They can ban importation or set tariffs at various levels. Tariffs are just another tax. Also, the governments of nations where exported products are produced have a right, as sovereign nations, to permit goods to be produced under sweat shop conditions and permit environmentally unsound production practices. They have a duty to humanity and to their own people not to do this but, as far as diplomacy is concerned, other nations have no right to interfere.

Why do we have trade negotiations? Mainly, it is to prevent nations from protecting their own industries to the detriment of other nations’ industries as happened in the 1930s. The Smoot-Hawley tariff is cited as a counterproductive effort to lift the United States out of a Depression by restricting foreign imports. The problem is that everyone else did this, too, so that American exports suffered. What we need, therefore, is an international consensus of opinion that allows certain tariffs to be imposed under certain conditions. If the earth’s nations agree on such a program, there should be no self-defeating trade wars.

After the Trans-Pacific Partnership is scrapped, I would propose that U.S. and other trade policy makers begin to look at alternative models of trade with the idea that these can be accepted universally, Probably, such an order would need to be administered through the United Nations, the International Labor Office, the World Trade Organization, and other international bodies. We will need trade experts from many institutions to work on such a plan.

The basic idea of my scheme is that tariffs can be legitimately used as disincentives for various harmful business practices around the world. It is harmful for businesses to pay their workers an inadequate wage and require excessive hours of work. It is harmful for energy to be produced by polluting the air or for toxic chemicals to be dumped, polluting the ground or water. Businesses that gain a cost advantage from such practices need to be penalized. Specifically, tariffs need to be slapped on their products offered for export so that the cost advantage from bad production practices is at least neutralized.

I would put a premium on reducing work hours because this affects the supply of labor and, therefore, eventually the level of wages. The international community should decide what level of hours is appropriate to each nation, depending upon its degree of industrialization, access to capital, and unemployment rate. The United States and other highly industrialized nations should be expected to have shorter workweeks and longer vacations than poor nations such as Sri Lanka. I think a 32-hour workweek would be appropriate for us. A 40-hour workweek might be appropriate for poor nations while they are industrializing. This can be negotiated in trade talks.

Once the international community has decided upon appropriate levels of working hours in the various nations, trade and other experts need to develop a mechanism for reflecting this labor standard in tariffs that are permitted in the new trading order. If work hours exceed the national standard, then the community of nations permits importing nations to impose tariffs upon exported products made under substandard conditions - in this case, where working hours exceed the standard - to have those products be penalized by higher costs. I advocate that particular producers and factories be penalized by the tariffs, not all producers in a country. The goal is to encourage businesses to upgrade their labor standards to avoid the tariffs. Regular inspections of working conditions would be done. (See employer-specific tariffs. See labor-standards inspections.)

This will take some work. Trade and other experts need to develop a method of calculating the cost advantage from violating the standard and translate this into a tariff that is a percentage of the product’s value. Computer technology makes it possible to calculate products costs quickly, apply them to units of product, and then impose tariffs as products enter other nations. I am unable to say what the technique should be in all cases. It needs to be studied and then discussed in trade negotiations.

Once such a technique is perfected and accepted by the community of nations, nations whose producers are penalized by the tariffs cannot complain about them. There need be no trade wars. Also, we cannot require the importing nations actually to impose the tariffs that can legitimately be levied because they are sovereign nations. What can happen, however, is that an international agency can publicize the fact that these governments receiving the imports are refusing to help their own producers defend themselves against unfair trade competition. It can post specific information on a website that people in all nations can see. This will make it politically difficult for politicians working corruptly with the multinationals to shortchange their own people in refusing to impose the tariffs.

Labor standards are not the only consideration here. We need tariffs to encourage better environmental practices. Certain abusive behaviors in this area need to be costed and translated into per-unit tariffs. I would also permit tariffs to be used to protect agricultural products produced on a small scale in various countries. Applying this to NAFTA, for instance, the Mexican government should have been able to protect its peasants who grew corn from massive imports of inexpensive grain from the United States. We need to consider the employment situation in each country with an eye to promoting social stability.

This, in a nutshell, is what might be considered as an alternative to the present free-trade regime. Whatever happens, however, trade talks should be transparent. They should not be negotiated in secret. Congress should be allowed to amend the negotiated agreements. Large corporations should not be the only ones given information. Also, the United Nations and its affiliated agencies should play a larger role in administering the new trading order.


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