A new approach to trade policy is taking shape—multipurpose trade policy. Nicolas Lamp, associate professor at Queen’s University, highlights the evidence for this paradigm shift in trade policy, outlines the key challenges that it presents, and explores its implications for international trade cooperation.
After years of upheaval in international economic relations, a new approach to trade policy is taking shape: multipurpose trade policy. Inspired by competing narratives about globalization that bring different values to the fore, this approach no longer just tries to achieve an efficient international division of labour through trade liberalization. Rather, it tasks trade policy with achieving other substantive policy objectives as well, which include bolstering labour rights, addressing inequality, building resilient supply chains, safeguarding national security, and mitigating the climate crisis.
Trade officials have long been attentive to the effects of trade on other policy objectives, often portraying them as either positive or negative externalities of trade liberalization. On the positive side, increased international interdependence was expected to promote peaceful international relations. Some expected that rising incomes would lead to better working conditions and more support for environmental protection. Others argued that trade produced negative externalities, such as the overexploitation of resources and environmental degradation, and advocated for the expansion of exceptions to trade obligations to resolve conflicts between trade and other objectives. Since the early 1990s, trade agreements have also often featured provisions regarding labour rights and the environment to ensure that greater international competition does not take place on “unfair” terms.
The key distinguishing feature of the more recent shift to multipurpose trade policy is that other policy objectives no longer come into the picture as externalities of trade liberalization or as safeguards against unfair competition. Instead, those other policy objectives have taken a place alongside, and in some cases the place of, trade liberalization as the immediate objectives that trade policy is supposed to pursue.
The purpose of this article is to sketch the evidence for this paradigm shift in trade policy, outline the key challenges that it presents, and explore its implications for international trade cooperation.
The Crisis of Globalization
It is now commonplace to observe that globalization is in crisis. One piece of evidence of this crisis is that the establishment view of globalization as an inevitable force for good is increasingly being challenged by other narratives that bring a range of competing values to the fore. From the economic establishment’s perspective, free trade and an efficient international division of labour have the potential to make everyone better off—if governments implement the right policies domestically to help workers adjust to the dislocations that competition in a truly global economy may cause.
As Anthea Roberts and I show in our book Six Faces of Globalization, many other narratives are testing this view. There are those who argue that the damage that job losses cause to certain groups of workers outweighs the benefits of cheaper products and additional economic opportunities that globalization may create in other places and for other professions. Another narrative maintains that the investment and intellectual property protections in international economic agreements contribute to rising inequality. There are also rising concerns about the security implications of international economic interdependence; Russia’s invasion of Ukraine is only the latest illustration of why it may be unwise to become overly reliant on a trading partner whom one cannot trust. Yet others point out how the COVID-19 pandemic has exposed the fragility of global supply chains and our economic systems’ lack of resilience to shocks. And finally, the drumbeat of news about floods, droughts, extreme heat, and wildfires provides a daily reminder of how the global diffusion of Western patterns of production and consumption has set the world on a path to climate breakdown.
The Turn to Multipurpose Trade Policy
We can understand the shift to multipurpose trade policy as a response to these narratives. As European Union Director General for Trade Sabine Weyand has written, it is now “normal to ask what trade can do to address the big tests of our time. How can it help combat climate change? How can it promote labour rights globally? How does it impact security?” Weyand notes that “trade is seen as a tool to attain broader objectives more than ever.” Trade policy is increasingly moving away from efficiency as its primary objective. United States Trade Representative Katherine Tai has argued that the pursuit of efficiency has created a “quite fragile global economy” and that “in refashioning globalization to a Globalization 2.0 … we [need to] adapt the rules of trade to incentivize firm behavior to take into account more than just efficiency, but to promote and to reward decisions that are made to pursue sustainability for our people and our planet.” The U.S. initiative for an Indo-Pacific Economic Framework, which the United States is negotiating with 12 countries in the region, foregrounds the objectives of “resilience,” “inclusion,” and “sustainability.” At the same time, ever more aspects of U.S. trade policy are dominated by considerations of national security, especially in its relationship with China.
Multipurpose trade policy also plays an increasingly prominent role in the World Trade Organization (WTO). The Agreement on Fisheries Subsidies is the first WTO agreement that primarily pursues a sustainability objective. In the wake of the global supply chain crisis and rising food and energy prices, food security has taken a much more prominent place on the WTO’s agenda. And the debate about how the WTO can help its members do a better job of weathering the next pandemic is in full swing.
Not all new objectives enjoy universal support. While some goals, such as sustainability and resilience, are broad enough to garner virtually universal assent, others, such as the use of trade measures to promote labour rights or shore up national security, are more controversial. Even on the widely supported objectives, there is disagreement on how best to achieve them. However, the bottom line is that trade policy is now expected to pursue a much broader range of objectives than even a few years ago.
Nicolas Lamp is an Associate Professor at the Faculty of Law of Queen’s University in Ontario, Canada.
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