Unleashing the Made-in-Keynes Trade Manifesto: A Solution to Modern Trade Wars
Decision time for European Union: Shaping the Future of the EU
Ever thought the current "trade wars" are just a manifestation of the unpredictability of the U.S. President? Well, think again! These ongoing conflicts also shed light on the limitations of the free trade approach, hinting at a possible end to its era. Why? Because neither the traditional free trade theory nor the WTO have a solution for the ever-growing U.S. trade deficit in their balance of payments.
Following the scientific free trade theory, either the dollar exchange rate should automatically adjust or wages should, in theory, correct the trade balance. However, since 1991, the U.S. hasn't experienced a trade surplus – that's over 30 years ago! Similarly, many poorer countries are drowning in debt. The World Trade Organization (WTO), supposedly responsible for the rules of free trade, comes up empty-handed too. Neither exporters nor importers find a solution to their problems within the WTO.
So where did we go wrong? Historical judgment might point the finger at the U.S. government in 1944, which rejected the proposal by the British economist John Maynard Keynes to balance trade imbalances (whether deficit or surplus) by implementing penalties such as adjusting exchange rates, applying punitive tariffs, or providing negatively interest-bearing loans. Keynes' plan was elaborate and far-sighted. Post the 2009 financial crisis, it found new life, appreciated not only by the Chinese central bank but also a UN commission led by esteemed American economist, Joseph Stiglitz. Implementation, however, fell short again. Perhaps, Keynes' brilliant idea is worth another chance – this time within an ethical world trade order aiming to bring some order to the current chaos.
A Brand New Era for World Trade
This proposed ethical order would view trade as a means to serve the global community's overarching goals: peace and democracy, human and labor rights, social security and distributive justice, environmental and climate protection. In this vision, countries and companies working in accordance with these goals would enjoy freer trade access than those acting against them. The United Nations (UN) could serve as the regulatory body since the WTO was set up independently, making it challenging to integrate other objectives.
The x-factor here? Raising the standards, not lowering them! In today's logic, climate protection, social security, or higher labor standards supposedly lead to a competitive disadvantage. But in our proposed system, those who wish to play would need to up their game – raising standards rather than lowering them. Similar standards apply at the corporate level. Apart from financial balance sheets, a common good balance sheet or sustainability report with measurable, comparable results would be a prerequisite for corporations to compete in the global market. The better the balance sheet, the better the access to the market.
This proposed Ethical Trading Zone ("UNETZ") would mark the third attempt to regulate world trade within the UN, following the International Trade Organization (ITO) of 1944 and the UN Conference on Trade and Development (UNCTAD) 1964. It's high time to rewrite the rules of world trade to make it profitable and politically beneficial to uphold climate, human rights, social cohesion, and world peace.
The Man Behind the Vision
Who's championing this ethical world trade order? None other than Christian Felber, the initiator of the Economy for the Common Good, currently co-author of the working paper, "A New Paradigm for the EU's Global Trade Strategy" from the CBS International Business School.
Is it time to reevaluate the world trade rules? You bet! Let's unleash the power of ethical trade and build a more sustainable industrial policy in Europe!
- The proposed ethical world trade order advocates for an international system where countries and companies that align with global goals, such as peace, democracy, human rights, social security, and environmental protection, could benefit from freer trade access. This vision might be regulated by the United Nations (UN) to ensure compliance with these objectives.
- Christian Felber, the founder of Economy for the Common Good, is the driving force behind the idea of an ethical world trade order. He is currently working on a paper titled "A New Paradigm for the EU's Global Trade Strategy" at the CBS International Business School, exploring ways to redefine the rules of world trade for the betterment of global economy, industry, finance, politics, and general-news.
