Dock workers in Grimsby with container ship. Photo: Monty Rakusen

Free trade: what would it take to get union backing?

27 Feb 2017, by Frances O'Grady in International

Today I was asked to give a speech at the Foreign Office by Liam Fox, Secretary of State for International Trade, about free trade. This is an edited version of what I said.

The debate over free trade is a timely one, given that those who advocate protectionism seem to have their tails up. And too many free traders have their heads firmly in the sand.

Dani Rodrik, the author of the book Has globalisation gone too far? twenty years ago wrote recently about what happened when he began discussing the downsides, and not just the upsides, to globalisation.

He was struck by how many of his fellow economists seemed to think that even admitting that there may be losers from globalisation was a kind of treachery. Breaking ranks in this way would only hand ammunition to the enemies of free trade.

But if we learned anything from the EU referendum and the election of Donald Trump, it’s that ignoring those communities who have lost out comes with a high price.

Economists can’t carry on pretending that trade deals are great for everyone, or that the market automatically corrects. And politicians can’t carry on pretending that if people get ‘left behind’ then that’s a price worth paying.

Voters don’t buy that any more.

There are, of course, strong arguments that can be made in favour of free trade. Some point to competition, specialisation and technological concentration. But for the majority of the people what matters is that the benefits of free trade can be more jobs, higher wages and lower prices.

But let’s not pretend that that is always the case, or that everyone benefits equally.

In a paper called The China shock, published a year ago, US economists looked at how increased trade with China had caused severe and permanent harm to many American workers and their communities. They wrote:

“Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churn and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition…but offsetting employment gains in other industries have yet to materialize.”

Now Britain has had far longer to adjust to global trade. But trade unions here are all too familiar with that picture. The deep scars of deindustrialisation and unemployment. Well paid skilled jobs being replaced by worse ones. High streets dominated by charity shops and communities forced into decline.

We’re all too familiar with what happens when, as in the case of the steel industry, others don’t play by global rules. And when our government actively lobbies against the enforcement of those rules.

Bluntly, people know that free trade brings benefits. But experience has taught them that, all too often, they and their families won’t see a fair share of those benefits.

So the only way to build popular support for trade is by making it fair, as well as free.

Here are four ideas from the TUC.

First, we need to be realistic about the winners and losers from trade deals we negotiate.

We can’t rely on the benefits that trade brings trickling down so that the losers get compensated. As the American research found and trade unionists know, that doesn’t happen.

So we need government action to tackle the harm trade deals can cause, and provide real alternatives for those people and communities worst affected. It needs to be a mix of demand and supply-side measures. Investment in new industries, better infrastructure and training, for starters; and a proper safety net of public services and social protection.

Second, any post-Brexit trade deal needs to put the interests of working people on an equal footing with those of business.

The highest standards of worker, consumer and environmental protection must lie at its heart. It must make the creation of good jobs one of its top priorities, especially in those parts of the country that need them most. And it must not become a vehicle for privatising or undermining public services.

Trade unions will oppose any deal which gives special privileges for foreign investors through Investor-State Dispute Settlement, and provides no equivalent way to enforce the rights of workers, citizens and the environment.

Thirdly, we need to acknowledge that jobs, rights and livelihoods are central to any deal with the European Union after Brexit.

And that the British people’s prosperity depends on getting a good trade deal with the EU.

A hard Brexit that takes us out of the single market – the world’s biggest free trade zone – would be a monumental mistake.

Last year, investment fell by 1.6%. This year, inflation is rising as a result of currency movements alone. And pay packets are back under pressure. As the Centre for Cities reported last month, of the 62 largest city economies in the UK, the EU is the main export market for 61 of them.

So if the government is serious about addressing divides between the north and south, cities and towns; if its new industrial strategy is to have any chance at all of protecting good jobs and wages; then negotiating a new trade agreement with the EU must be an urgent priority.

And it must deliver what the Prime Minister has promised – that after Brexit, workers’ rights which are currently guaranteed by EU membership will be protected and enhanced.

And, my final point: when it comes to a new deal with the United States, my advice is tread very carefully.

Get it wrong and that could scupper popular support for free trade at a stroke. You could even say: “No deal would be better than a bad deal.”

Last month, when the PM went to Washington, we heard lots of warm words about an agreement. President Trump said it’ll be “really great”.

But we need to know exactly what any deal would mean for the NHS, for the car industry, for steel, farming and food safety standards; and for workers’ rights.

That’s why the TUC has joined forces with our sister union centre in the US, the AFL-CIO. We would welcome a realistic trade agreement between the US and the UK provided it puts the interests of working people first, not those of multinationals and foreign investors. And provided it enforces globally recognised labour standards – rights that American workers want and British workers don’t want to lose.

We want our governments to work together to promote decent jobs, high skills and good wages.

But the key point is this: if you want to build support for free trade, then you need to make it work for ordinary people.

Free trade can be a force for good.

Get it right, and we can deliver growth, jobs and prosperity for all. Get it wrong, and the result will be more inequality, alienation and discontent.

Let’s make the right choices.