Globalised trade causes a range of issues for humanity and the environment.  One of these issues is that globalised trade drives reducing standards in several areas of human activity.  This occurs because countries that allow poor working conditions, uncontrolled pollution, environmental damage, poor animal welfare, and reduced taxation that leaves them unable to provide necessary services for their citizens, gain a comparative trading advantage over countries that act responsibly in these areas.  This comparative advantage creates a dilemma which pressures potentially responsible countries into reducing their standards so that they can compete.  

Much of the goods bought here in Australia and more generally in developed countries are currently made in countries with low industrial-relation, environmental, and social standards.  These countries' workers are not paid enough to feed and house themselves properly, working conditions are dangerous, pollution and environmental protection controls are weak or non-existent, and agricultural animals are treated poorly.  Currently, we in developed countries only maintain our competitiveness by lowering our own standards in response; if we can’t lower our own standards we withdraw from the areas of commerce in which we consequently can’t compete, to our disadvantage.

The reason that developed countries such as Australia can’t compete in manufacturing is not because we are inherently incapable; we’ve certainly done this manufacturing before – until recently we used to make cars, a few decades ago we used to make clothes, back in the nineteen-sixties Australians used to make our own televisions and appliances – that seems unimaginable now.  The reason we can’t compete in many areas of manufacturing now is because we set ourselves high standards for what happens in our country, as we should.

While Australians and citizens of other developed countries believe that we are a modern liberal society that has good standards for looking after people and the environment, this is a superficial and inaccurate belief.  Many of the products that we import and buy have cruelty, environmental destruction, and pollution embedded into them due the standards under which they are made.  Even though these products are not made in Australia we are endorsing and accepting these standards by importing and buying them, so our own claimed high standards are an illusion by which we deceive ourselves that we are humane, responsible, and morally superior.

To resolve the dilemma inherent in globalised trade we must develop a method of ensuring fair and equal competition between the countries that are trading (a “level playing field”), and of ensuring adequate standards in all exporting countries so that this destructive downward spiral in values doesn’t happen.  This method must negate the comparative trading advantage that results from accepting low standards and disregarded values and eventually eliminate those low standards and disregarded values.

In the past, countries have protected locally made products by limiting the importation of products which displace them. They have done this by applying tariffs and quotas which create an artificial comparative trading advantage for their products.  Modern economists generally reject protectionism, claiming that it results in less economic activity overall and higher prices, and therefore doesn’t achieve the best possible economic outcomes.  This traditional protection of local markets isn’t intended to address the issue of reducing standards and disregarded values; however, the mechanism of protectionism may be adaptable to achieve these outcomes.    

We need a modern form of trade protection: a values-based trade agreement, which integrates with globalised trade and doesn’t result in the negative economic effects of tradition protectionism.  

So how could a values-based trade agreement work?  This is an overview of the requirements of such a system, with ideas on how it could be achieved.

 Firstly, we would need to comprehensively define the values that relate to competitiveness in commerce and manufacturing that we want to support: values such as industrial relations; work-related human health; animal welfare; pollution, including greenhouse gas pollution; environmental degradation; sustainability; and fair and sufficient taxation.  These are areas in which developed countries like Australia are at a disadvantage due to our moral concerns over the consequences of ignoring them.  Once we know what values we want to support we would develop formal standards in all of them.

We would then apply a tariff on imported products for which the manufacturing process doesn’t support these values.  Initially, all such imported products would have a tariff applied, which would be reduced, perhaps in stages or on a sliding scale, as the standards are achieved.  We could developed a point-scoring system to facilitate this.

Ideally, we would size the tariffs to bring the cost of a non-compliant imported product up to what it would cost if it did comply with the value standards so that, as standards are achieved at a higher manufacturing cost, the tariff would reduce to keep the final price steady. 

Such a system of tariffs must not directly advantage any particular nation.  We must incorporate safeguards to eliminate the tendency of individual countries to distort or undermine these standards and values to gain a competitive trading advantage.

We would need to be certain that imported products really did comply with these value standards, so a certification system would be required with certifying authorities that are independent of the international manufacturers, distributors, and governments.  We could apply this certification to specific products, individual companies, administrative regions with sufficient autonomy, or whole countries. 

Individual countries could implement the certification process on their imports and exports, although it may be more effective if we implemented it through an international agreement, in a similar manner to other international agreements such as the CPTPP and GATT. 

The money raised by any tariffs would initially be used to pay for the costs of the certification and monitoring process.  Any remaining money could then be returned directly to the citizens of the country that collected it, to offset the higher prices that they may pay (which represent the real costs of production), in a manner similar to how the carbon price was setup in Australia.  

This method of a using values-based trade agreement could potentially be expanded to protect unrelated values beyond those that are associated with competitiveness in international trade, for instance to broader human-rights issues.  However, if we used a values-based trade agreement as a means of imposing other values that are not directly related to fairness in international trade it would become a form of coercion (a sanction) used to impose broader national agendas on other countries.  This would reduce the focus and distort the principle of a values-based trade agreement.

There is one issues caused by global trade that may justify inclusion in a values-based trade agreement even though it doesn't directly relate to fairness in international trade.  This is the environmental consequences of moving goods huge distances around the world by aircraft, ships and road transport, which produces pollution, uses energy and other resources unnecessarily, and causes direct and indirect environmental damage.  

The international transportation of goods isn’t directly part of fair and equal competition because it isn’t controlled by the manufacturers or the countries that they operate in; but it is an important part of moving products around the world, and therefore should be included in the consequences of that trade.  (Although, in its own right, international goods transport involves values including working conditions, pollution, resource consumption, and animal cruelty on board the craft that may be considered for inclusion.)

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blog post: a values-based trade agreement to help save humanity and Earth

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