The war in Ukraine shows why we need trade cooperation

U.S. Trade Representative Katherine Tai recently stressed the importance of strategic trade cooperation, testifying that trade alliances were “instrumental to [the West’s] strong, united response” to Russia’s invasion of Ukraine. Her comments remind us, amid all the recent eulogizing of neoliberalism, that trade cooperation is more necessary than ever. The rules of the international trade game, and the players involved, just have to be chosen more carefully.

The White House includes trade reforms under its “foreign policy for the middle class” agenda. It’s an effort to address trade’s discriminatory effects by focusing on job creation and wage growth. Legal scholars sometimes call this “socially inclusive” trade policy, harkening back to a New Deal-era idea that trade should serve workers, not the other way around.

One key goal is to create more space within international trade laws to prevent “social dumping” — i.e., the exploitation of cheap labor abroad at the expense of domestic workers. The problem is that, under current rules, labor standards – as well as environmental regulations and safety standards – are often construed as discriminatory. Recognizing this tension, there is growing consensus that international law has to be more flexible, providing governments with greater room to maneuver within the rules to prioritize domestic objectives, even if it means stepping away from their liberalizing commitments and limiting trade, in order to protect labor from globalization’s harsh impacts.

The second core element of trade reform is renewed cooperation. Inclusive rules cannot work in a vacuum. They require buy-in from America’s partners, and a cornerstone of “foreign policy for the middle class” is re-establishing old alliances with like-minded countries — namely, governments that respect labor rights and share an interest in combating uncompetitive, coercive tactics of autocrats.

Building an effective coalition, as Ambassador Tai noted, means shoring up relationships with industrialized democracies across Europe and the Pacific Rim. And, while the specifics of a new, rules-based arrangement among these countries remain unclear, the idea is that key economic partners must agree to a less exploitative form of globalization. That means getting countries on board with those more flexible rules to combat social dumping — and, just as importantly, convincing America’s allies to reduce reliance on Russia and China.

Of course, reform is not easy. Rewriting the rules, and convincing other countries to play along, are both difficult.

First, adding more flexibility to international trade law may bring new legal headaches. The world’s market powers have long histories of arguing over the legitimacy of trade restrictions based on labor, environmental or even national security concerns. Flexibility provisions, like anti-dumping and safeguards, are notoriously prone to accusations of abuse. It is no coincidence that a plurality of World Trade Organization disputes involve anti-dumping. Any reforms that add greater flexibility to the rules, and allow governments to use trade remedies more often, may backfire, leading to more frequent litigation.

Second, even if countries can agree to a rules-based framework, America’s traditional allies may be reticent to cooperate. Despite President Biden’s progress restoring the U.S.’s reputation, other countries’ decisions to hop on board with a set of worker-centric trade policies is about more than trust. It is also about money. America’s top trade partners must determine how much they are willing to distance themselves from Russia and China.

Europe’s response to the invasion of Ukraine shows that this decision is not straightforward. While some countries were quick to sanction Russian banks, the much tougher test is reducing reliance on energy imports. Russia is the European Union’s primary gas supplier and moves to cut these ties have been understandably slow. Add to this mix China’s centrality as a global source of manufactured goods, and many of the would-be participants in a new, democratic trade bloc are caught in a difficult position. 

Fortunately, both of those obstacles are surmountable. There is newfound willingness among many advanced industrialized democracies to distance themselves from the instability and coercion that often follows from doing business with dictators. Important U.S. partners, from the European Union to Canada, share an interest in limiting social dumping. And partners like Japan share an interest in diversifying supply chains and reducing uncertainty.

To be sure, Biden’s initiative has its skeptics. Some think the White House is making a mistake from a grand strategy point of view. And not everyone agrees that foreign policy – or, more precisely, trade policy – has the ability to affect middle-class welfare. It’s certainly true that more domestic work like the COMPETES Act must be done to protect labor’s interests and better redistribute the gains from trade.

For now, however, there’s a unique opportunity to make trade more inclusive – and to salvage something positive for international law – from a wasteful, unnecessary war.

Jeffrey Kucik is an associate professor in the School of Government and Public Policy and the James E. Rogers College of Law (by courtesy) at the University of Arizona.