Harnessing Globalisation?

Wednesday, May 17, 2017 - 14:48

 

The European Commission released last week a reflection paper on harnessing globalisation. This aims at kicking off a debate on how the EU and its Member States can shape globalisation in a way that improves the lives of Europeans – it is a reaction to the increasing rejection of the EU and mainstream political parties in Europe. We were hoping to see alternatives to the neo-liberal approach promoted for so long by the European Commission and most member states. But this is not really the case…

Serious gaps in the analysis

With this paper, the EU admits that globalisation “brings challenges” such as widening inequalities and social polarisation. It also recalls that the objectives of globalisation should be the protection of rights and increased human well-being. On this, we agree! However, this reflection paper lacks any understanding of the impacts of globalisation on people living in poverty in the Global South - it promotes instead a short-term Eurocentric agenda. The boomerang effect may not take long if we pay no attention to the impact of European policies in partner countries… precisely because we live in a globalised world.

The paper notes that supply chains have gone global and that products designed in Europe are assembled elsewhere from parts made in other regions of the world. That has led to downward pressure on workers’ pay and conditions in Europe, says the paper. This is true, but the paper does not make any reference to the impact of the model of global supply chains, promoted by free trade and investment agreements, on people living in developing countries. In fact, this model is based on low wages, insecure and often unsafe work, with women being the most affected. Value is added in Europe, and the workforce in developing countries is confined to low-skilled and poorly-paid jobs. Automation will have devastating impacts in Europe, but what about developing countries?

The paper claims “globalisation has helped lift hundreds of millions of people out of poverty and enabled poorer countries to catch up. It has played a role in increasing stability, democracy and peace”. This is a strange assertion, while conflicts are affecting a large part of the Middle-East, without speaking of Afghanistan, South Sudan, Ukraine or the tension in North Korea. The competition for natural resources is generating conflicts, and human rights defenders are harshly repressed in many countries. Total arms sales reach unprecedented levels and the top 10 exporters of conventional arms (excluding small arms/ light weapons) include 5 EU member states. But more fundamentally, if foreign investments and international trade have played a role in the past lifting people out of poverty in many countries, is it still the case today? And in contrast, what about the role of social protection, labour laws and a dynamic independent civil society?

Solutions proposed: A mixed picture

Solutions proposed are more global governance and global rules for the external action, and more innovation and social protection within Europe.

The external response (i.e. the EU agenda on the global stage) will be about tackling tax evasion, corruption, resource extraction, social dumping and harmful subsidies. That is a great roadmap. How to do that? There is a reference to the need to reform multilateral institutions to make them fairer and to step up the fight against tax avoidance at global level. Let’s hope the Member States – so far very protective of their special tax regimes – are going to follow suit. The paper also proposes to decouple economic growth from resource use, and to promote collective bargaining systems at global scale. Those are definitely steps in the right direction.

But beyond those proposals, the focus is mostly on removing barriers to free trade, pursuing Europe’s economic interests abroad through diplomacy, using development assistance to promote (European) private investments in developing countries or strengthening European business organisations abroad. The paper says the European Investment Plan, a flagship development initiative, will “create investment opportunities for European companies”. This pro-private sector approach presents the risk of further exacerbating power imbalance and inequality instead of reaching women and the most marginalised, and is not balanced by any commitment to regulate in order to enforce responsible corporate behaviour. “European companies should take their social or environmental responsibilities seriously or be held to account”, says the paper - but it does not propose anything to make that happen!

In terms of domestic policies, the Commission proposes to improve the realisation of social rights in Europe, including by investing in health and child care to raise the participation of women in the labour market. The proposal to better take into account the distributional impacts of structural policies in the European semester is most welcome as well. Boosting innovation, ensuring that companies pay their taxes (in Europe) where profits are actually made, and a greater emphasis on training and education are welcome as well. However, the continued focus on growth and on trade and investment liberalisation as part of the solution casts a shadow over the whole initiative. And distressingly, despite the effective protests against such clauses in the proposed trade agreement with Canada, the proposal of an investment court reflects the continued belief that investors’ interests deserve higher level of protection than people and planet.

It is time to admit that we need more than adjustments to the system to build a just, equitable and sustainable world.  We share the same challenges and a common destiny with people living in other regions in the world. The time has come to reimagine a different pathway for humanity, and that requires making the economy work for all by redistributing wealth and power.