13 Apr Multilateralism redux and the Havana Charter
President Donald Trump’s tariff tantrum has provoked a mixture of disbelief and loathing, none more than from economic pundits who have deemed it irrelevant (for reducing the trade deficit), irresponsible (in damaging job prospects) and irrational (by weakening the global value chains on which American business depends).
Much of this criticism hits the mark. But it is worked in to a meta-narrative about the end of the post-war liberal order that not only presents a flawed interpretation of history but one that is unlikely to help advance a policy agenda that speaks to the anxiety and anger that President Trump continues to successfully tap.
International trade was the most contentious part of the original discussions on the post-war multilateral architecture, so much so that handling the conflicting interests was given to the United Nations which responded in 1947 by launching a conference on trade and employment. After a hard five-month slog, negotiators signed, on the 24th of March 1948, the Havana Charter for an International Trade Organization.
The Charter is remarkable in its scope and ambition, setting out a blueprint for a more “balanced and expanding world economy” through a combination of increased domestic spending, open markets, widespread industrial development, long-term capital flows, and strengthened worker rights. It insisted that countries should be protected against external shocks and predatory corporate behaviour, that their international commitments should be commensurate with their level of economic and social development and that the full use and equitable distribution of the world’s human and material resources would be managed through strong public action, at both the national and international levels.
Despite being signed by 56 countries, both developed and developing, the Charter eventually fell victim to rejuvenated business interests in the US (appalled at the thought of possible multilateral interference in their profit-making endeavours) and the sharp turn in Congress from New Deal populism to McCarthyite scaremongering.
Still, its influence persisted in the GATT’s (General Agreement on Tariffs and Trade) abiding efforts to reduce tariffs and through the flexibilities and safeguards that became part of the wider post-war multilateral consensus. In various ways and to varying degrees, that consensus delivered the international public goods needed to underpin a stable and peaceful world order without unduly compromising the domestic policy space needed to fulfil the ambitious post-war economic and social agenda.
There is plenty of room to debate the successes and failures of that consensus but what is certain is that free trade was not its modus operandi; indeed as the Chicago economist Jacob Viner noted as negotiations on the Charter got underway, “There are so few free traders in the present-day world, no one pays any attention to their views and no person in authority anywhere advocates free trade.”
Free trade only resurfaced in the late 1980s, as communism collapsed and a hypertrophied financial sector gained a tighter grip over the economic policy agenda. This new liberal order broke with the multilateral practice of previous decades, not least in rejecting full employment as a policy goal, insisting on a one size-fits-all liberalization agenda and making corporate profitability the animus of a new social contract.
In that sense at least, President Trump’s actions to bolster the profits of American business through heightened protection from international competition, lower corporate taxes and renewed deregulation, is less a break with the recent past and more an inside struggle for the reins of today’s hyperglobalized order; and like the actions of his more cosmopolitan-minded rivals his solutions will prove neither inclusive nor sustainable.
The silence on the 70th anniversary of the Havana Charter speaks volumes about the current era’s approach to multilateralism; not simply in the contrasting levels of ambition but in subverting its underlying logic by assuming that opening-up to trade and private capital flows, full employment and economic development will automatically follow. Evidence continues to favour the drafters in Havana.
Progressive voices calling for a revitalized multilateralism would do well to revisit the Charter and to think hard about its relevance for addressing the imbalances and inequities of the 21st century global economy. There are already signs (unknowingly perhaps) that this is happening; the actions of the EU Commission to reign in rogue monopolists, the G20’s Marshall Plan for Africa and China’s Belt and Road initiative can all be interpreted as tentative steps in that direction; none, however, has the clarity of vision, strength of conviction or depth of ambition embodied in the Charter.
Perhaps the best thing for now is to celebrate its 70th anniversary by acknowledging its intent to bring “mutual understanding, consultation and cooperation” to the ongoing task of building a more stable, inclusive and prosperous multilateral order.
* Richard Kozul-Wright is director of globalization division at UNCTAD.
(This article was first published at Livemint on Thu, Mar 29 2018.)