Open economies grow faster and have more spread of technology and ideas, but the erosion of public trust and the persistence of economic uncertainty are opening the door to protectionism and isolationism.
All those involved in trade and related activity be it at local, national or global level, as real world actors, policy makers and policy shapers engaging and communicating in this space need to respond in the respectful, intelligent and sophisticated manner that public concerns and anxieties crystallised in the backlash against globalisation and automation deserve. This requires exiting comfort zones, reconnecting trade with everyday experiences, and understanding trade is not a stand-alone activity or policy, but part of a complex, interconnected ecosystem of societal activity going well beyond the narrow economic prism. Most importantly trade must be understood as a means – rather than an end in itself - to contribute to delivering inclusive growth for all, in concert with a host of other policies and activities. To save trade, we need to save it from itself.
Main image: Getty Images
The modern-day narrative around trade has been complex for the last 25 years, going all the way back to the North American Free Trade Agreement (NAFTA). Long before anyone beyond New York had heard of one Donald Trump, another American billionaire businessman, Ross Perot, ran as an independent in the US 1992 presidential campaign made memorable by his graphic depiction of NAFTA as provoking “a giant sucking sound of (US) jobs going South (to Mexico)” due to the chasm in labour costs and adherence to labour and environmental standards between the two countries.
Far more revealing in today’s context, was the question posed by the audience member in the presidential TV debate to which he replied: “What will you do as president to open foreign markets to fair competition from US business and to stop unfair competition here at home from foreign countries so that we can bring jobs back to the US?” That same question was front and centre in the presidential campaign 24 years later.
Shortly after this, in January 1993, the day NAFTA entered into force, the Mexican EZLN Zapatista movement, the precursor to what became known the Anti-Globalisation movement that took the WTO Ministerial Meeting in Seattle hostage in 1999, announced its arrival.
So nothing new under the sun about the challenges in communicating the benefits of trade.
What has changed is that, since 2016, the toxicity of the trade brand and its association with the free movement of goods, services, capital and people, has gone from enjoying peripheral political appeal to being mainstream, most markedly in the very countries most associated with promoting global free trade and its institutions in the aftermath of the second world war, the United States and the United Kingdom. A tide of scepticism is threatening to swamp the very foundations of the global system in a wave of protectionism and populism.
When communicating trade in a post-truth Western world, our starting point, whether we like it or not, should be the recognition that brand ‘Trade’ needs to be detoxified. To do so we need to ask ourselves uncomfortable questions about whose truth on trade we tell.
"Our starting point should be the recognition that brand ‘Trade’ needs to be detoxified."
Where we are now
It is an understatement to acknowledge that the momentum does not lie in favour of an expanding trade agenda, as national elections and global economics exert a push-pull effect on various talks.
Some initiatives are currently paused - the broad agreement sought in the Doha Round continues to elude negotiators, fully 16 years after its launch, major regional agreements like the Transatlantic TTIP are in the deep freeze. Others, from the Trans-Pacific Partnership to NAFTA, are in rewind, while Britain is in the process of disengaging not only from the deepest, most integrated global trading regime, the EU, but will, in the process cease to enjoy the benefits of the EU’s extensive network of 60 Free Trade Agreements around the world that it did so much to influence and fashion.
Brexit requires it to build a trade policy and strategy from scratch without the clout and leverage of the biggest consumer market in the world.
All the while, the digital revolution continues to change the world of trade. The future of work is the future of trade as well, with a shift toward services and intellectual property that is not new but has increased exponentially in recent years. Preliminary OECD estimates suggest digitalisation will automate at least 14 per cent of jobs in future with another 30 per cent significantly impacted.
As it always has, trade continues to create jobs and, result in the obsolescence of others. Whilst in large parts of the planet, emerged, emerging and developing countries alike, trade continues to help pull people out of poverty and creates growing ‘middle classes’ in relative terms in many post-industrialised and so-called developed countries, it is perceived as being responsible for the destruction of age-old “industrial” activities such as coal and steel production or ship-building, threatening or decimating livelihoods, communities and the very purpose of many people’s existences.
In many such areas suffering from the geography of discontent, throughout the United States and western Europe this phenomenon is not new. But the global financial crisis sparked in 2008 and subsequent great recession has revealed the stark divide between the “left behind” and dynamic metropolises and regions that have ridden the modern wave of globalisation.
Eight years later, the political day of reckoning began. In 2016 the twin political earthquakes of the EU referendum in the UK and the US presidential elections proved a watershed moment. Since then, the results of elections in the UK, France, Germany and Italy have all revealed significant fault lines in the societal fabrics of these electorates. This also coincided with the emergence of the “post-truth” phenomenon in political and public policy discourse.
As EU president Donald Tusk acknowledged following the conclusion of the trade (or rather economic integration) agreement between the EU and Canada (CETA), “Post-factual reality and post-truth politics pose a great challenge on both sides of the Atlantic”.
Citizens appear increasingly susceptible to the provision of misinformation and appeals to ‘irrational’ emotion, all made possible by a crisis of trust in politicians and policy-makers alike.
Post-truth poses an existential threat for organisations like the OECD. As a provider of objective data and analysis, we are now competing in an information jungle in which everyone is an author or content producer, although not necessarily with the same editorial responsibility or accountability.
Research at the University of Indiana shows that people are just as, or more likely to, share misinformation as they are reliable information on platforms such as Facebook.
Statistics, the favoured weapon of the ‘experts’, are also under fire. As William Davies argues, “antipathy to statistics has become one of the hallmarks of the populist right. Not only are statistics viewed by many as untrustworthy, there appears to be something almost insulting or arrogant about them."
The advent of citizen-generated big data certainly poses a serious challenge to the long-term viability of official data generated by the statistical offices of nation states.
Is this really post-truth?
It is easy, lazy and dangerous to lay the problems of trade at the door of post-truth. It is more useful to pose the right questions: whose truth are we talking about when it comes to trade? Truth to ‘people like us’ or truth to families in the many regions left-behind? Which facts are we referring to? Those we find in economic aggregates, or the facts faced by households?
Sometimes, those things are the same. More often, they are not.
In a speech to the Economic Club of Minnesota in April of last year, the OECD secretary general Angel Gurría recognised this: “We have to begin by acknowledging that many people are unhappy. And rightly so. In the wake of the crisis, life has not been getting any better for a lot of them. …They believe that the system is not working for them; they feel that it is unfair; and there is increasing evidence that many of them may actually be right.”
We are fond of saying that trade supports jobs, and that unemployment rates are falling in most of the world. But in a household where one parent has lost a job due to globalisation, or digitalisation, the unemployment rate in that household is 50 per cent. When job losses are concentrated in regions with few jobs and few prospects, we see lasting negatives.
The OECD has gained an increasing understanding of the phenomena at work, over time analysing the low growth trap, where, even as trade may have expanded in the private sector, we have stopped investing in skills and infrastructure in the public sector. So as citizens of many nations have watched companies get bigger and richer on trade, they and their communities can feel themselves being left behind.
Beyond regions, many businesses have been left out. There is a rising productivity gap between the best firms and the rest, and that means a gap in opportunity for their workers as well. And it’s often outdated policies and the lack of responses to this new reality, not lack of ambition, that’s to blame.
Income inequality is also on the rise: in every country*, work is not as valuable as capital.
The picture is even more worrying once OECD statistics go granular, beyond the aggregate, to where most people live. We’ve documented stagnating standards of living for the middle class in advanced countries, a drop in life expectancy, inert social mobility and a lack of access to the social ladder of education from generation to generation.
We’ve also documented a “missing middle” in the labour market where high-skilled and very low-skilled workers are in demand, but those with mid-level skills can find themselves with no place to turn.
What to do
What’s prompting a backlash about trade is not necessarily a communications problem in the reductionist sense, when it is reduced down to broadcasting, transmitting and telling. When communication is understood in the genuine sense, the ability to listen and to pose the right questions in order to fully understand an issue can reveal much. In this case this can result in the recognition that the problem lies with outdated policies, lexicons, analysis and data.
Trade policy and activity is one factor in a complicated eco-system. An integrated approach is needed, a comprehensive policy package that reconciles competing pressures from infrastructure to skills to housing to education to health care to the environment and so much more.
To ensure that trade benefits the real majority of their citizens, countries must look at lifelong learning and skills, social protection systems that get people back on their feet and prevent lasting hardship when creative destruction hits, investment in infrastructure and people. Those horribly termed “domestic policies” must encourage opportunity, innovation and competition.
Everyone has to play by the rules. Policy must be rebalanced in favour of SMEs relative to multinationals, the traditional big beasts of the trade jungle. The G20-OECD tax policy project on Base Erosion & Profit Shifting does just this by curbing the ability of multinationals to play the system by locating many of their most profitable intangible operations such as branding, marketing and IP, in very low tax jurisdictions independent of whether they generate their revenues.
SMEs were never in that game to start with. Policy has to remove the barriers to services that raise costs for all sectors, regulate efficiently and fairly to promote competition, and keep credit flowing.
What to say – and when to stop talking
When we look at all the policy gaps that workers and families are falling through, it’s no wonder people don’t trust trade. When communicating trade in a post-truth world, it doesn’t help if trade policy is ‘pre-truth’: if it doesn’t recognize the both people’s perceptions of trade and its real effects on their lives.
"When we look at all the policy gaps that workers and families are falling through, it’s no wonder people don’t trust trade."
The OECD’s efforts on public affairs, communications and engagement are increasingly dedicated to understanding – and responding to – the “geography of discontent.” On its surface, that’s fuelled by a concentration of economic challenge in lagging regions. But tackling that is a matter, again, of whose side you see it from.
Here’s an interesting example from the Pew Research Centre: “Although counties containing big cities such as Los Angeles, New York and Houston generate the highest dollar volumes of exports, the most export-dependent places tend to be relatively small, often rural or suburban counties whose economies are based on a single industry – or sometimes even a single company or plant. In fact, of the 154 counties or county equivalents where exports accounted for more than a quarter of GDP last year, only 11 had populations above 100,000 and half had fewer than 25,000 residents, according to a Pew Research Center analysis of data compiled by the Brookings Institution for its “Export Monitor 2017” report.”
For pro-traders, this merely proves that people are voting against their interests, they don’t understand how trade works, the people who are most anti-trade are the ones who need trade the most. “It’s a good thing we’re in charge.”
But the people in those counties may say: “Look at how careless trade proponents are with our lives. They’re not paying attention at all. They use phrases like ‘winners and losers’ and ‘job churn’ and ‘displaced worker,’ but they don’t see us. They make a trade deal that sends a single industry somewhere else, they’ve devastated us. Best not to touch anything at all.’
So for communication’s sake, these people must be included in the conversation. They must be listened to, not just talked at. This is the most important priority in communications to be incorporated into trade outreach.
These clear messages and public perceptions are ignored at our peril. And not just about what trade policy does, but about how it’s made. The Anti-Counterfeiting Trade Agreement, for example ran into the sand in the European Parliament amid strong charges of government secrecy; this criticism stuck and torpedoed a pact whose text had been public for two years.
The failure of ACTA was widely chalked up to poor communications: “if only the EU and the US among its signatories had explained the outcomes earlier, better, everything would have been fine”, was the refrain
But it had become apparent from a communications standpoint long before the policy community accepted that old mores of transparency (or lack thereof) would no longer fly in trade. The global public had become used to instant availability of background information about everything crossing their screens. Little less would do for trade agreements they were expected to welcome.
This explains why even the best communication of a negotiation’s outcome will not save them from what will now be a severe flaw at its roots - failure to engage the public in the construction of the policy itself.
Dani Rodrik, a professor of international political economy at Harvard University, considers the only way trade negotiations can move forward is if negotiating texts are public and the agreements are truly co-created.
Are we ready for that? Are old-school, seasoned and hardened trade negotiators and wonks ready to give up their ways, habits and, in some cases, jobs? Can we transition towards an era of far greater democratic engagement?
For the old-school NGO activists is the real point of calling for transparency, to make agreements impossible to reach? All of these are urgent communications and policy questions that will have to be addressed.
Repeating old facts won’t change people’s minds. Confirmation bias, which causes us to believe ever more strongly that which we think is true, regardless of evidence to the contrary, evolved as a survival tactic for humans.
People’s deeply held beliefs about public policy areas, combined with direct access to information and misinformation and ideas and ideologies, have detonated into public discourse and changed everything. Now, we have no choice but to change, too.
We can’t throw out our bedrock tasks: honest story telling about trade trends and impacts, in language people can understand and in stories where they see themselves and their understanding of trade reflected.
"We can’t throw out our bedrock tasks: honest story telling about trade trends and impacts."
We need to update our lexicon to ensure it is intelligible and accurate: Free Trade and Deep Economic Integration are not one and the same. Most agreements address far more issues than trade but no one thought to update the name of the generic. And more deeply, I neither are going to win hearts and minds No more jargon monoxide which means an end to those acronyms only the cognoscenti understand. The trade people are their own worst enemies: NAFTA, TRIPS, TTIP, TPP, CETA, the list is endless.
Whether trade is threatened by failure of message or incomplete policy underneath, we in the international community who value the important role trade can play locally, nationally and internationally have no time to waste. We suffer from time-lag: while the new agreements of today address many of the problems highlighted by critics, adding the attendant policies that solve the whole complex of problems people face will take time.
In the meantime, scepticism and opposition can continue to grow.
If we are true to what we say about trade being good for the people we serve, we have to practice what we’ve often preached to others: it’s time to adapt and fast, to this post-truth world to keep trade alive.