Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

The Wallonia Mouse And ‘Undemocratic’ Trade Deals

Dani Rodrik 25th October 2016

Dani Rodrik

Dani Rodrik

It appears Belgium’s Wallonia has put a nail in the coffin of the EU-Canada trade agreement (CETA) by vetoing it. The reasons, The Economist puts it, “are hard to understand.”

Well, yes and no. Canada is one of the most progressive trade partners you could hope to have, and it is hard to believe that Walloon incomes or values are really being threatened. But clearly something larger than the specifics of this agreement is at stake here.

Instead of decrying people’s stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I’d put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people’s concerns with earlier trade agreements.

The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there’d be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as “free trade” agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.

And because they failed to provide those distinctions and caveats, now trade gets tarred with all kinds of ills even when it’s not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade’s cheerleaders that deserve some of the blame.

One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won’t be enough — even if carried out. It’s about fairness, loss of control, and elites’ loss of credibility. It hurts the cause of trade to pretend otherwise.



Don't miss out on cutting-edge thinking.


Join tens of thousands of informed readers and stay ahead with our insightful content. It's free.



I discussed in an earlier post on Brexit how to think about international agreements and the constraints on state action they entail in terms of democratic legitimacy. Since that discussion has relevance beyond Brexit, I’ve pasted the relevant part here below. The basic point is this: the fact that an international rule is negotiated and accepted by a democratically elected government does not inherently make that rule democratically legitimate.

The optimistic argument has been best formulated by the political scientists Bob Keohane, Steve Macedo and Andy Moravcsik. They point out there are various ways in which global rules can enhance democracy — a process that they call “democracy enhancing multilateralism.” Democracies have various mechanisms for restricting the autonomy or the policy space of decision makers. For example, democratically elected parliaments often delegate power to independent or quasi-independent autonomous bodies. Central banks are often independent and there are various other kinds of checks and balances in constitutional democracies. Similarly, global rules can make it easier for national democracies to attain the goals that they pursue even if they entail some restrictions in terms of autonomy. Keohane at al. discuss three specific mechanisms: global rules can enhance democracy by offsetting factions, protecting minority rights, or by enhancing the quality of democratic deliberation.

However, just because globalization can enhance democracy does not mean that it always does so. In fact there are many ways in which global governance works in quite the opposite way from that described by Keohane et al. Anti-dumping rules, for example, augment protectionist interests. Rules on intellectual property rights and copyrights have privileged pharmaceuticals companies and Disney against the general interest. Similarly, there are many ways in which globalization actually harms rather than enhances the quality of democratic deliberation. For example, preferential or multilateral trade agreements are often simply voted up or down in national parliaments with little discussion, simply because they are international agreements. Globalization-enhancing global rules and democracy-enhancing global rules may have some overlap; but they are not one and the same thing.

More broadly, international commitments can be used to tie the hands of governments in both democratically legitimate and illegitimate ways. External discipline can be sought in two different kinds of settings–one of which is much more defensible on the traditional democratic delegation grounds than the other.

Consider first the case where the government faces a “time-inconsistency” problem. It would like to commit to free trade or to fiscal balance, but realizes that over time it will give in to pressure and deviate from what is its optimal policy ex ante. So it chooses to tie its hands through external discipline. This way, when protectionists and big spenders show up at its door, the government says: “sorry, the WTO or the IMF will not let me do it.” Everyone is better off, save for the lobbyists and special interests. This is the good kind of delegation and external discipline.

Now consider the second kind. Here, the government fears not its future self, but its future opponents: the opposition party (or parties). The latter may have different views on economic policy, and if victorious in the next election, may well choose to shift course. Now when the incumbent government enters an international agreement, it does so to tie the hands of its opponents. From an ex-ante welfare standpoint, this strategy has much less to recommend itself. The future government may have better or worse ideas about government policy, and it is not clear that restricting its policy space is a win-win outcome. This kind of external discipline has much less democratic legitimacy because, once again, it privileges one set of interests against others.

This article originally appeared on the author’s blog.

Dani Rodrik
Dani Rodrik

Dani Rodrik, professor of international political economy at Harvard University’s John F Kennedy School of Government, is president of the International Economic Association and  author of Straight Talk on Trade: Ideas for a Sane World Economy (Princeton University Press).

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u42198346ae 124dc10ce3a0 0 When Ideology Trumps Economic InterestsDani Rodrik
u4219834676e9f0d82cb8a5 2 The Competitiveness Trap: Why Only Shared Prosperity Delivers Economic Strength—and Resilience Against the Far RightMarija Bartl
u4219834676 bcba 6b2b3e733ce2 1 The End of an Era: What’s Next After Globalisation?Apostolos Thomadakis
u4219834674a bf1a 0f45ab446295 0 Germany’s Subcontracting Ban in the Meat IndustryŞerife Erol, Anneliese Kärcher, Thorsten Schulten and Manfred Walser

Most Popular Articles

u4219834647f 0894ae7ca865 3 Europe’s Businesses Face a Quiet Takeover as US Investors CapitaliseTej Gonza and Timothée Duverger
u4219834674930082ba55 0 Portugal’s Political Earthquake: Centrist Grip Crumbles, Right AscendsEmanuel Ferreira
u421983467e58be8 81f2 4326 80f2 d452cfe9031e 1 “The Universities Are the Enemy”: Why Europe Must Act NowBartosz Rydliński
u42198346761805ea24 2 Trump’s ‘Golden Era’ Fades as European Allies Face Harsh New RealityFerenc Németh and Peter Kreko

Foundation for European Progressive Studies Advertisement

Spring Issues

The Summer issue of The Progressive Post is out!


It is time to take action and to forge a path towards a Socialist renewal.


European Socialists struggle to balance their responsibilities with the need to take bold positions and actions in the face of many major crises, while far-right political parties are increasingly gaining ground. Against this background, we offer European progressive forces food for thought on projecting themselves into the future.


Among this issue’s highlights, we discuss the transformative power of European Social Democracy, examine the far right’s efforts to redesign education systems to serve its own political agenda and highlight the growing threat of anti-gender movements to LGBTIQ+ rights – among other pressing topics.

READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

With a comprehensive set of relevant indicators, presented in 85 graphs and tables, the 2025 Benchmarking Working Europe report examines how EU policies can reconcile economic, social and environmental goals to ensure long-term competitiveness. Considered a key reference, this publication is an invaluable resource for supporting European social dialogue.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
The evolution of working conditions in Europe

This episode of Eurofound Talks examines the evolving landscape of European working conditions, situated at the nexus of profound technological transformation.

Mary McCaughey speaks with Barbara Gerstenberger, Eurofound's Head of Unit for Working Life, who leverages insights from the 35-year history of the European Working Conditions Survey (EWCS).

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

BlueskyXWhatsApp