The rise of populism and its implications on trade and global governance — Part I

Whether right wing or left wing, populist movements all share a same claim: that the benefits of globalization and trade have not been fairly split, resulting in increased tariffs, trade wars, and even Donald Trump threatening to leave the World Trade Organization. However, these unilateral decisions have led to fear from investors as a the possibility of an economic recession in 2020 due to trade wars increases.

Introduction to the topic: The rise of populism and its implications on trade and global governance

President Trump’s election, Bolsonaro’s, Brexit, the Yellow Vests… It seems that populist movements are on the rise. Whether they are right-wing or left-wing, it appears that they all share a common hatred towards free trade. This, in turn, is becoming increasingly alarming not only for multinationals whose prosperity relied on the international division of labour but also for export-driven countries.

Today, populist movements share this one aspect: a focus on the people. These are usually opposed to a larger entity, and most recently the World Trade Organization has been a clear target. While international trade allows greater innovation and cheaper prices, workers are increasingly being laid-off and replaced by cheaper unskilled labour available in low-income developing countries. While tariffs used to protect local workers from foreign competition, they now have to face competitors through the destruction of trade barriers. Feeling left out by the current political and economic system, workers may tend to rally behind a political movement which puts them at the forefront of current issues — hence the recent rise of populism. Most often, this movement is led by a very vocal politician, which may come as a form of “savior” for these workers. However, populism is not to be confused with demagogy. While they share the same roots (demos means the people in grecque), demagogy is more of a rhetoric tool to persuade voters using over simplistic arguments and the voters’ fears. While populist movements may use demagogy, the question is do they always, and if they do not, are their convictions legitimate.

On the other hand, our traditional political institutions are being shaken up by the recent populist turmoil. Populism has led to fractures in our society. Indeed, McDonnell and Albertazzi suggest that populism “pits a virtuous and homogeneous people against a set of elites and dangerous 'others' who are together depicted as depriving (or attempting to deprive) the sovereign people of their rights, values, prosperity, identity, and voice". In our case, the “depriving” entity represents large international organizations such as the WTO and large transnational firms, which, in addition to being perceived as increasing unemployment in certain industries, also contribute to a fading of cultural identity through its support of international trade and thys of an increase in imports of foreign goods. In turn, rising extreme views are emerging and extreme political actions are being taken. For instance, the trade war between the US and China reflects this: the increasing tariffs put are a mirror of US manufacturing workers’ rising unemployment. However, this event also comes with a possible impeachment of the US president. This highlights the conflicts that populism has created within our society, but also the fragility of our political structures.

In this context, the role, goal, and rights of the World Trade Organization are being put in question. Can our economies, and democracies, survive in a globalized world ?

Picture from the protest in Seattle, 1999, photo by Pete Shaw

History of the Topic (and Past UN Action)

Like many political terms, populism is a rather loosely defined, contested concept. However, it can be agreed that at its core sits a popular based, anti-elite politics which can have both left and right-wing manifestations. Although sharing a wide range of similarities, perhaps most importantly in that they appeal to large groups of discontent peoples, it is important to outline that not all populists are the same. Some scholars argue rightwing populists tend to be “exclusionary” (omitting, say, migrants or ethnic minorities from their conception of a virtuous people), whereas left-wing populists have a broader, inclusive concept of who counts as “the people”. Indeed, throughout its history, populism has taken a variety of characters. One of the first populist movements emerged in the late 19th century and looked to put into place a socialist political structure in the then rural Russia. Similarly, at that time in the United States, the People’s Party sought a return to rural values and claimed the superiority of independent farmers over urban paid workers. By no means united on every detail, these agrarian reformers stood against the “money power” of the Gilded Age, the monopolies, banks, and gold standard. In the mid-20th century, academics have used the term to describe everything from Peronism in Argentina, and McCarthyism in the US, to Nasser’s Egypt and the Poujadiste movement led by Pierre Poujade in 1950s France.

The surge of populism in 21st century has its own history, too. Compared to centuries prior, the 21st century is well characterized by unprecedented trends of multilateralism. Indeed, in the era of technology and economic growth, never before have international institutions and state cooperation been so pertinent and present in the world stage. The World Trade Organization, in particular, heavily relies on the modern principles of interdependence and economic globalization. Globalization, in general, is defined by Held et al. as “the widening, intensifying, speeding up, and growing impact of worldwide interconnectedness”. Economic globalization, in particular, can be defined as the process whereby all national economies have to a greater or lesser extent, been absorbed into an interlocking global economy. The modern globalized economy came into existence in the second half of the twentieth century. It was a product of two phases; the rise of the Bretton Woods system, and its eventual collapse in the 1970’s. The Bretton Woods system laid the basis for the later economic globalization in substantially expanding productive capacity and helping to fashion a consumerist form of capitalism. It laid the basis for the modern international financial institutions (IFIs), such as the International Monetary Fund (IMF), the World Bank and the WTO. During the early post-1945 period, western governments believed that the instabilities of the business cycle had been solved by the application of Keynesian principles, which seemed to offer a means of counteracting the tendency towards booms and slumps. However, this belief declined after the stagflation crisis of 1970. Financial markets are always susceptible to fluctuations and instability, however, the emergence of a globalized financial system has accentuated these tendencies, by leaving states more vulnerable to the vagaries and volatilities of global markets. This, Susan Strange has called casino capitalism. This economic instability brought about the new system, and its tendency towards financial crises has been demonstrated since the mid 1990’s, in Mexico, in East and South-East Asia, Brazil, Argentina, and elsewhere. The Asian financial crisis, for instance, was the most significant and far reaching crisis before the global financial crisis of 2008. When the Great Recession shook the economy in 2008, a wave of anti-establishment messages emerged that eventually led to a rising appeal of populist politics, according to Stanford political scientists. Certainly, the way people view institutions has been fundamentally affected by the financial crisis, particularly more on how none of the elites seem to have faced many consequences.

In addition to the economic challenge, it is now also evident that populism draws strength from public opposition to mass immigration, cultural liberalization, and the perceived surrender of national sovereignty to distant and unresponsive international bodies, all products of globalization.

One of the first protests that signaled the beginning of an anti-globalization happened in Seattle in 1999. Disrupting the World Trade Organization Ministerial Conference, student groups, NGOs, anarchists, environmentalists and multiple labour unions such as the American Federation of Labor-Congress of Industrial Organizations. More than 40,000 protestors were present to contest free trade and the human right issues that globalization created. Through sit-ins, chaining themselves together, street theatre, and locking themselves to metal pipes in strategic locations, the protestors were able to prevent the conference’s inauguration. This moment became very symbolic as it is the first time that protestors are successful at blocking the happening of an international summit but also because it became one of the first mobilizations to be filmed and uploaded online. However, the protests escalated and began to target large multinational firms which had driven globalization. Indeed, a few hundred anarchists, “Black Blocs”, destroyed a few Nike, Starbucks, and Nordstrom stores. The police’s response was even more violent, notably through the use of pepper spray, tear gas, and rubber bullets. Seattle was left with millions of dollars of property damaged as well as lawsuits from protestors pointing at civil rights violation. On January 2007, the city of Seattle admitted that some of the convicted protestors had been arrested using insufficient evidence, thus violating the US’s Fourth Amendment.

The roots of the causes for protesting against the WTO lies in the organization’s history. While the GATT was less known, the WTO was immediately criticized. Indeed, the GATT solely acted on trade agreements regarding manufactured goods. On the other hand, the WTO was also given authority on agriculture, services, and intellectual property. In addition, the WTO has the power to require changes in national laws if they were considered to violate trade agreements. However, only critics also emerged within the WTO itself, with leaders disagreeing on multiple subjects such as farm subsidies for smaller agrarian farmers. The WTO was also criticized for solely focusing on trade but not on the human impact globalization had, in particular regarding child labor. In addition, the WTO was accused of not promoting free trade but offering rather a “700-plus pages of rules [setting] out a comprehensive system of corporate-managed trade" (A Citizen's Guide ..., p. 1), meaning that international trade was just even more complexified. In particular, several smaller developing countries saw this as a form of protectionism: requiring them to meet First World standards was an additional barrier for them to enter international markets.

Today, the impact of populism on global trade is even more striking, and its effects even more damaging. To understand where we stand today, please read part 2 of this article.