How to tell apart trade agreements that undermine democratic principles from those that don't

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 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.

Comments

[Trachtman]

Hello, Dani. It is difficult for scholars to observe national democratic processes from some Archimedean point and argue that there is a failure of democratic legitimacy. For the U.S., we approve trade agreements through a constitutionally-acceptable process that has been enacted by our democratically-elected legislature. While we might argue about whether fast track allows sufficient democratic input, the democratically-elected legislature has determined that it is acceptable. The making of international agreements is a two-level game that requires some adjustments to permit international cooperation. There can be errors of conservatism. For example, the ability of little Wallonia to hold up the entire EU and Canada’s otherwise approved policy—a type of tyranny of the minority—seems inconsistent, at least at some level, with democratic legitimacy. In addition, as Donald Trump has emphasized, it is possible for future governments to withdraw from trade agreements, so there may be less binding of future governments than you fear. But I would hasten to add that states, like firms, need a way to make binding agreements to constrain—to exchange—policy autonomy. While everyone can make mistakes and enter into welfare-reducing agreements, the overall effect of contract seems to be importantly positive. I am not sure why you believe that the overall effect of international law would be different. Best, Joel

[RepubAnon]

Entering into an business arrangement with no exit strategy if things aren't working out is a very bad idea. That's what makes these arbitration boards so dangerous - they can arbitrarily decide whether a law is meant to protect people, or as a restraint on trade. Consider what happens if the US decides to, say, ban the import of Internet-capable devices that lack basic security protections. Are they doing it to help prevent DDoS attacks such as the one that shut down major web sites recently - or as a restraint on imports? Should an arbitration board really have the power to make that decision?

[kaleberg]

When I studied colonialism in high school I wondered why the Chinese were so upset about extraterritoriality when the European powers were running the joint. Then I read my first brokerage arbitration agreement. No wonder they were upset. The colonizers and brokerages get the government to do their dirty work without having to put up with the messiness of balanced interests in government. The Chinese, of course, aren't putting up with it anymore. We are.

[Jacky]

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