Listener 23 February 2002

Keywords Globalisation & Trade; Political Economy & History

I fear the terrorists have won. Oh sure, they may all be eventually eliminated by the efforts of the Western Alliance, but another generation will rise, who will have had confirmed that the methods of bullies and thugs are justified. …

… Many people live in political systems where such arbitrariness and tyranny predominate. But we in the West generally do not. A few hundred years ago it did, but our sort of society evolved a system of the rule of law in which the brutal power of the executive was increasingly restrained.. The Red Queen’s ‘Sentence first – verdict afterwards’, is a joke to us, but a barbarous reality in some regimes, where even the trial, if there is one, can be a farce.

The terrorists were bullies when they crashed planes into buildings. They may argue that their actions were justified by some higher power, of which they were the sole judge. (The English cut off the head of the head of a king who argued that.) When America and its allies struck back against those who they deemed terrorists, they were appealing to the same principle. (The British government at least admitted they did not have enough evidence to convict Osama Bin Laden in a court. But they sentenced him anyway, and joined in the attempted execution.) The West’s responses sets a bad precedent for any terrorists: might is right; bully if you can get away with it.

The rule of law not only protects our human rights, but in doing so it protects private property rights, the result of which has been to promote economic growth. Thus the prosperity of security against arbitrary interventions by the state, is combined with material prosperity as business takes place in a context where outcomes are not upset by arbitrary interventions, and where there is the security of knowing that the proceeds of successful enterprise will not be arbitrarily confiscated.

While this broadly applies in some economies – perhaps not a majority of them, although in all prosperous ones that do not depend on quarrying resources – does the rule of law apply to trade between economies?

It is getting there. In 1999 the US slapped a tariff of at least 9 percent and up to 40 percent on our lamb exports despite an agreement that it was bound to (could not be higher than) only a few cents per kilo. The surcharge was entirely for domestic political purposes, and it may have cost New Zealand farmers up to $45m over three years. Our redress against the bullying was to follow World Trade Organisation (WTO) procedures, which found in our favour. The US, having stated it was bound by international trading rules, reduced the tariffs to the bound levels.

The role of the WTO is to develop a rules based international trading system, where traders cannot do the equivalent of acts of terrorism or invading other countries because they are angry. Of course the exact rules matter and, just as in our history, the powerful are most active in establishing them and the rules the create favour themselves. But rules evolve. When signing the Magna Carta the barons meant literally that they should be judged by their peers, and did not envisage the day where the principle would apply to their serfs.

Today’s barons are countries and corporations. How should New Zealand, down at the serf level, approach the WTO? In my view we should welcome the development of rules-based international trading system, but criticise – preferably in association with other small like minded nations – where the rules favour the powerful. But in the end we must expect – with rare exceptions – to sign up, even where the rules are onerous.

We should vigorously promote human rights, minimum (appropriate) working conditions, environmental standards, and the protection of culture and national identity. Sometimes another agency may be a better means of regulation, such as protecting working conditions via the International Labour Organisation conventions. But we should reject the principle that every existing job must be permanently protected, which seems to be the only concern of some – but not all – protestors against the WTO (their own jobs of course). Other non-governmental protestors will contribute to the development of more humane and ecologically sustainable ones.

(The logic of the evolution of a rules-based international trading regime does not apply to bilateral trading deals. We seem to be involved there because competitor countries, especially Australia, want them, and we fear being discriminated against if we dont join in. )

A common complaint against the WTO is that it reduces national autonomy. Sometimes it has tried to unnecessarily. But usually the loss of autonomy begins with the country getting involved in international trade. That is the point of the rule-of-law based societies. Once involved in social intercourse, we give up some autonomy. Rules and conventions in a civil society dont reduce autonomy, but enable it to be maximised. They limit tyrants, bullies, thugs, terrorists and other savages. We should pursue the rule of law in international trade: we should pursue the rule of law in international politics.