Essential Elements of a Just and Sustainable International System

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The global trade and finance system and its primary rule making institutions — the Bretton Woods triumvirate of the WTO, IMF, and World Bank — are at a crossroads. Decisions to be made in the next few years will have an important effect on which direction the system will go.The need for a multilateral system of rules for international trade and finance is not in question. A proper system of rules is essential to stability, predictability and fairness for all participants. Unfortunately, the present system is unstable, unpredictable, and unfair in the extreme—particularly for the countries of the South. 

Rules are essential, but they must be determined democratically to serve the public interest.

In addition to being stable, predictable, and fair, a suitable international system should support these goals:

  • Democratic Self-Determination. The democratic right of all people to establish their own economic priorities and policies must be protected so long as their actions do not infringe on the rights and freedoms of people of other localities and nations.
  • Balanced Trade. Every country, both North and South, has a responsibility to its international neighbors to maintain a balance between its imports and exports.
  • Fair Commodity Prices. There is a need for international commodity agreements and mechanisms among countries to maintain fair and stable commodity prices that reflect the full costs of production, including a living wage and all environmental costs. There should be institutional mechanisms at the international level through which nations can coordinate their policies to achieve fairness and stability in international market prices.
  • Open Access to Information and Knowledge. Intellectual property rights should be limited to measures necessary to stimulate innovation and creativity. Open access to information and beneficial technology is a key to a just and sustainable human future.
  • Policy Space. If public policy is to serve community interests, countries of both South and North need adequate policy space and freedom to choose trade and investment policies consistent with the interests of their people and the interests of domestic enterprises that function within a democratically determined framework of rules to internalize costs, provide living wage employment, secure environmental health, and maintain public health and safety. This principle should be central to any system of international rules relating to trade and finance.

Essential financial reforms to restore the integrity of the international financial system are closely related to essential reforms in other areas such as trade. When a country liberalizes its imports even though its local sectors are not prepared to compete and it has no capacity to increase its export revenue, the country's trade and balance-of-payments deficits and thereby its international debt burden and domestic unemployment will almost inevitably grow. A nation must have the right and capacity to manage flows of both money and goods across its borders.

Under assault from predatory corporations and financial speculators, developing countries have no choice but to institute domestic measures to protect themselves. In particular, they should have regulations that control the extent of public and private sector foreign loans (for example, restricting them to projects that yield the capacity to repay in foreign currency); that prohibit manipulation of their currencies and stock markets;  and that treat foreign direct investment in a selective way that avoids build-up of foreign debt.

The array of national policy instruments should allow countries to use capital controls as a tool to avoid an excessive buildup of external debt, curb volatility of the flow of funds, and provide scope to adopt macroeconomic policies that can counter recession (such as lower interest rates or budget expansion) while reducing the risks of volatility in the exchange rate and flow of funds.

There is a related need to review and roll back provisions of existing trade and investment agreements that are development distorting, environment distorting, health distorting, labor distorting, and otherwise contrary to important public interests. This would include particular attention to:

  • The existing WTO financial services agreement that opens domestic finance to foreign corporate control and of the TRIPs agreement on intellectual property rights that supports corporate monopolization of essential information and technology. Serious consideration should be given to transferring responsibility for these agreements from the WTO to more suitable forums.
  • IMF/World Bank loan conditions that impose harmful liberalization policies on Southern countries.
  • Rules in bilateral investment treaties and the investment chapters of U.S. trade agreements that allow private foreign investors to bypass domestic courts and sue governments in international tribunals.  They can sue over alleged breaches of a long list of so-called “investor protections,” including public interest regulations that reduce the value of their investments.