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Responsible Trade Program:
Trade and Globalization

History of the Modern Global Economy

In an era of rapid globalization, mechanisms supporting the engines of commerce have reached all corners of the globe, while analogous institutions to ensure corporate accountability and protection of the environment have lagged behind. Over the past 50 years, there has been a steady increase in the importance of international trade in the global economy. Simultaneously, the world has seen substantial environmental degradation and must currently face the global challenge of climate change.

Our modern international trade regime evolved from an institution, the General Agreement on Trade and Tariffs (GATT), created in 1948 to rebuild the global economy after WWII. For several decades the GATT concentrated exclusively on tariff reductions on goods. But the seventh round of negotiations, the "Tokyo Round" (1973-1979), coincided with the emergence of a strong market-driven ideology in Washington and the rise of giant transnational corporations that wanted more access to unregulated labor and consumer markets and an expanded supply of natural resources.

Trade negotiations started to deal with "non-tariff barriers" to trade. Since government actions to protect health, workers' rights, and the environment, could be categorized as "non-tariff barriers" to trade, citizens began to take notice. The Uruguay Round of GATT negotiations (1986-1994) expanded the scope of the discussions dramatically and eventually led to the creation of the World Trade Organization (WTO).

During the late 1980's, it became clear that ongoing negotiations to form the WTO would take several years, so President George Bush began to negotiate a regional free trade agreement in North America. On January 1, 1994, the North American Free Trade Agreement (NAFTA) took effect, with the U.S., Canada, and Mexico as members, and pursuing regional and bi-lateral trade deals became a key strategy of the U.S. to quicken the pace of corporate globalization when WTO negotiations dragged. The WTO and NAFTA became the model free trade agreements upon which the language of international trade is based. These rules are reinforced by an anti-democratic dispute resolution mechanism with the power to enact serious trade sanctions.

The connections between international trade and climate change are becoming increasingly clear. Trade rules without environmental standards have spurred unsustainable production and consumption patterns. These rules have allowed companies to move operations to wherever labor and environmental standards are the weakest, abandoning communities and workers in the U.S. and wreaking havoc on those abroad. Trade and climate will remain intertwined as we work to ensure that there are safeguards to avoid the relocation of energy-intensive industries to countries with weak environmental standards, while moving toward a global agreement limiting greenhouse gas emissions to safe levels.

We need to adopt trade policies that support, rather than undermine, environmental and labor standards. We must move away from unchecked trade liberalization and towards policies encouraging progress in developed and developing countries alike. Trade must allow for the evolution to green economies, protection of natural resources, and increased workers' rights.

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