World trade derails? It’s all Uber’s fault!

[ By Antoine Martin ]

We are living in troubled times. The British are paving their way out of the EU (trying, anyway), the major agreements which were once expected to foster growth between the United States, Europe, the Asia Pacific or Canada are seriously compromised. Trade has shifted from policy goal to political incorrectness. Let’s face it, the world as we know it is shaking. And this is Uber’s fault. Or Google’s, or Alibaba’s. So they say…

The politics of globalization trade have changed

In case you wondered what is going on with globalization at the moment (read: Globalization, political tensions & economic uncertainty, what is going on?), the answer is fairly simple: the politics of doing trade and the methods used to rule our world are changing.

During the 1990’s, international trade rules used to be negotiated at the global level, through ‘multilateral’ talks involving all the Members of the World Trade Organization (the WTO). Over time, however, the negotiations got stuck because disagreements appeared as to what problems really mattered. Developing economies wanted a framework on agricultural trade to export their productions more easily. Developed economies rather aimed at preserving their subsidized agricultural industries while gaining access to services markets abroad, such as financial intermediation or telecommunications, to cite but two.

Thus, developing economies continued negotiating on agriculture at the global ‘multilateral’ level while the others entered into bilateral or trilateral negotiations on the issues that mattered to them. In the early 2000s, the politics of trade and the way the world was ruled thus became a matter of preferentialism. At the time, it was actually hopped that bilateral relations would achieve more in terms of trade than global methods. Some even suggested than Geneva (understand the WTO) was not Brussels, which was a way of saying that the World Trade Organization and its heavy structure would never manage to act as a leader again and would never achieve the type of multiparty framework that had been set up by the European Union.

In other words, international affairs – which were a matter of doing business with the extended family – became a matter of doing business with friends, only.

As of 2016, making business with friends has however become a major problem. Geneva has never been as far from Brussels, but Brussels has taken a serious hit too. In fact, plate tectonics helping, Brussels is now a galaxy away from London. Priorities have changed, the people are not ready to accept large agreements they don’t understand. In most cases, in fact, the policy discourse which could help understanding international law and international relations has become a matter of shrill political fanfare that the people refuse to hear.

Blame it on technology 4.0

Yet at the global level, leaders refuse to see through. Starting with the WTO. For the past weeks (not to say months), Roberto Azevêdo the Organization’s Director General has actually been blaming it on technology.

Trade is in a difficult path, he says, but globalization and global politics are innocent. The problem is with new technologies! In sum, it’s Uber’s fault! Or Google’s! Uber is a car company without cars, Alibaba or Amazons are warehouses without goods (pretty much). And Google is building driver-less cars which will create massive unemployment. Last week, in fact, a Budweiser truck powered by UberFreight and Otto made the first driver-less cargo delivery in history. ‘Proudly Brewed, Self-Driven’, as they say.

But I’m not sure Mr Azevêdo appreciates the joke.

In at least two recent press communications (see for instance here and there), the official position has been that, ‘actually trade is a relatively minor cause of job losses’.

In Azevêdo’s words, for instance, ‘150,000 Kodak employees lost their jobs to new technologies like Instagram, which was developed by just 15. A 10,000 to one ratio’. Another argument: ‘there are currently over 3.5 million truck drivers in the US, and many more jobs supporting those drivers — providing coffee, food, motel rooms and so on. Self-driving technology is set to dramatically transform that picture. So how are we going to adapt?’. More arguments? ‘Almost 50% of existing jobs in the US are at high risk of automation’ and ‘the evidence shows that well over 80% of job losses in advanced economies are not due to trade, but to increased productivity through technology and innovation … technological advances have meant that fewer workers are needed to produce more goods’.

In developing economies such Cambodia, Indonesia, Vietnam, Philippines and Thailand, according to an ILO (International Labour Organization) study referred to by the Head of the WTO, 56% of jobs would also be ‘at high risk of automation [with, in] some sectors over 80% of jobs are at risk’. And, in case you would wonder, there are 36 robots per 10,000 workers in China, against 164 in the US and 315 in Japan.

Simply put, globalization and the dynamics of trade are messed up, the people are in the streets, the EU nearly lost it with Canada and, in fact, is said to have lost track of its commercial policy. But to the WTO the problem lies with modern technologies and the idea that robots are taking over our world.

How about some change, perhaps?

The truth is, whether the current times reflect the premises of a fourth revolution and the beginning of what Joseph Schumpeter calls a ‘creative destruction’ cycle (modern business replaces outdated models but markets adapt), things will need to change.

To use Kling’s words, trade is about trust, and trust is about ensuring that all beliefs, norms and institutions are aligned, one way or another, to create a basic social rule capable of reinforcing trust. Today, the basic social rule requires re-thinking redistributive policies and ensuring that everyone has access to the benefits of easier trade. We seem far from that. But in the meantime, sure, let’s blame it on Uber.

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