On Trade Justice: A Philosophical Plea for a New Global Deal 6674157187, 1355191203, 6220227231, 0198837410

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Preface and Acknowledgments Inevitably, any larger work on political philosophy reveals how the authors think political philosophy should be practiced. Trade justice is a difficult subject because conceptually it comes rather late: one must already have views in place about personhood and political organization, as well as about the kinds of obligations that arise in such contexts. So one needs to approach the philosophical complexities of trade with some patience. Ours is a work of contemporary analytical philosophy, with its machinery of subtle distinctions, fine-grained arguments, and searching conceptual analysis. But we also believe such work is relevant only because it helps with actual political problems. Moreover, what we are presenting is a work of political philosophy that is historically and politically embedded. We engage more with both history and practical problems than many philosophers might be comfortable with. Conversely, we do more philosophy than those who normally think about the history and politics of trade. We hope the various audiences we address thereby will be persuaded by the relevance of the kind of inquiry they respectively do not normally engage with. The political and philosophical agenda of any given moment grows out of a historical process, and that process is especially important for understanding trade. There have been several attempts in the postwar period to give an institutional implementation to ideas about trade justice. They have all failed. This book is a philosophical plea not to abandon these efforts. Anthony Appiah has argued that moral revolutions do not normally happen in response to appeals to reason or morality. Instead they happen only once it becomes a matter of honor to bring about a certain kind of change. If that is right, then we can only hope that the creation of a world that takes trade justice seriously becomes such a matter in the not-too-distant future.1 Philosophers do not do much joint work, but we recommend such collaborative efforts. We have learned immensely from each other, mainly from the ­ongoing commenting on each other’s ideas that such a project involves. Moreover, any larger project includes so many sub-problems and requires so much a­ ppropriation of relevant literature that dividing up the efforts works wonders to speed things up and not to artificially limit the scope of inquiry because doing more would surpass what any one person could competently do. And in any event, any discipline with a shared research frontier should permit and encourage collaborative work. But while ours genuinely is joint work, we have adopted an internal division of labor in terms of responsibility for various parts. Risse has been mostly responsible for Chapters 2–4 and 7–10, Wollner for Chapters 5, 6, and 11–14. Both authors have worked on all chapters, but we have refrained from making

vi  Preface and Acknowledgments remaining stylistic differences or variations in how to approach philosophical problems disappear entirely. We could not agree on everything, and where we did not, we make it clear. But the disagreements do not seriously affect what we say about trade justice. We have received much help with this book. We are grateful to audiences at the National University of Singapore, University of St Gallen, University of Manitoba, Harvard Law School, San Diego School of Law, New York University at Abu Dhabi, University of Düsseldorf, Free University of Berlin, European University Institute in Florence, the University of Ottawa, Technical University Dortmund, and a conference of the Justitia Amplificata program in Bad Homburg, where we presented various parts of our project. Three workshops have been devoted to our manuscript as it evolved, one at Harvard in April 2017 (organized by Risse), one at the University of Ottawa in October 2017 (kindly organized by Christine Straehle and Patrick Leblond), and one at the Humboldt University of Berlin in January 2018 (organized by Wollner). Commentators at Harvard included Eric Beerbohm, Helena de Bres, James Christensen, Peter Dietsch, Frank Garcia, Malgorzata Kurjanska, Nien-hê Hsieh, Michael Kates, Florian Ostmann, Joshua Preiss, Sanjay Reddy, Lucas Stanczyk, and Nicholas Vrousalis. Commentators in Ottawa included Michael Blake, Andrew Lister, Vida Panitch, Boudewijn de Bruin, Lisa Herzog, Peter Dietsch, Patrick Leblond, Patti Lenard, Rob Sparling, and Wayne Norman. Commentators in Berlin included Valentin Beck, Matthew Braham, Andreas Cassee, Henning Hahn, Marco Meyer, Luise Müller, Mirjam Müller, Christian Neuhäuser, Peter Niesen, Cord Schmelzle, Lukas Tank, and Andrew Walton. Their thoughtfulness and thoroughness have advanced our project substantially. The Carr Center for Human Rights Policy at the Harvard Kennedy School (under the directorship of Douglas A. Johnson) has provided generous support for the Harvard workshop, and also partially financed the workshop at the Humboldt University. We are grateful to Bill Alford, Larry Alexander, Matt Zwolinski, Aaron James, and Andrew Walton for conversations about trade over the years. James also deserves credit for triggering the collaboration that led to this book. Our first shared project was a critical discussion of James’s Fairness in Practice commissioned by the Canadian Journal of Philosophy. Risse knew he needed to say more about trade in the context of global justice than he did in On Global Justice. Wollner’s interests in exploitation then entered productively. Andreas Cassee, Ben Ferguson, Micha Glaeser, Johannes Himmelreich, Jeffrey Moriarty, Aaron James, Anja Karnein, Ewan Kingston, Samuel Moyn, Florian Ostmann, Marco Meyer, Cord Schmelzle, Moshik Temkin, Garrath Williams, and several anonymous referees generously provided comments on parts of this project over the years, some more than once, and some on the entire manuscript. Malgorzata Kurjanska kindly allowed us to refer to some of the ideas from her earlier joint work with Risse on fairness in trade. Jana Brown, and Amanda Watson have been very helpful with

Preface and Acknowledgments  vii editing the final version of our manuscript. We owe special thanks to Nikolas Mattheis, who carefully read the whole manuscript twice in its last stages and suggested a large number of improvements. We are grateful also to Kozue Sato, who had the right idea for the cover design. At Oxford University Press, Dominic Byatt’s early enthusiasm for this project was highly encouraging during the writing process. In addition, we are gratetul to Céline Louasli and her team for actually bringing this manuscript into print. Gabriel Wollner would like to thank everyone who discussed questions of trade justice with him. He is grateful to students at Humboldt University of Berlin who took the seminar “Philosophy and Economics: International Trade” for listening to, reading about, and challenging earlier versions of this book’s arguments. Members of the research group “Global Challenges in Economic and Environmental Ethics” at Humboldt, in particular Barbara Bziuk, Lisa Frach, Johannes Himmelreich, Mirjam Müller, Lukas Tank, and Marcel Twele, not only made for the most enjoyable work environment but could always be relied upon for what in retrospect seem too many lunch visits to one and the same restaurant. And of course, there is Olivia Serdeczny, who always knew when better not to discuss trade justice. Mathias Risse would like to thank Sushma Raman, executive director of the Carr Center for Human Rights Policy, for her enthusiastic support of this work, as well as for being key to maintaining a productive atmosphere at the Carr Center. He is also grateful to Matt Gallaway at Cambridge University Press, for taking such a strong interest in his other project, On Justice: Philosophy, History, Foundations. That book does some work in greater detail which we do in this book only to the extent required to talk about trade justice. Being able to list that other work as forthcoming made it possible to add some footnotes with crossreferences. On Justice completes the project begun with On Global Justice (as well as with Global Political Philosophy) in 2012 and continued through the present book. Risse also owes special thanks to Alex Attia, General Manager of the Charles Hotel in Cambridge, for maintaining several wooden benches outside the hotel on which many a sentence in this book was written or revised. Most ­importantly, Risse would like to thank his wife, Kozue Sato, for adding fun and beauty to his life, and for lots of other things better left to personal conversation. In some parts of this book, we use material that has previously been published and we are grateful to the respective journals and publishers for giving us permission to reuse it here. In particular, Chapters 1, 3, and 4 use material from: Mathias Risse, On Global Justice, Princeton: Princeton University Press, 2012; Mathias Risse and Gabriel Wollner, “Critical Notice of Aaron James, Fairness in Practice: A Social Contract for a Global Economy,” Canadian Journal of Philosophy 43, no. 3 (2013): 382–401; Mathias Risse and Gabriel Wollner, “Three Images of Trade: On the Place of Trade in a Theory of Global Justice,” Moral Philosophy and Politics 1, no. 2 (January 1, 2014).

viii  Preface and Acknowledgments Chapter 5 reproduces material from: Gabriel Wollner, “Anonymous Exploitation,” Review of Social Economy, online-first: https://www.tandfonline.com/doi/full/10. 1080/00346764.2018.1525758. Reprinted by permission of Taylor & Francis. Copyright owned by Association for Social Economics. Chapter 6 reproduces material from: Gabriel Wollner, “On the Claims of Unjust Institutions: Reciprocity, Justice and Non-Compliance,” Politics, Philosophy & Economics 18, no. 1, (February 2019): 46–75. Reprinted by permission of Sage Publications, Ltd. Chapters 8 and 10 incorporate material from: Mathias Risse, “Multilateralism and Megaregionalism from the Grounds-of-Justice Standpoint,” Global Justice: Theory, Practice, Rhetoric 10, no.1, http://dx.doi.org/10.21248/gjn.10.1.108. Chapters 11, 12, 13, and 14 incorporate material from: Mathias Risse and Gabriel Wollner, “From Theory to Practice I: Passing Judgments of Exploitation,” San Diego Law Review 2015: 1035–66.

Note 1. Appiah, The Honor Code.

1

The Political Significance and Philosophical Complexities of Trade 1.1  Trade has Made the World “Trade” covers everything from primordial exchanges across village lines and one-time interactions among strangers to modern highly structured exchanges governed by domestic and international law, from personal exchanges to refined supply chains sustained by fleets of container ships. For millennia, exchange of ideas and goods across large regions has let our species advance in concert, widespread enmity and competition notwithstanding. But until recently philosophy paid little attention to trade and its relation to global justice. Traditionally, ­political philosophers focused on questions about the dominant political structures of the day, such as city-states in European Antiquity, kingdoms and later empires in early China, or states in modern times. Who should wield power in these structures? How should power be exercised? Hardly anybody explored how trade might give rise to moral demands. Nor had social science fully articulated how beneficial trade was for humanity. Now we understand the importance of trade for the advancement of humankind, both historically and from a social-science standpoint. Since World War II, political and economic interconnectedness has risen to new levels. For some ­decades now, trade has been structured through the Word Trade Organization (WTO), whose performance has been contested by groups ranging from economic nationalists to advocates of institutional reform favorable to the global poor. Yet trade remains elusive and profoundly difficult for philosophical thought. What, if anything, is it about trade that generates obligations, and what is the nature of these obligations? Can we identify a normative ground for trade-specific obligations while recognizing other grounds such as common humanity or shared citizenship? How should we think about such a ground in ideal theory, where everybody does as they ought to, and in non-ideal theory, where not everybody does? These are tough questions, partly because trade touches on many philosophical subjects but must also be properly understood historically and social-scientifically. We offer an account of trade justice that makes ideas about exploitation central, in ways that give pride of place to ideas about global justice but also engage disputes about concrete practical questions. We touch on the full spectrum of normative On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

2  On Trade Justice questions about trade, from the foundational to the applied. Accordingly, the upcoming chapters are written in different styles. Most are composed in the searching style of contemporary analytical philosophy. Some explore case studies or institutional proposals, or engage in historical reflection. This approach captures our view of what should be on the radar of anyone concerned with trade justice. Political philosophy needs to be both philosophical and p ­ olitical. In that spirit, ours is a philosophical plea for a New Global Deal, to continue, with appropriate differentiation, several efforts of the decades to design a fair system of global governance in the spirit of the American New Deal of the 1930s. This introduction provides guidance to the material we discuss and the theses we defend.1

1.2  Trade in Human History It has probably been about 70,000 years or so since Homo sapiens left Africa and  began populating the globe, originally in small bands of several dozen. By about 10,000 years ago only remote islands and ice-covered regions remained untouched. Humankind’s conquest was accompanied by many innovations that helped our ancestors live better lives and got adopted quickly across enormous swaths of land. Eventually the emergence of agriculture pushed us beyond subsistence. Farming made a sedentary life possible, where administration and distribution of surpluses created new challenges. Life changed profoundly as throngs of individuals with manifold abilities and inclinations came to live in proximity. Cities were founded, and eventually empires, structures including many more people than made up the original bands.2 Throughout these advances, trade channeled both cooperation and competition into directions beyond what small groups could make possible. Exchange allows us to obtain things we would otherwise not possess using things we know how to produce, on mutually advantageous terms. Over time, also, technology and finance have markedly enhanced possibilities of exchange. Increases in trade have in turn magnified the role of finance and technology. Humans engage in acts of interlocking intentionality to coordinate everything from simple acts of moving heavy objects to the formation of complex institutions. Our capacities to cooperate and compete within sophisticated webs of interaction among strangers are distinctively human. People may jointly produce things for their own use, or to outdo others. They may also explore entirely new possibilities once previously unobtainable goods and services become accessible. Contemporary economics emphasizes trade’s potential for cooperative gain, whereas political science also highlights its competitive aspects. Long before sophisticated civilizations there was a loose human web within which not only goods but also ideas and technological innovation traveled across

The Significance and Complexities of Trade  3 large regions. Eventually exchange became sufficiently intense that even in our contemporary world of states it behooves us to speak of the existence of a world society.3 Within that web or world society, trade has harnessed the human ability for even genetically distant individuals to develop shared or interlocking intentions. Trade generates incentives for individuals and groups to specialize in making items others find valuable. But trade also depends on trust, on decisions to rely on strangers to provide even essential goods. Fueled by ideas of reciprocity and our normal human capacity to detect transgressors, trade has laid the foundations of human civilizations.4 While there has been a human web for millennia, it was European expansionism starting in the late fifteenth century that has (forcefully) unified the world in recent centuries. This expansionism was driven by a desire to trade, if necessary by force. Imperial China, the great power of the era, had terminated its own maritime expansion earlier in the fifteenth century. Unlike China, European rulers did not maintain control over trade and finance. European conquerors often served the ruling circles but were in business mostly for themselves. Ocean navigation and European tendencies to commercialize human affairs became the glues of an increasingly unified global web.5 In earlier stages explorers were after gold, silver, slaves, spices, and silk. Later sugar and cotton drove trade, along with tea and coffee, commodities consumed by not only a select few but millions around the world. When particular commodities dominated trade, much effort went into exploring where to produce them efficiently. Such experimentation often irretrievably changed the fate of whole regions. World history is a history of trade. For instance, sugar cane was domesticated in New Guinea around 8000 BC and spread to East and South Asia. Muslim traders brought it to Europe, and eventually it came to the Americas. Over centuries, millions of Africans were sold into slavery to languish on Caribbean sugar plantations, after brutalization had exterminated indigenous populations. Coffee was originally grown in Ethiopia and in the fifteenth century assumed a dual function as a “social lubricant and an aid in performing the monotonous tiring work of everyday life.”6 It did so first in Muslim countries, then in the seventeenth century made its way into Europe, gaining social importance through the spread of coffee houses. Later coffee was cultivated in Indonesia and the Americas to meet European demand. Later still textiles made from cotton would ignite the Industrial Revolution and “gave birth to the British Empire.”7 Cotton too would eventually go to the Americas, to be grown on slave plantations. In the process of trade, artisans would copy innovations, ship’s doctors would study local herbs, and vessels would add useful features spotted in foreign harbors. Animals and crops would be tried in new places. For example, a flourishing silk industry developed in Spain and Italy in the sixth century, owing to sustained efforts to bring the silkworm from China to Europe. Most famously, on his second voyage Columbus brought much of the Western inventory of crops and

4  On Trade Justice domesticated animals to the Americas, including pigs, horses, and cows. Potatoes and corn went to Europe to change diets there forever. Even before European expansionism there had been highly intense periods of trade, especially during the Pax Romana early in the Common Era, Pax Islamica around the turn of the millennium, and Pax Mongolica in the thirteenth century. The predominance of  one power enabled unusually fertile exchanges of products, technology, best ­practices, and ideas. Our moral inclinations have resulted from an evolution that eventually rendered Homo sapiens exceedingly effective in small bands of several dozen. Some such bands started the global spread of Homo sapiens. For all we know, these groups were rather egalitarian in outlook. That outlook rested on a system of moral intuitions concerning fair division and acceptable hierarchies. Our ancestors had ways of reining in cheaters, bullies, and transgressors.8 Presumably, there has been reflection on what for us would recognizably be matters of justice ever since Homo sapiens departed from Africa. We have a record of such endeavors for less than 3000 years. But as we think about its significance for humanity, it is indeed curious that over the centuries political philosophy would pay such scant attention to trade.

1.3  What We Argue in this Book “New Deal” is the name for the rebuilding of the American political and economic order under Franklin Delano Roosevelt in response to the Great Depression. Globally, the calamity of the world wars and the Depression triggered the founding of the United Nations (UN) and additional organizations concerned with ­global betterment. Some New Dealers were eager to internationalize their efforts to combine social justice and liberty while promoting social-scientifically informed governance. Within that new framework, there were struggles to emancipate newly decolonized countries and to create something genuinely like the New Deal on a global scale. It was only in the 1980s that neoliberal attitudes—resisting state intervention domestically and internationally, preferring to let markets take their course—finally syphoned off any willingness to offer such a New Deal to developing countries. Since the mid-90s, the World Trade Organization (WTO) has coordinated trade negotiations and maintained rules. Developing countries had to accept cumbersome conditions to join. Arguably they never received enough in return for their compliance. We badly need a New Global Deal. Ours is a philosophical plea for such a deal as an effort to provide trade justice. We develop the idea that trade—specifically, subjection to the global trade regime—is one in several grounds of justice. Roughly, a ground of justice is a context where particular principles of distributive justice apply, and do so because individuals in their scope have certain properties or stand in particular relations

The Significance and Complexities of Trade  5 to each other (which therefore have to be spelled out for any such ground) that render these especially demanding principles applicable. Risse’s On Global Justice develops a theory of global justice based on five such grounds: common humanity, membership in states, membership in the world society, humanity’s collective ownership of the earth, and subjection to the trading system.9 What justice requires for trade is best developed within such a framework, with the notion of exploitation central to how we spell out trade (in)justice. More specifically we advance these theses: 1. Since it focused on entities with immediate power to exercise violence and coercion, political philosophy has neglected the importance of trade for distributive justice and that of firms as agents of (in)justice. 2. Postwar history has seen several efforts to create a trading system that eventually led to the WTO. None of these did justice to developing countries; they have largely been exploitative. 3. There are various ways of thinking about how trade comes up for consideration from the standpoint of global justice (“images of trade”) that can be systematically assessed in terms of their philosophical merits. 4. The philosophically most plausible account of trade from the standpoint of global justice is to see trade as one in several grounds of justice. Particular principles of (distributive) justice apply to trade. Others apply in different contexts. As an image of trade we call this view Trade-As-One-Ground. 5. Trade injustice consists in exploitation. Gains from trading are distributed justly only if the gains have been obtained without exploitation 6. Our philosophically preferred view of exploitation understands it as unfairness through power. The particular version of this general account that applies to trade characterizes exploitation as power-induced failure of reciprocity. 7. Some types of exploitation are stepping stones towards a just world or prices worth paying, and as such are temporarily bearable. Agents see the world from a standpoint of constrained agency rather than that of a universal planner. 8. States, generally the most powerful entities, should shoulder the lion’s share of obligations. They ought to found an international organization devoted to trade justice. The grounds-of-justice view dilutes differences between domestic and foreign policy. 9. The WTO must be reformed to assume the obligations of a trade organization with global ambitions. Avoiding exploitation means empowering developing countries and accepting a development-oriented mandate. 10. There should be one global trade organization, rather than several regional ones. Trends towards mega-regionalism are problematic for global justice.

6  On Trade Justice 11. Other than states, companies are the most important actors in trade. Their obligations concern treatment of employees, but also their relationship with outsiders, including communities where they do business, contractors and suppliers, as well as governments under whose jurisdiction they operate. These obligations fall under the requirement not to exploit. 12. Questions of workers’ compensation arise as a topic of trade justice. Exploitation as unfairness through power offers the most convincing perspective on the issue. Often corporations pay workers exploitative wages. 13. Decisions about where to produce raise questions of trade justice. Relocating firms might exploit by using power to induce failures of r­ eciprocity. There are conditions under which such exploitation is all-things-considered justified. In relocations from one developing country to another, such conditions are less likely met than in relocations from a developed to a developing country. 14. A theory of trade justice as non-exploitation also helps answer question such as: Under what circumstances can companies deny moral responsibility for wrongdoings of suppliers or sub-contractors? When may companies cooperate with authoritarian regimes? The most promising strategies of denying responsibility for wrongs committed by suppliers are unsuccessful, and cooperation with authoritarian regimes is permissible only under a very limited set of circumstances.

1.4  The Philosophy of Trade Before Adam Historically philosophers have engaged in two major debates concerning trade, one about just price and one about free trade. Both change dramatically with Adam Smith’s 1776 Inquiry into the Causes of the Wealth of Nations.10 Subsequent contributors to both debates are more or less contemporary figures. Now that we see how trade has made the world and what theses we advance to make our philosophical plea for a New Global Deal, it is time to introduce these previous themes in the philosophy of trade. Regarding the question which price counts as just, Aristotle is an early contributor. His Nicomachean Ethics, in the famous Book V on justice, introduces the notion of reciprocal or commutative justice. This form of justice, Aristotle tells us, occurs in communities of exchange, for instance when farmer and shoemaker exchange food for shoes. Exchanges are just only if goods are somehow equivalent. That equivalence Aristotle saw fixed as a function of needs and wants prevalent in the community. The just price does not depend on peculiarities of a person’s situation, or on the costs of production, but on regularities of supply and demand in the community.11

The Significance and Complexities of Trade  7 The idea of a just price was subsequently reflected in Roman Law and Canon Law. It made an especially consequential appearance in the work of Thomas Aquinas. On one established interpretation, Aquinas thought of that price in terms of costs of production rather than patterns of needs and wants. That thought led later commentators to see connections between Aquinas and Marx’s labor theory of value. Marx would analyze the price of an object in terms of the socially necessary labor entering into its production.12 Centuries after Aquinas, John Locke revisited the just price, capturing it in terms of the Aristotelean view. An injustice is done to somebody who needs to buy items for a price higher than market rates, for instance in distress.13 With Smith’s Wealth of Nations, however, the search for the just price gave way to an empirical theory of economic value, price theory as nineteenth century economics understood it.14 An early contributor to the other debate, on free trade, was Dutch natural lawyer Hugo Grotius, a founding father of international law. His 1609 pamphlet Mare Liberum, or Free Sea, argues for the impossibility of appropriating the sea, which opens the oceans for trade. Moreover, geographical conditions and distribution of people on the earth, says Grotius, reveal that trade is part of a divine plan, or otherwise prescribed by natural law. Oceans are navigable, and the winds are “not always blowing from the same quarter, and sometimes from every quarter,” which Grotius takes to show that “nature hath granted a passage from all nations unto all.” Quoting Seneca, he adds it is the greatest benefit of nature, that even by the wind she hath mingled nations scattered in regard of place and hath so divided all her goods into countries that mortal men must needs traffic among themselves.15

By enlisting Seneca, the learned Grotius referred to ancient disputes about what to make of the fact that much of the known world was covered by water, and whether a location near the sea was a blessing or curse. Seneca and others had offered a doctrine of a universal economy. They enlisted providence’s design of  sea and wind to support that idea.16 The significance of this doctrine was ­hampered, however, by the contempt in which commerce was often held before modern times. Lest we too readily classify Grotius (and perhaps Seneca) as early free-trade advocates, we should be mindful of twentieth-century economist Joseph Schumpeter’s judgment that Grotian natural law was “devoid of scientific meaning.”17 Writers of that same period to whom Schumpeter would ascribe more such meaning mostly opposed free trade. Only decades after Grotius, Thomas Hobbes argued the sovereign should control trade not only to sustain the Commonwealth (to make sure goods that could aid enemies eluded them) but also for the welfare of the citizens (to keep out useless or dangerous goods).18 Not only was trade supposed to benefit the realm as judged by the sovereign, but the era’s mainstream thinking

8  On Trade Justice (including most of what Schumpeter recognized as scientific) was mercantilist. Economic wealth can be generated through trade, so that reasoning roughly goes, by selling to others more than what is imported. There is then a presumption in favor of trade restrictions.19 Even those who shared Grotius’s natural law outlook increasingly introduced exceptions to free trade. In the minds of eighteenth-century thinkers like Emer de Vattel and Christian Wolff, “the right of all countries to engage in trade had been transformed into the right of all countries to regulate their own trade.”20 But a friendlier disposition towards trade would soon emerge, exemplified by David Hume’s 1752 essay “On the Balance of Trade.”21 Attacking the mercantilist point that precious metals must not leave the realm, Hume wonders if it had even been possible for the gold and silver Spaniards took from South America not to leave Spain again. Spain flourished by putting those metals to work, Hume thought, exchanging them for goods or services. Productive people were the true wealth. Hume anticipates Smith, especially his views that control of economic choices was easily counterproductive, and that free trade benefited all involved. Contrary to Christian or Civic-Republican traditions, for Hume commerce was not inherently corrupting.22 But it was Smith who presented a systematic, coherent frame of reference to think about economic activity. Smith established among economic thinkers the superiority of free trade to any kind of import protection to produce wealth.23 Economic historian Robert Heilbroner only slightly exaggerates in arguing that “after Smith [. . .] displayed the first true tableau of modern society, all the Western world became the world of Adam Smith: his vision became the prescription for the spectacles of generations.”24 Smith’s Wealth of Nations set the stage for all ­subsequent discussion about economic activity generally. When Immanuel Kant wrote in On Perpetual Peace that the “spirit of commerce sooner or later takes hold of every people, and it cannot exist side by side with war,” he captured the mood of the times.25 Johann Gottlieb Fichte went against the tide when he published his Closed Commercial State in 1800, arguing countries should be reclusive to avoid complications from transnational interconnectedness.26 The nineteenth century teems with authors with bright ideas about trade, though they do not discuss trade in terms of global justice. They can be understood as participants in conversations that are still ongoing, so we introduce them throughout as appropriate. But since we introduced Smith as the towering champion of free trade we should also draw attention to two key figures who identify its pernicious effects: Karl Marx and Friedrich Engels. Their 1846 German Ideology argues that trade, “which after all is nothing more than the exchange of products of various individuals and countries,” nonetheless rules the whole world through the relation of supply and demand—a relation which, as an English economist says, hovers over the earth like the Fates of the

The Significance and Complexities of Trade  9 ancients, and with invisible hand allots fortune and misfortunate to men, sets up empires and overthrows empires, causes nations to rise and disappear.27

Trade simultaneously is a major mechanism to damage human personalities through alienation and a vehicle to bring revolutionary change to create a new (communist) society. It is the former because trade increases pressure to specialize, which means mindless work for many to produce things absorbed by vast networks of exchange. It is the latter because “communism is only possible as the act of the dominant peoples ‘all at once’ and simultaneously, which presupposes the universal development of productive forces.”28 Echoes of these views have been heard ever since, more or less loudly.

1.5  Philosophical Complexities: the Rubik’s Cube of Trade International trade did not receive book-length treatment through the lens of justice until the twenty-first century. One reason for this is that political ­philosophers focused on who should rule and on how those subject to them should fare under their tutelage. Another reason for neglect presumably is that philosophical work on trade encounters multiple intertwined challenges. Engaging trade justice is like solving a Rubik’s Cube: as one places the component cubes, one cannot focus on only one side. Just as the Rubik’s Cube has six sides, we identify six complexities one must tackle to engage trade justice. The first is that trade is a subject of both ideal and non-ideal theory: thinking about trade, what features of the world should we accept as given? The second is that trade is a mid-level phenomenon: can one think about trade justice without developing a full theory of justice? Third, there is the related question of whether trade gives rise to independent principles: is what ought to happen in the domain of trade a function of trade practices, or should trade serve overarching requirements of justice? Fourth, there is a methodological question of how to resolve conflict between requirements of trade justice and other moral or prudential demands: should philosophers merely identify relevant principles, or can we make recommendations for how to resolve conflicts? Fifth, many trade issues are empirically contested: how should normative theorists handle such disagreement? Finally, there is the problem of fragmented agency: in domestic theory it is clear what the subject of justice is, but to whom do principles of trade justice apply given that trade practices involve many actors? All these questions must be answered simultaneously: how one answers one imposes constraints on the ­others. Let us consider each of the six sides of the Rubik’s Cube of trade justice in more detail. An important distinction in recent political philosophy is that between ideal and non-ideal theory. We take ideal theorizing to identify what well-nourished,

10  On Trade Justice well-motivated people can be expected to do. Ideal theory assumes everybody is motivated to act in accordance with moral norms and values that apply to them, and nobody is prevented by hardship from acting on that motivation. One assesses matters under conditions of non-ideal theory if one assumes that, in some other regards, the world is not as it should be. People fail to do as they ought to, in one way or another.29 Suppose we explore a proposal about immigration, and concerns arise that the proposal flounders because some will refuse to do what the proposal requires of them (e.g., help with integrating new arrivals), or because this policy is incompatible with certain labor market policies. Ideal theory assumes all people do their part in a fair policy. One would assess, in particular, whether labor policies must be modified as well, as a matter of fairness. Philosophers advance ideal-theory inquiries about domain X to assess what X would be like in an otherwise morally impeccable world (but one still populated by humans, rather than saints or bodhisattvas). Non-ideal theory explores whether resistance to the immigration proposal can be overcome with available means. Absent ­satisfactory answers, we may have to drop the proposal. Philosophers advance non-ideal-theory inquiries about X to assess how to pursue normatively appealing goals under economic, political, or other constraints. Both ideal and nonideal theory are essential for political philosophy. Ideal theory gives us a sense of what kind of world to aspire to.30 Non-ideal theory offers advice on what to do here and now. Ideal theory must work out what constraints on agency, if any, it accepts as limiting its prescriptions. Non-ideal theory must decide how much reality to take as given, and—a difficult task—make that choice consistently across subject areas. The ideal/non-ideal nexus matters greatly for trade.31 Since we develop an account of trade justice as part of a comprehensive theory of global justice, much of our inquiry is of the ideal type. Exploitation is an issue in ideal theory in the sense that problems of exploitation still arise once all other demands of justice are settled. There are markets in ideal theory, and exploitation captures injustices inherent in markets. Arguments for markets only support an abstract sort of market, one that shows people that their choices impose costs on others and also helps with coordination. But they do support that much.32 However, to discuss trade properly we need both ideal and non-ideal theory. The transition is facilitated by the fact that even ideal theory gives much play to constrained agency. Principles of justice can be formulated objectively, or, as  one might say, from the standpoint of the universe or for an ideal ­observer. But prescriptions of trade justice—or generally prescriptions in the grounds-of-justice approach—address actors with constrained agency. In nonideal theory such constraints become larger because other agents fail to do what they ought to do. Later chapters that deal with actors offer both ideal and non-ideal theory.

The Significance and Complexities of Trade  11

1.6  The Rubik’s Cube of Trade, Continued The second complexity is that one has to decide whether to theorize trade in isolation, as a mid-level phenomenon without a full theory of global justice, or as part of such a theory. There seems no reason to treat mid-level phenomena ­separately, apart from pragmatism. Researchers might not have time to cover the whole domain of which trade (in this case) is part. Practitioners might be under too much pressure to put matters into a larger context. But trade importantly connects to other issues, in both ideal and non-ideal theory. Considered judgments cannot be made detached from this larger picture.33 Another normative dimension in discussing trade—the third complexity—is about whether normative assessments should treat trade as a separate domain or ground of justice. Alternatively, trade could be assessed exclusively in terms of how it advances other concerns. This is a different question from the ideal/­ non-ideal issue and the question about treating trade in isolation or as part of a comprehensive theory. All available responses to those matters are consistent with the view that trade as such generates moral concerns and obligations that cannot be reduced to other concerns or obligations (such as those drawing on common humanity). But all such responses are also consistent with the view that matters of trade justice are thus reducible. Our view is that trade does demand separate treatment from the standpoint of justice. Trading as such generates obligations. This position results from substantial moral argument, involving comparative assessments of relative merits of competing views. Influential defenses of the opposite stance include various types of consequentialism, such as utilitarianism, which judges trade in terms of how it enhances collective well-being. John Stuart Mill, who wrote extensively on trade, advocates such a standpoint. Another kind of instrumental view on trade is the global-egalitarian outlook advocated by Simon Caney or James Christensen.34 For them, what matters is to meet certain cosmopolitan ideals. An account of trade justice is a service account. On such an account no complexities arise from the need to integrate trade with other matters. We reject instrumental approaches and argue that trade is its own ground of justice. This view faces complications. For one thing, even if trade generates obligations on its own, in other domains trade is instrumental vis-à-vis other goals (say, making people better off). We are led to a distinction between obligations from trading and those arising in the context of trade, where the latter can have this instrumental nature. In addition, we encounter the question of how to integrate obligations based on trade as a ground of justice with obligations based on other grounds. These difficulties notwithstanding, among the various images of trade (roughly, the various lenses through which one could view the moral relevance of trade) that we discuss, we defend one we call Trade-As-One-Ground: subjection to the international trade regime is one in several grounds of justice.

12  On Trade Justice This leads to the fourth difficulty, how to resolve conflicts between requirements of trade justice and other moral or prudential requirements. Should one rest content with identifying the respective principles, or are there general recommendations for how to systematically resolve conflicts? One way or another, this challenge arises for any moral theory, if only because an account is needed of how moral demands match with other types of practical advice (such as prudential matters). But for our view, Trade-As-One-Ground, this problem arises with great force. After all, we recognize several grounds associated with respectively different principles. What this pluralist machinery entails for particular agents (e.g., states and companies) needs to be spelled out, especially how agents ought to handle conflicts among principles associated with different grounds. We solve this issue in terms of the constrained-agency perspective and explore how to weigh conflicting principles. The fifth challenge is how to integrate empirical disagreement. Discussions of trade justice inevitably touch on complex issues. To some extent those matter for ideal theory to obtain a proper understanding of trade to begin with. But most importantly, empirical disagreements matter for non-ideal theory where ­strategies for the pursuit of justice are at stake. Such disagreement matters for instance when we talk about how important trade is for development. It also matters when it comes to different proposals for institutional design of the WTO, or when we need to assess how certain large-scale efforts in the world (such as mega-regionalism) will turn out. In most cases, we work with what strikes us as the most authoritative account emerging from the empirical sciences. Wherever there is one, we adopt the predominant view or try to render our position compatible with different empirical assumptions or finding. The most important empirical issue in this book is the extent to which trade matters for development. There is a substantial amount of convergence around the view that while trade matters greatly here, it is only one of several factors. Social scientists and policymakers have recently paid much attention to enabling developing countries to design policy space in ways most conducive to their ­trajectory. Without other types of policy, and without appropriate institutional design, the sheer possibility of exporting goods and services will help little. The last complication is to sort out who the relevant actors are in the domain of trade. We later use the terminology of different “images” of trade. These images vary in terms of how they capture the moral ontology of trade, that is, what they say about its morally important aspects. We talk about “images” to emphasize various ways of looking at what matters morally about trade. Different images stress the relevance of different actors. For James, states are the most important actors because states maintain the international market reliance mechanisms that make trade possible. States make sure routes are safe and payments reliable. A competing view sees trade as a myriad of interactions among willing individuals. What stands out on this view is trade’s contractual nature rather than state regulation.

The Significance and Complexities of Trade  13 Our image, Trade-As-One-Ground, recognizes a range of actors, from states and companies to individuals. Thereby our view acknowledges the fragmented nature of agency and the dispersion of responsibility in trade. The perspective of constrained agency matters to assess what kind of obligations apply to different agents. Even in ideal theory we must recognize a multiplicity of actors. It is the perspective of constrained agency, rather than the standpoint of the universe or that of any social planner, that matters for assigning obligations of justice. This chapter casts light on both the political and historical significance of trade and its philosophical complexities. We have also introduced the major theses this book defends. Let us end this introduction with a chapter-by-chapter preview of what is ahead. Part I, “Trade Justice,” which includes Chapters 2–6, explores competing views on the morality of trade, makes the case for our own image (Trade-As-OneGround), and explores the central notion of exploitation. Chapter 2, “Towards a New Global Deal,” illuminates how developing countries have fared in postwar efforts to create a trade regime. After World War II, the Bretton Woods institutions were designed to help with economic betterment and avoid calamities like the world wars and the Great Depression. The world gradually outgrew the ­imperialist era and saw the creation of dozens of new states, which, however, were poorly integrated into the global economic system. An influential idea in the early stages of this system was to design a global New Deal including an effective and just trade regime to serve the poor. Subsequently, ideas about a New International Economic Order became prominent, supported by dependency theories about the world economy. Before this historical canvas we make our own philosophical plea for a New Deal for the world—a New Global Deal. We also touch on earlier intellectual responses to these developments, ranging from various versions of postwar intellectual radicalism to the emergence of the global justice literature in Western liberal philosophy to which our own work belongs. Chapter  3 introduces the images-terminology and addresses Amoral Trade, Instrumental Trade, and Structural Equity, three competing images of trade. Amoral Trade is the view that trade is an interaction among a myriad of ­individuals that does not let trade come up for (much) moral assessment in the first place. Instrumental Trade does give moral significance to trade, but only to the extent that trade helps with the pursuit of other goals. According to Structural Equity, trade delivers gains beyond what states could accumulate in autarky, and each state may remove from the totality of trade gains what it could generate in autarky. The surplus is divided equally among participating states. We reject these images and then introduce our own image, Trade-As-One-Ground, and offer some initial arguments for it. Chapter 4, “Trade as One Ground of Justice,” explores our image more systematically by way of introducing the grounds-of-justice approach from Risse’s On Global Justice. That approach makes good on the claim that trade is one in several

14  On Trade Justice grounds, and indeed is one such ground. Technically the ground is not trade as  such but subjection to the global trading system. We explain that notion and explore why one should indeed regard it as one ground of justice. We also investigate differences between inquiries into fairness in trade and trade justice. We capture trade justice in terms of exploitation, and thus rely on an account of exploitation. Exploitation is one of the great buzzwords of political thinking on the left. The original Marxist notion was formulated based on the labor theory of value, which most thinkers in that domain no longer endorse. But the kind of unfair advantage-taking the notion covers has continued to engage activists and philosophers alike. Chapter 5, “Exploitation as Unfairness Through Power,” surveys the lay of the land, with a focus on recent work, and introduces our own proposal on exploitation. Our proposal offers the most plausible response to ­disagreement between various conceptions of exploitation and identifies a structural unity across them. We offer a proposal for how to think about exploitation that combines the advantages of competing conceptions while avoiding their shortcomings. Exploitation, on our general ecumenical account, is unfairness through power. The version that applies to trade characterizes exploitation as power-induced failure of reciprocity. Importantly, non-individual actors like groups or institutions may exploit or be exploited. Exploitation generally is ubiquitous in human affairs, as is specifically the injustice involved in exploitation in the domain of trade. Chapter 6, “The Moral Force of Exploitation,” explores how to respond to occurrences of exploitation. We develop a general perspective of constrained agency and an accompanying differentiated vocabulary to delineate obligations of particular agents. We also offer a theory of stepping stones towards as well as prices worth paying for the creation of a just world. Such an approach lets us distinguish between two kinds of cases: first, cases of exploitation we can accept temporarily on a decent progression from the current unjust state of the world to a more just one, and secondly, cases that cannot be viewed this way and thus must be terminated forthwith. We reflect on how to use such arguments properly since their overuse is tempting. Parts II and  III look at trade justice from the standpoint of two major types of  agents in that domain, states and corporations. The four chapters in Part II, “Seeing like a State,” deal with a range of questions about the state. Our world as of now is, and for the foreseeable future will be, a world of states. States therefore are the most important duty-bearers. But their role is complicated because their obligations are both domestic and international, and arise on different grounds. Chapter 7, “The State as an Agent of Trade Justice,” theorizes the normative role of states in the global order generally and in trade specifically. One challenge for a  theory of multiple grounds of justice is that an assignment of duties is not straightforward. We expand on the constrained agency perspective introduced in Chapter 6 regarding the role of the state within a pluralistic theory of global justice.

The Significance and Complexities of Trade  15 One obligation of states is to found an international organization concerned with trade justice. Chapter  8, “A Much-Needed Organization: Rethinking the WTO,” continues that theme, explores what obligations this organization would have, and discusses institutional reform of the WTO in light of these arguments. We argue that the WTO’s multilateralism is a requirement of justice and reflect on how this point bears on how the global trade organization should be organized. Chapter  9, “Domestic Trade Policies in an Interconnected World,” explores particular domestic obligations of states in the domain of trade, including obligations and prerogatives to protect their labor force and industries from competition. The final chapter in Part III, Chapter 10, “A Step into the Wrong Direction: Mega-Regionalism,” addresses the negotiation of regional treaties prominent in the final years of the Obama administration. The Trump administration’s counterefforts notwithstanding, the attractiveness of mega-regionalism reveals a crisis in trade multilateralism that has arisen partly from the increasing unwillingness of less powerful states to accept whatever the powerful offer them, and partly from the increasing digital divide that undermines the extent to which trading partners have similar regulatory interests. We object that mega-regionalism diminishes the prospects of multilateralism in the service of trade justice. Part III, “Seeing like a Corporation,” explores a range of questions about the role of corporations in trade justice. Chapter 11, “Theorizing the Firm,” explores the corporation as a subject in moral and political theory. The chapter identifies questions about both the moral requirements applying to the corporation’s ­internal structure, including treatment of employees, and its responsibility to ­outside actors, including communities, other firms, or states as matters of trade ­justice. Arguments that firms are, morally speaking, off the hook in matters of trade ­justice do not succeed. We introduce a case study about Nike that lets us  formulate several questions about obligations of firms that the remaining chapters answer. The question of a just wage has presumably been contentious ever since there have been wage relations, and philosophical thought on the subject reaches back hundreds of years. Yet the subject remains elusive. Chapter  12, “Dealing with Workers: the Question of Wages,” deploys our conception of exploitation as powerinduced failure of reciprocity by showing how certain wages might ­plausibly be criticized as exploitatively low. In addition to setting wages, transnational corporations also regularly confront choices about where to locate facilities. This involves uprooting production to move elsewhere. There is basically no normative work on the issues that arise here. Chapter 13, “Dealing with Communities: the Relocation of Jobs,” proposes conditions under which relocation is exploitative and explains what policy measures may still render it all things considered permissible. At issue is both the decision to relocate from the corporation’s country of origin (often a choice to relocate from the developed to the developing world) and relocation from a second to a third country.

16  On Trade Justice Another aspect of the economic activities of transnationals is how they operate in contexts characterized by dispersed responsibility. One such context is in the outsourcing of economic activity. Companies hire other companies or individuals not directly under their control to do certain tasks. Chapter  14, “Dispersed Responsibility: Cooperating with Other Firms and Authoritarian States,” our final chapter, explores under which circumstances companies can deny moral responsibility for wrongdoings of suppliers or sub-contractors, and whether outsourcing might be morally problematic even in cases where suppliers or sub-contractors do not commit any wrongs. Another context characterized by dispersed responsibility is the choices corporations must make regarding operations under authoritarian regimes. We apply the “moral force of exploitation”-reasoning to explain when corporations may, or should not, cooperate. Our Conclusion revisits our main practical recommendations.

Notes 1. By now, a small but sophisticated literature on trade justice has emerged. This is symptomatic of an increasing focus on sub-topics within global-justice research (such as also immigration, human rights, or climate change), rather than the development of more overall accounts of global justice. The high standards of that literature notwithstanding (and we engage with most of it in due course), to our minds no current theory of trade justice is intrinsically convincing, makes for sensible connections to an overall theory of global justice, and allows us to think through moral and political questions in the real world. 2. For the big picture, see Wilson, The Social Conquest of Earth; McNeill and McNeill, The Human Web; Tattersall, Masters of the Planet; Harari, Sapiens; Boehm, Hierarchy in the Forest. 3. The “human-web” terminology draws on McNeill and McNeill, The Human Web. The “world society” terminology draws on, among others, the work of sociologist John Meyer; see Krücken and Drori, World Society. 4. For trade in world history, see Bernstein, A Splendid Exchange; Pomeranz, The World That Trade Created; Findlay and O’Rourke, Power and Plenty. For the point that trade allows strangers to develop interlocking intentions, see Seabright, The Company of Strangers. See also Tomasello, A Natural History of Human Thinking. For the relevance of social trust for trade, see Wade, Before the Dawn, 162. See also Boyer, Minds Make Societies, chapter 5. 5. For Europe in the late Middle Ages and early Modernity, see McNeill and McNeill, The Human Web, chapter 5. For that period in China, see Menzies, 1421: The Year China Discovered America. 6. Bernstein, A Splendid Exchange, 245. 7. Bernstein, 254. 8. On early egalitarianism, see Boehm, Hierarchy in the Forest. 9. Risse, On Global Justice. We refer to the view that there are several grounds of justice as the grounds-of-justice view. The version of that view defended in On Global Justice is

The Significance and Complexities of Trade  17

10.

11. 12.

13. 14. 15.

16. 17. 18. 19. 20. 21.

22.

23.

called pluralist internationalism for taking membership in states to be one such ground and for viewing states as the most important agents of global justice. Smith, The Wealth of Nations. For the themes of the next several paragraphs, see Spiegel and Hubbard, The Growth of Economic Thought; Schumpeter and Perlman, History of Economic Analysis. For an introduction to trade itself, see Helpman, Understanding Global Trade. Aristotle, Nicomachean Ethics, V 5 1132b31–3. See ST 2–2, question 61, art. 1–3 (pp. 123–9), and question 77 art. 1 and 4 (pp. 143–8) in Aquinas, On Law, Morality and Politics. For discussion of the just price in Antiquity and the Middle Ages, see Baldwin, “The Medieval Theories of the Just Price”; Roover, “The Concept of the Just Price”; Reiff, Exploitation and Economic Justice, chapter 2. For connections between Aquinas and Marx, see Baldwin, “The Medieval Theories of the Just Price,” 71–80. Locke, “Venditio.” Reiff, Exploitation and Economic Justice, 66–73. We reconnect to the just-price debate in Chapter 12. Grotius, The Free Sea, 11. On the history of the free trade debate, see Irwin, Against the Tide. For the general background of economic thought, see Spiegel and Hubbard, The Growth of Economic Thought; Vaggi and Groenewegen, A Concise History of Economic Thought. Irwin, Against the Tide, 11–17. Schumpeter and Perlman, History of Economic Analysis, 371. Hobbes, Hobbes, 173. This is in the Leviathan’s Chapter XXIV, “Of the Nutrition and Procreation of the Commonwealth.” On mercantilism, see Irwin, Against the Tide, chapter 2. See also Negishi, Developments of International Trade Theory, chapter 1. Irwin, Against the Tide, 24f. Emphasis is added. Hume, “On the Balance of Trade.” Montesquieu’s 1748 Spirit of the Laws too is often taken to reflect a free-trade attitude, especially for insisting on the importance of trade for peace (see especially chapter 10). On Robert Howse’s alternative reading, commerce does not secure peace in a world of sovereign states but represents an alternative to such a world. Commerce offers a model of peaceful cooperation that requires laws and conventions of a transnational kind. By illustrating how stateless merchants maintain order among themselves to sustain exchange across diverse societies, commerce points the way; see Howse, “Montesquieu on Commerce, Conquest, War and Peace.” On Smith and his predecessors, see Teichgraeber, “Free Trade” and Moral Philosophy; Irwin, Against the Tide, chapters 4–5. On Smith and Hume, see Rasmussen, The Infidel and the Professor. For Hume’s defense of the modern liberal commercial order, see his “Of Refinement in the Arts,” in Hume, Essays, 275–88. Here is a famous passage: “It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy. [. . .] If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage;” Smith, The Wealth of Nations, IV.2.11–12.

18  On Trade Justice 24. Heilbroner, The Worldly Philosophers, 41. 25. Kant, Kant, 114. This is in Point 3 of the First Supplement to On Perpetual Peace. Emphasis in the original. 26. Fichte, “The Closed Commercial State.” 27. Marx, Karl Marx, 186. A similar theme appears in the Communist Manifesto, see Marx, 247f. We do not know to which economist they refer. 28. Marx, Karl Marx, 187. This is the essence of the later orthodox Marxist standpoint on international politics: capitalism must first go global before it can be overthrown. 29. On ideal vs. non-ideal theory, see Swift and Stemplowska, “Ideal and Nonideal Theory”; Simmons, “Ideal and Nonideal Theory”; Valentini, “Ideal vs. Non-Ideal Theory.” 30. For a contrasting view, see Sen, The Idea of Justice. Sen-style criticism is often directed at Rawls, A Theory of Justice. But as a testimony to the complexities involved, note this: for G. A. Cohen the problem is not that Rawls’s theorizing about justice is too detached from reality. Rather, Cohen holds that Rawls mixes concerns of justice with other concerns that arise in our moral lives but need to be kept separate. So while Sen thinks Rawls is too much concerned with ideal theory, for Cohen Rawls is too little concerned with ideal theory. See Cohen, Rescuing Justice and Equality, chapters 6–8. For another critical take on Rawls, see Steinhoff, “The Uselessness of Rawls’s ‘Ideal Theory.’ ” 31. Consider three examples. To begin with, there is the question of whether to assess policies in light of their best possible consequences or in light of their most likely consequences. Judged by their best possible consequences, mega-regionalist ­endeavors (trade arrangements for large regions but not genuinely global in outlook) prominent in the last years of the Obama administration (especially the Trans-Pacific Partnership or the envisaged Transatlantic Trade and Investment Partnership) may appear desirable. They were lauded for enhancing growth in participating countries. Judged by their most likely consequences, a different picture unfolds: mega-regionalism undermines multilateralism. Secondly, there is the issue of whether to formulate principles of trade justice on the assumption that other domains of human activity, especially domestic societies, are organized justly. If we reflect on trade justice in this spirit, many problems (e.g., sweatshops) disappear. Otherwise we might formulate principles that, instead of  requiring us to overcome a bothersome status quo, end up endorsing it. Finally, there is the question of whether we should formulate principles of trade justice on the assumption that the actors to which they apply, such as multinational enterprises, are morally motivated. Alternatively, we might assume they are self-interested. Adopting the former option, we may end up endorsing principles devoid of real-world effect. But otherwise we might fall short of formulating required standards by taking too much ugly reality as unchangeable. 32. Gibbard, “What’s Morally Special about Free Exchange?” For the view that markets corrupt the human spirit, see Cohen, Why Not Socialism? Cohen denies that there would still be markets in ideal theory. But ideal theory as we understand it offers ­theoretical prescriptions for a broad range of interconnected issues such that we assume people act morally throughout (i.e., they are not prevented from doing so by lacking motivation or means). This presupposes each of these domains can be theorized, and they can be theorized together. What Cohen offers—doing away with any

The Significance and Complexities of Trade  19 kind of market, including highly regulated markets whose function is reduced to ­creating incentives and coordinating activities—is not so much ideal theory as a moral idea whose realization would transcend the context normally covered by moral theory, a desideratum rather than a potential prescription (of the sort covered by ideal theory). Consider a parallel. Marx’s Critique of the Gotha Programme describes communism in terms of a society where each should contribute according to ability and receive according to need. One influential reading does not understand this view as a theory of justice but as communism transcending justice; see Lukes, Marxism and Morality, chapter  4. Analogously, we offer a theory of justice, whereas Cohen’s idea transcends such a theory. We should record that we disagree about what one might call the realistic-utopian potential of non-market mechanisms of coordination (i.e., the prospects of ever coming to a point where non-market arrangements at a larger scale become feasible). Wollner harbors higher hopes than Risse. Risse agrees with Sen that “to be generically against markets would be as odd as being generically against conversations between people (even though some conversations are clearly foul and cause problems for others—or even for the conversationalists themselves). The freedom to exchange words, goods, or gifts does not need defensive justification in terms of their favorable but distant effects; they are a part of the way human beings in society live and interact with each other;” Sen, Development as Freedom, 6. 33. Along such lines we object to James, Fairness in Practice. Another example is Peter Dietsch’s work on capital flight, Dietsch, Catching Capital. For the argument that for Dietsch too this choice generates difficulties, see Risse and Meyer, “Review of Catching Capital.” 34. Caney, Justice Beyond Borders; Christensen, Trade Justice.

2

Towards a New Global Deal 2.1  Towards the New Deal and Beyond The world got closer to becoming one through Columbus’s arrival in the Americas, for better and for worse.1 In a broad sense, “globalization” characterizes the whole period that commenced then. But it was the nineteenth and early twentieth centuries that produced the first great globalization, captured in terms of increasingly dense economic interaction across borders. In the nineteenth century, Mark Mazower observes, “free trade has been depicted in almost cosmic terms as a means of facilitating communication among men and bringing peace to the world.”2 This was the world of imperialism, an era when Europeans deployed increasingly sophisticated technology, science, and logistics to penetrate the rest of the world even more than through the previous network of colonies. Trade had long been a driving force behind expansionism. Even Marx supported free trade, for his own reasons: through trade, capitalism would spread, and thus implode sooner.3 The dynamic changed during the period from 1914 to 1945, which witnessed significant de-globalization. The combined shocks of world wars and economic depression saw countries withdraw from integration and endorse nationalist approaches. With the global economy fragmented, trade declined. In that period rudimentary ideas for a global trade organization began circulating. In 1916, US Congressman Cordell Hull argued for a permanent trade congress. With US power increasing, consideration was given to the impact of trade ­barriers on global well-being.4 John Maynard Keynes’s prescient 1919 Economic Consequences of the Peace proposed a free-trade union under auspices of the League of Nations.5 The League provided an arena for cooperation but never founded anything like such a union, notoriously lacking means of enforcement. Growing protectionist sentiment after the crash of 1929 scuttled efforts to advance free trade. Meanwhile, in 1922 Sun Yat-sen, revered founder of the Republic of  China, published a book on development advocating for an international ­organization specifically to improve living standards in China. That organization should provide money, expertise, and technology. Sun pioneered the use of the term “international development,” and his ideas would still be present among the Chinese delegation at Bretton Woods in 1944.6 In the 1930s, US President Franklin Delano Roosevelt initiated the New Deal. In the wake of the Great Depression, one-quarter of the American workforce On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

24  On Trade Justice was unemployed. There was no unemployment insurance or social security, existing state and private charities had collapsed, urban populations faced starvation, and homelessness was rampant. The term “New Deal” characterizes the ­reconsideration of the American political order in response to that crisis. More specifically it denotes a thicket of policies to increase public spending and the role of government in the economy. New Deal policies increased social welfare and government regulation throughout the 1930s, which led to a powerful technocratic bureaucracy and set the stage for the growing American military capacity and global leadership during World War II. The New Deal’s success in terms of economic elevation and political and administrative reorientation in the United States, as well as the fact that the US defeated Germany and Japan, was often taken to validate liberal democracy over dictatorships of various stripes. These successes also demonstrated that not all efforts at non-revolutionary change were doomed. The terms “New Deal” or “New Deal Order” also designate the period of Democratic Party rule between Roosevelt’s 1933 inauguration and Eisenhower’s election two decades later. This broader take makes it sensible to think of American postwar multilateralism as a New Deal for the world. What drove the New Deal was the realization that the freedom of each to live without fear and want depended on the larger economic context. Great Depression and world wars demonstrated that this point applied globally. The famous four freedoms Roosevelt made his guiding ideas—freedom of speech and worship in addition to freedom from fear and want—became the New Dealers’ vision for the world. Roosevelt emphasized that people should enjoy these freedoms “everywhere in the world” and “in all the lands.”7 These freedoms also became enshrined in the Atlantic Charter, released by Roosevelt and Prime Minister Winston Churchill in August 1941. That declaration stated their war aims and became the seminal document for the founding of the UN that transformed a war alliance into a framework for global multilateralism.8 However, questions about what exactly an internationalized New Deal could be, or whether there should be one at all, only arose when the domestic one was already cut to size. The original New Dealers had endeavored to create a welfare state of sorts, which was then a mainstream response to the depression across ideologies and regions of the world. The Soviet Union, Germany, the UK, and South American countries alike wanted the state to take a major redistributive role, beyond protection from market forces and provision of a social minimum. Simultaneously, specifically Fascist Germany and the Communist Soviet Union, in their different ways, pushed state penetration of society and individual lives dramatically beyond redistribution. In the US, visions of a fair society that included egalitarian critiques of wealth and oligarchy ultimately failed to be realized. Most instructive is the comparison to the UK, where the Labour Party implemented a welfare state after the war.

Towards a New Global Deal  25 Limitations for a potential New Deal for the World caused by diminished domestic aspirations were reflected in the fate of Henry Wallace, vice president from 1940 to 1944 and popular advocate for an extended New Deal. Wallace saw the twentieth century as a “century of the common man.” However, he stumbled when word spread he might ask Americans to provide “a quart of milk for every Hottentot,” which he strenuously denied. Derision from this episode contributed to his sacking as vice presidential candidate in favor of Truman.9 When the Pax Americana (American Peace) was created that shaped the postwar period, especially in the North-Atlantic region and South America, it was to some extent driven by zeal among New Dealers to internationalize their efforts to combine social justice and liberty while promoting technocratic governance to facilitate the implementation of their vision. But by then the fading of the New Deal contrasted with the establishment of welfare states elsewhere. And so the New Deal for the world was remarkable for what it was, but also for what it might have been but was not. A global welfare state could at least have become the ideal, inspired by domestic examples. But instead, as global realities changed and World War II gave way to the Cold War, Pax Americana was designed to compete with the Soviet model for global leadership. The Soviets too had won the war, generating as much credibility for their economic model as the Americans did. Pax Americana was also designed to solve an economic problem, that most potential customers were countries too ravaged by fighting to purchase American products. Part of the efforts to create a postwar order was to keep economic nationalism at bay through concerted management of capitalism beyond anything ever attempted.10 Struggles to implement a credible vision for trade went through ­several incarnations, remaining on the agenda for decades after World War II. The phrase “New Deal” periodically resurfaced in these debates, especially as those who in earlier stages merely appeared as beneficiaries asserted their own views on its terms. A telling example of how that phrase resonated is a statement by Pakistani politician Mahbub ul Haq in 1975, when developing countries pushed for a deal known as the New International Economic Order: If history is to be our guide, I believe that we may be on the threshold of a  historical turning point. At the national level such a turning point was reached in the United States in the 1930s when the New Deal elevated the working class to partners in development and accepted them as an essential part of the consuming society. On the international level we still have not arrived at the philosophical breakthrough when the development of the poor nations is considered an essential element in the sustained development of the rich nations and their interests are regarded as complementary and ­compatible, not conflicting and irreconcilable. And yet we may be nearing that philosophical bridge.11

26  On Trade Justice But instead, that bridge moved yet further out some years later. At the time of its conception, a New Deal for the world was an elusive dream. It has remained so ever since.

2.2  Early Postwar Efforts at Coordinating Trade The 1944 Bretton Woods Conference established an international institution for monetary policy, the International Monetary Fund (IMF), as well as the World Bank, initially designed to reconstruct economies ravaged by war. These institutions “were in many ways the Atlantic Charter’s most innovative multilateral ­artifact, embodying a Keynesian vision of a global New Deal.”12 The New Dealers’ imaginative proposals for technocratic governance devoted to moral causes were complemented by Keynes’s economic theory that stressed governmental intervention to direct aggregate demand. To be sure, Keynes thought Roosevelt had done far too little for the creation of a just society.13 Though Bretton Woods was mostly an encounter between Keynes and his American counterpart Henry Dexter White, there was much input from Latin America, Eastern Europe, India (not yet independent, but represented), and China. One incubator for expanding economic collaboration was Roosevelt’s “Good Neighbor” policy with Latin America, a financial partnership that, before the background of decades of US efforts at dominating its Southern neighbors, aimed to extend the New Deal across the Americas prior to global multilateralism.14 A year after Bretton Woods the UN was founded in San Francisco, “an ­organization that combined the scientific technocracy of the New Deal with the flexibility and power-political reach of the 19th-century European alliance system.”15 Its Economic and Social Council embodied New Deal internationalism. An elected subset of member states, that Council provides a forum to discuss economic and social issues, as well as formulate policy recommendations for members and the UN system as a whole. In 1948, the Universal Declaration of Human Rights was added to the UN charter. As progressive as all of this was by historical standards, it was a far cry from globalizing welfare-state ideals. The UN perpetuated a wartime alliance. In the ideological struggle among ­liberal democracy, communism, and fascism the latter was defeated by a coalition of the other two—an alliance that did not entail ideological recognition of the respectively other view. Maintaining the alliance without a common enemy was therefore a tall order. And whereas before World War II imperial powers occupied much of the world, their demise ushered in a slew of new countries, especially in Asia and Africa. Communism became a model for many. Alongside Central and South American countries that had cut ties with colonial masters a

Towards a New Global Deal  27 century earlier, these countries became increasingly vocal in the UN. Colonial backwaters became “developing countries.” Subsequently they became the “Third World,” in reference to the French Third Estate, which had stood in opposition to aristocracy and clergy. So while that term implied inferiority, it also alluded to the possibility of a unified will and evoked a perspective that did not reduce the options to capitalism (“First World”) vs. socialism (“Second”). The election of Burmese diplomat U Thant as first non-European UN Secretary-General in 1961 embodied this perspective.16 Later still, as developing countries saw themselves increasingly as a unified force with distinctive concerns, talk of “North” and “South” became common, overcoming the rank-ordering that to many was still implied by talk of the “Third World.” For many the UN was a bearer of ardent hopes for a new order to safeguard them from calamities and allow new countries to emerge from the shadows of colonialism. However, the wartime solidarity of the great powers the UN was ­supposed to preserve quickly evaporated. The institution founded as cornerstone of the New Deal for the world (such as it was) assumed a life of its own. The General Assembly often became Anti-American. New agencies proliferated and competed for impact. New thinking entered. For instance, the Prebisch– Singer thesis that commodities would fetch increasingly lower prices relative to manufactured goods was presented by two UN economists. New countries would often refer to this thesis to demand support for greater inclusion in the world economy.17 New countries and their advocates created novel entities within the UN, under control of the General Assembly, to advance their concerns. IMF and World Bank governance were aligned with interests of wealthy countries. One organization where new countries might have been respected more, had it come to pass, was the envisaged International Trade Organization (ITO). The Bretton Woods delegates, especially Keynes, saw a need for a trade institution to complement the IMF and the World Bank. Negotiations over several years laid foundations for such an institution, culminating in the signing of the Havana Charter at a 1948 conference in the Cuban capital. That conference covered a longer list of topics than any economic conference before, producing the most comprehensive economic agreement in history. Havana witnessed vehement controversies about development. Latin-American countries insisted the organization be used to facilitate redistribution. After the Marshall plan to support European reconstruction was announced, the US’s Southern neighbors feared they would fall behind. Questions about integration of developing countries had arisen. The language of “development” became prominent in a vanishing imperial world where talk about a “civilizing hand” had reigned supreme. Debates about development inspired the radical thought that in the 1960s spurred the creation of the UN Conference on Trade and Development.

28  On Trade Justice Efforts at creating a trade organization were thwarted by waning American interest. The ITO was supposed to advance liberalization. But that endeavor was based on the premise that it took an international entity to do so. No link between free trade and international organization was favored by nineteenth-century trade enthusiasts. The ITO’s designers invented that connection. Orthodox free traders worried that such an entity would inevitably impose rules of its own to advance liberalization (which would then naturally be less than full). For American protectionists, some forms of state intervention were acceptable. But they saw such an organization as a nascent super-state infringing upon sovereignty. Accordingly, the Havana Charter was defeated by an “unholy alliance” of protectionists and free-traders.18 What remained was the General Agreement on Tariffs and Trade (GATT). While the ITO was under discussion, a multilateral agreement to regulate trade was also negotiated. According to its preamble, the GATT aims for a “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.”19 But a crucial difference between ITO and GATT was that the former allowed disputes to be referred to the International Court of Justice, whose decisions would be binding. The GATT’s dispute settlement mechanism was voluntary. The GATT ended up being the only multilateral trade institution. Over time it morphed into a de facto organization under whose aegis multiple rounds of negotiations occurred. Tariffs fell enormously. The GATT was a tool for the American leadership of the postwar world. Its signatories needed a framework to lower tariffs and settle disputes. However, the GATT did not address “development” and ignored textiles and agriculture, in which new countries had advantages. It had provisions that could obstruct developing countries that had succeeded at something. When some produced low-cost textiles, various developed countries appealed to GATT rules against “dumping” (exporting at below economic cost) to block competition, citing “market disruption.” The result was the 1962 Long-Term Arrangement on Cotton, forcing “voluntary constraints” upon Asian exporters. This became the Multi-Fiber Agreement and lasted for forty years.20 Postwar multilateralism aimed to limit mercantilist practices and provide predictability in trade without much compromising the policy space of developed countries to offer their citizens economic security through extended social services and pursuit of full employment. The GATT played an important role in recovery and security of the Western Alliance, though efforts to cut trade barriers fell dormant as the Cold War progressed. According to a sympathetic commentator, its “humble beginnings and modest nature belie the fact that GATT proved crucial to the Free World’s victory” in the Cold War.21 But until the WTO’s Doha round (launched in 2001) there was no development perspective in the GATT. No new economic order would ever emerge from it.

Towards a New Global Deal  29

2.3  Towards a New International Economic Order The 1950s and early 1960s witnessed the ongoing demise of empires, often accompanied or followed by uprisings or civil war. The new, “developing” countries had to come to terms with the UN system, a political and economic system designed by others, including former colonizers. Those other actors not only had firstmover advantages in institutional design. The parts of the UN system that aimed for economic betterment also replaced an economic division within the imperial world that involved actual de-industrialization of colonies. It was partly as a result of such policies that colonies were often ill-prepared to persevere as sovereign countries.22 Finding one’s place in that system included adopting the state model of p ­ olitical organization, as well as securing acceptance in international institutions. “What counts today,” wrote Frantz Fanon in 1963, in his iconic book of resistance, The Wretched of the Earth, “is the need for a redistribution of wealth. Humanity must reply to this question, or be shaken to pieces by it.”23 Such a redistribution was not charity. “Europe is literally the creation of the Third World,” so what must be given to developing countries is their due.24 Fanon advised emerging countries to eschew the state model and any efforts to “catch up” with Europe. “Two centuries ago,” he wrote: a former European colony decided to catch up with Europe. It succeeded so well that the United States of America became a monster, in which the taints, the sickness and the inhumanity of Europe have grown to appalling dimensions.25

Not all thinkers of this era struck such radical chords. But as power was reshuffled globally, some modes of thought flourished that deviated from the mainstream liberalism behind the New Deal and its global aspirations. These modes of thought, as well as decolonization as such, unfolded while former colonizers took social justice seriously at home in unprecedented ways. Internationall, matters were different, however, especially in relations to former colonies. Talk about reparations was common, especially in Africa. Latin American countries normally did not make this argument. They had been independent for a century, often with ruling circles of European descent. Socialist countries liked the reparations argument since it allowed them to align themselves with decolonized countries. Former ­colonizers wanted to hear none of it.26 Latin American politicians and intellectuals emphasized global interconnectedness. Most influential among them stands Argentinian economist Raúl Prebisch, often called the “Keynes of the South.” He became the central figure in the developing world’s efforts to navigate that new global order. Prebisch became well known for the Prebisch-Singer thesis. According to him and German economist Hans Singer, dynamics of trade divide rich and poor. There has been an observable tendency for prices of primary goods (commodities) to decline relative

30  On Trade Justice to prices of manufactured goods. However, developing countries were not only subject to worsening terms of trade but also vulnerable to business cycles. Such cycles commenced in developed countries, the “center” of the global economy, and ended in developing countries, its “periphery” (vocabulary original with Prebisch). This viewpoint sought to explain why developed countries reaped major benefits whereas developing ones failed to flourish. Prebisch had articulated this thesis since the 1940s. Under his charismatic leadership, the UN Economic Commission for Latin American (ECLA) became the center of developingworld activism.27 Swedish economist Gunnar Myrdal also wanted more for developing nations than what the UN provided. Executive Secretary of the UN Economic Commission for Europe from 1947 to 1957, Myrdal had contributed to the development of the welfare state in his native country. Now he advocated for its global expansion: “The concept of the welfare state, to which we are now giving reality in all the advanced nations, would have to be widened and changed into a concept of a ‘welfare world.’ ”28 The goal was to curb the galloping inequality across countries that Myrdal regarded as unbearable in an interconnected world. He realized it was precisely the nationalist sentiments and policies that made welfare states ­possible which obstructed global institutionalization. But his work showed that further-reaching visions were available beyond the thinned-out global New Deal that had emerged. As a matter of historical irony Myrdal ended up sharing the Nobel Prize in economics with Friedrich August von Hayek in 1974. Hayek was a standardbearer of a competing economic approach to global Keynesianism and other views pushing for sustained state involvement in society. The hallmark of Hayek’s “neoliberal” view was a preference to let markets run human affairs.29 A style of thought that reduces much of politics to economics, neoliberalism combined classical liberal commitments to the importance of individual judgment, liberty, and rule of law with insights from economics that seem to favor restraint in state intervention in the economy and the life of citizens. According to neoliberalism, the increasing logistic and technological capacities of the twentieth century ought to be utilized by individuals rather than a strong state. Hayek embodied opposition to everything Myrdal stood for and would see his ideas come true beginning in the 1980s. Myrdal was so aghast “reactionaries” like Hayek and later fellow neoliberal Milton Friedman would receive this prize that he demanded its abolition.30 But whereas even developing-world leaders regarded Myrdal’s welfare world as utopian, the Prebisch–Singer thesis generated much influential thinking about interconnectedness around center–periphery distinctions. Later thinkers differed in terms of what causal mechanisms were at work and what solutions they recommended. Some advised developing countries to move beyond commodities towards diversified industrial economies. This would involve pursuing reforms

Towards a New Global Deal  31 to find their place in the global economy and highlight the importance of trade for development. A different proposal was to disconnect from the global economy, at least temporarily, to protect emerging industries. In the words of one chronicler, Prebisch proposed “a philosophy of international economic policy that might be described as the internationalization of protectionism for less developed countries.”31 For the ECLA under Prebisch, the cure for declining commodity prices—“the universal postcolonial solvent”32—was import-substituting industrialization promoted through infant industry protection (protection of relatively new industries not yet capable of competing on global markets). Let us briefly record some viewpoints of international political theory to contextualize Prebisch’s ideas. Some theorists took reflection on global interconnectedness into a neo-Marxist direction. Marx had thought capitalism a necessary step towards communism. But in his 1957 Political Economy of Growth, American economist Paul Baran saw capitalism as an obstacle to emancipating poor countries from underdevelopment.33 In light of global interdependencies developed countries would prevent the periphery from industrializing, barring orthodox Marxism’s pathway to emancipation. Baran supported state planning, following the Soviet model, to avoid capitalism altogether. So, Marx thought capitalism was a stepping stone towards communism, Prebisch was eager to integrate developing countries into a capitalism that would work for all, and Baran took capitalism to be an obstacle to genuine flourishing. In addition, more quintessential dependency theorists like Brazilian economist Celso Futado, Chilean economist Osvaldo Sunkel, and global peripatetic Andre Gunder Frank argued that capitalism not merely maintained under-development but caused it.34 This view was popular in South America and had sympathizers elsewhere, such as Kwame Nkrumah, president of newly independent Ghana and major intellectual advocate of African unity.35 Calls for more inclusion already present at Bretton Woods grew louder in time. John F. Kennedy proposed the UN declare the 1960s a “development decade.” But developing countries wanted to be in the driver’s seat. Leveraging their growing strength in the UN, a coalition of Latin American, African, and Asian countries— soon known as the Group of 77, or G77—pushed the UN to convene a conference on trade and development.36 The first was held in Geneva in 1964, the largest international event ever to that date.37 The UN turned the UN Conference on Trade and Development (UNCTAD) into a permanent body to pave the way for inclusive trade and development. UNCTAD was a turning point. It was created around the idea that economic rules should respond to enormous differences among countries, and the UN should make sure they did. An alternative forum for trade issues, UNCTAD was set up in contradistinction to both Havana Charter and GATT. “If GATT had already become the instrument of the First World,” writes one historian, “the Third World wanted its own counter.”38 UNCTAD’s first Secretary-General was

32  On Trade Justice Prebisch, who brought to bear his experience with Latin America on the crafting of general positions of developing countries. Removal of trade barriers had to be accompanied by positive measures for these countries to become competitive. Subsequently UNCTAD endeavored to extend supplementary financing, create commodity agreements, articulate tariff preferences, and advocate for more development assistance and debt relief.39 In an era of global interconnectedness, dependency, Marxist resistance, and thoughts of reparations, UNCTAD was a meeting place for all these ideas. Known as the Secretariat of the South, UNCTAD was the source of ideas that in the 1970s led to proposals for the New International Economic Order (NIEO). There was talk about such an order ever since UNCTAD’s founding. Unsurprisingly, UNCTAD was unpopular with industrialized countries, with only Australia, Canada, and New Zealand voting for the UNCTAD initiative.40 The GATT even tried to undermine its effectiveness and evolution.41

2.4  The New International Economic Order With Prebisch’s resignation in 1968, “UNCTAD’s heroic phase was over.”42 But the NIEO still lay ahead. During the 1973 “oil shock” the Organization of the Petroleum Exporting Countries (OPEC) showed that commodity exporters could disrupt markets profoundly when they withheld supply to raise world prices. Galvanized developing countries, organized around UNCTAD, made the central issue on the “North–South agenda” the creation of a commodity order in which they had more control of pricing, parallel to what OPEC did for oil.43 Negotiations regarding the NIEO were launched at the UN in 1974. Though the NIEO was widely seen as opposing Bretton Woods, many of the central ideas originated in the 1930s or 40s. But some proposals went further, influenced by postwar debates. Julius Nyerere, Tanzanian statesman, Pan-Africanist and socialist thinker, articulated a thought many in the developing world shared: “The demand for a New International Economic Order is a way of saying that the poor nations must be enabled to develop themselves according to their own interests, and to benefit from the efforts they make.”44 The power of oil brought these issues to the top of the agenda.45 On May 1, 1974, the General Assembly passed the Declaration on the Establishment of a New International Economic Order, as well as a Programme of Action on that issue. It also passed the more extensive Charter of Economic Rights and Duties of States.46 In September 1975 the Northern countries endorsed the NIEO in UN resolution 3362.47 The NIEO was a package of changes in trade, finance, and economic cooperation designed to allow Southern countries to escape dependence and poverty. Some of the proposed measures included an

Towards a New Global Deal  33 integrated approach to price supports for commodity exports whose prices were to be linked to manufactured goods; a commitment of official development aid provided by developing countries at 0.7 percent of GDP; deployment of industries to developing countries; technology transfer; and lowering of tariffs, among other measures. The Charter added rights to nationalize foreign property to support sovereignty over resources (regardless of existing provisions), as well as the right of commodity producers to form OPEC-like cartels free from interference by developed nations. The documents constitutive of the NIEO blamed dependencies and low incomes on colonialism and the neocolonialism diagnosed to be manifest in the postwar order. The Declaration pointed out that the gap between the developed and the developing countries continues to widen in a system which was established at a time when most of the developing countries did not even exist as independent States and which perpetuates inequality (Art. 1).

The instrument for exploitation used to be colonial administration. Under neocolonialism it was multilateralism and multinationals. The Programme insisted that  “all forms of foreign occupation, racial discrimination, apartheid, colonial, neocolonial and alien domination and exploitation be terminated” (Art. I.1.a). Regarding trade, the Programme asked developed countries “to make appropriate adjustments in their economies so as to facilitate the expansion and diversification of imports from developing countries and thereby permit a rational, just and equitable international division of labor” (Art. I.3.a.vii). In light of the oil crisis the Declaration pointed out that current events have brought into sharp focus the realization that [. . .] there is a close interrelationship between the prosperity of the developed countries and the growth and development of the developing countries, and that the prosperity of the international community as a whole depends upon the prosperity of its constituent parts.  (Art. 3)

But not long after the passage of the NIEO the political climate turned against state intervention at the global level. Developing-world power promoted by the oil shock evaporated. Developed countries became inward-looking, hostile (in neoliberal spirit) to aid and revisions of the prevalent order. The developing world failed to mobilize power in markets other than oil. Developing countries ­discovered their interests did not align, putting an end to any sense that the Third World could develop and act on a unified will the way the Third Estate once did. Some could succeed on their own in global capitalism. American Secretary of State Henry Kissinger deployed a divide-and-conquer strategy to undermine developing-world unity and stabilize the status quo. Many Southern countries

34  On Trade Justice had substantial credibility deficits with the North, ruled by regimes that could not speak for their people. The NIEO had been promoted by poor-country governments rather than poor people and stressed sovereignty. That only made it easier for the neoliberal reaction to take hold, with its emphasis on market competition that alone, it was alleged, could show the way to the future.48

2.5  The End of the North–South Dialogue and the Path to the WTO The 1974 Declaration ended by pointing out that this Declaration “shall be one of  the most important bases of economic relations between all peoples and all nations.” That it never was. In 1977 a different effort commenced to generate dialogue without reverting to critiques of neocolonialism and the accompanying finger-pointing that was off-putting to the North. World Bank President Robert McNamara invited former German Chancellor Willy Brandt to assemble international leaders to reflect on the failure to address the developing world’s plight. Brandt had distinguished himself by easing tensions between the Warsaw Pact and NATO. The hope was he could do for North-South cooperation what he had done for East-West. He could not. Brandt’s Independent Commission on International Development Issues was to make suggestions for the economy of the twenty-first century, largely eschewing the NIEO’s moral language in favor of a language of mutual interest. Indeed, the 1980 report of the Commission, Brandt wrote, aimed “to show that the l­egitimate self-interests of nations often merge into well-understood common interest.”49 Appeals to solidarity and international justice appear, and the moral urgency of the project is clear. But the report intended to persuade its readership that a prosperous South is in everybody’s interest. Proposals made as part of the NIEO resurfaced, though the commission insisted that much was expected of developing countries, including internal reform. Regarding trade, the report proposed a more open system to promote competition without encouraging protectionism. The North–South Commission also suggested merging GATT and UNCTAD into something like the once envisaged ITO.50 But new realities had set in when US Secretary of State Henry Kissinger dispersed the NIEO alliance, undermining prospects that developed countries could get organized under the aegis of shared interests. Ronald Reagan’s election “swept away New Deal liberalism,” such as it was, entrenching neoliberalism.51 In a 1981 interview Hayek, now that his time had come, dismissed Brandt’s recommendations as “stupid blabber” uttered in ignorance of the world’s real problems.52 Brandt himself developed doubts about the viability of a common-interests approach. In a 1988 speech he recognized that technological change decreased the

Towards a New Global Deal  35 importance of the developing world for industrialized states. Whatever prospects that approach ever had, even in the eyes of its major champion its plausibility waned quickly.53 Brandt’s report, it has been argued, “defined the extent of Atlantic liberalism, and it was its last gasp.”54 It terminated efforts to generate a New Deal for the world. Under Bill Clinton trade liberalization became the watchword of US foreign policy, which ultimately led to the creation of the WTO. The 1980s were generally considered a lost decade for development. “UNCTAD was defanged,” Mazower writes, “with the appointment of a Washingtonfriendly Secretary-General in 1984, and turned into a harmless accessory to the ­extraordinary transformation of capitalism” under Reagan and his successors.55 By the early 1990s, Vijay Prashad insists, “UNCTAD would blur its vision into that of the GATT,” and “the Secretariat of the South capitulated.”56 Since the 1980s, UNCTAD has focused on providing data and statistics as well as technical assistance. Its Trade and Development Report remains “the main UN source of regular analysis of the international economy that stands apart from the platitudes of the neoliberal consensus.”57 But UNCTAD ceased to be a negotiation forum. At the same time, the GATT’s agenda increasingly included topics of deeper harmonization such as differences in regulations of goods and services, investor and intellectual property protection, and government procurement. It was less  and less appealing for the North to let the South play a marginal but unregulated role. In what might seem like a cruel turn of events, a decade after the NIEO called for technology transfer, Northern businesses demanded ­protection of ­technological and scientific advantage, for instance by outlawing reverse engineering through patenting of products rather than processes. Northern service providers wanted safeguards to project their reach into the rest of the world. The last trade round under the GATT’s auspices, the Uruguay Round, resulted in the Marrakesh Agreement to establish the WTO as the GATT’s replacement as  of 1995.58 The Marrakesh Agreement involved what is often referred to as a “grand bargain.” Developing countries had to take the WTO treaty as a package (a “single undertaking”), without being able to reserve the possibility to opt out of particular provisions (including new commitments in areas such as intellectual property). In return, developed countries would put agriculture as well as clothing and textiles on the agenda, to find solutions amenable to the developing world (which often had a comparative advantage in those areas). Despite the lack of implementation on the developed-countries’ side of the bargain, particularly in agriculture, new trade negotiations were launched in Doha in 2001. So far, the WTO has not been used to channel political and economic power to create an economic order characterized by genuine reciprocity (a theme we develop later). Over decades, trade governance generated asymmetrical bargains favoring developed over developing countries, in spite of sustained efforts of the latter to get a better global deal.

36  On Trade Justice

2.6  Philosophical Reactions Throughout the twentieth century many non-Western and non-white thinkers—as well as Westerners outside the mainstream—have reflected on how the Global South could fit in with the global capitalism that increasingly prevailed, emanating from Europe and later the US. We have mentioned several of them, such as Sun, Prebisch, Fanon, Nyerere, Baran, Gunder Frank, and others. Marxist thinking played an outsized role. For much of the twentieth and into the twenty-first century, Marxists have ruled large parts of the world, resisting the Pax Americana. Mainstream liberalism was slow to articulate sophisticated thinking for the late twentieth century with its societal complexities and interdependencies. When such work appeared, liberals radicalized the political stances to which they were lending philosophical voices so much that they remained detached from activism. In 1971, Rawls published A Theory of Justice, the central work of liberal egalitarianism.59 Rawls saw society as dwelling on a basic structure of institutions within which intense cooperation generated a range of what he called social primary goods, including income and wealth but also opportunities, powers, rights, and liberties. These goods capture what societies do together. Accordingly, demanding standards apply to how institutions ought to be arranged that determine how these goods end up being distributed. Political and civil liberties ought to have a fair value for all citizens. That is, people of similar talents and ­motivation should have the same possibilities to influence agendas. Education should be arranged such that positions of influence and power are open to all, again giving those with similar abilities and motivation equal chances. Generally, inequalities are to be arranged to maximize prospects of those who benefit least from the organizational patterns chosen (compared to how the respectively least-advantaged would fare under different arrangements). Only a few years later, Charles Beitz globalized Rawls’s theory.60 Rawls’s basic structure, Beitz submitted, was a global structure in light of political and economic interdependencies. Rawls’s far-reaching ideas had to be applied globally, rather than to one state at a time. Ideas that had animated the NIEO were recast within a globalized Rawlsian framework. Beitz articulated the novelty of applying the distributive-justice paradigm globally, noting that beforehand “the only problem in international relations to have gained significant theoretical attention is the justification and prevention of war.”61 Contrary to the NIEO, Beitz’s framework was populated by individuals rather than countries. Much as Rawls radicalized the ideas behind the New Deal, Beitz radicalized the ideas behind the NIEO, the most drastic proposal yet produced for a New Deal for the world. When Beitz’s book appeared, the NIEO was foundering. Mainstream liberalism turned global exactly when the sun of global activism was setting. Beitz found few followers among philosophers over the next decade and a half. Global justice inquiry remained scarce until the 1990s, when it became a major preoccupation.

Towards a New Global Deal  37 To the extent that Beitz continues to shape philosophical discussions about global justice, that discussion in a way is a response to the NIEO, which itself, however, is barely known among philosophers working on these topics.62 In Martha Nussbaum’s 2007 Frontiers of Justice, global justice is such a frontier, as if ­philosophers had just stumbled upon the subject.63 This exemplifies the delayed engagement among Western liberal philosophers with dominant themes that had so greatly agitated postwar activists and thinkers outside of that liberal tradition. When global justice entered philosophy at a large scale, much path-breaking work instantly went far, too far in fact, viewed from the standpoint we develop. In its efforts to recognize the importance for distributive justice of global interconnectedness and common humanity, such work has not properly recognized anything that is not global but must also get its due as we consider what any person’s proper share in the accomplishments of humanity would be.64 Beitz had insisted that the notion of basic structure was misapplied if limited to one country. Later Simon Caney insisted justice did not apply on the basis of economic and social structures but in virtue of a common humanity.65 Like Beitz, Caney denied states played any fundamental role for the applicability of justice. Another seminal contributor to the global justice literature, Thomas Pogge, much advanced the field, especially by making clear that philosophical reflection must heed the social sciences to obtain an appropriate understanding of what transnational political and economic spaces look like. He also insisted that once an appropriate understanding was in place we could readily see that the global order as such was unjust by keeping much misery in place even though alternatives were available.66 But Pogge did not take his own insistence on the importance of social-science inquiry seriously enough and offered misguided arguments about how the global order as such was geared towards maintaining massive injustices inflicted by the global rich on the poor.67 In recent times big-picture thinking has given way to more issue-specific investigations, on subjects such as immigration, climate change, human rights, or indeed trade. One feature of Beitz’s work was that, since he talked about global justice by way of moving Rawls to the global arena, he also transferred the level of abstraction Rawls had brought to the domestic domain to the global domain. Trade was subsumed under activities occurring in the global basic structure. It would only be in the early years of this century that philosophers paid sustained attention to trade as such.68

2.7 Conclusion Peter Singer once insisted it was impossible to prove trade had made the rich richer and the poor poorer.69 Nonetheless he offered much critical reflection on the trading system. In such a spirit, by way of concluding we wish to emphasize

38  On Trade Justice that there are many questions about why the world has turned out the way it has that draw on counterfactuals we cannot assess. But we can safely say that there have been a number of occasions in the postwar era where more sustained efforts to put trade to work for the poor readily could have been made. In terminology we develop later, multiple opportunities were missed to create an order in which power would be deployed to maintain standards of genuine reciprocity. Instead, power was used to undermine such efforts, and so was deployed exploitatively. Ideas about a New Deal for the world have been floating around since the American New Deal. The global version was a mere shadow of what the New Deal was once meant to be for the US and fell short of visions that took i­ nspiration from national welfare states. But once its intended beneficiaries became assertive, power struggles resulted that were always settled in ways favoring the rich. In the 1970s, developing countries took a unified stance for the NIEO. Decades later these efforts are all but forgotten. Developing countries have parted ways. They no longer see themselves as a group with shared interests that deserve better standing in the global order. UNCTAD rightly pointed out in a 2011 report that: the postwar global deal was never completed in areas of particular interest to developing countries, and the flexibilities allowed to countries were often established on an ad hoc basis rather than as a formal part of the rules themselves.70

The grounds-of-justice approach from Chapter 1 picks up on several elements we encountered in our survey of New Deal and postwar activism. The New Deal articulated the need for sophisticated institutions, nationally and internationally, to secure benefits from cooperation. Advocates for developing countries repeatedly insisted on greater inclusion in global governance, especially trade governance. NIEO advocates focused on states and adopted prescriptions from dependency theory. But one does not need to share these views to agree with their insistence on stronger inclusion of developing countries into the global economy. And one does not need to support the most ambitious, welfare-world ­interpretations of a New Deal for the world to hold that no philosophically and humanely satisfactory deal of that sort has yet been realized. The grounds-of-justice approach articulates a complex understanding of distributive justice at the global level, where states play an important role but other matters too are captured as concerns of justice, including trade. Our view does not itself offer economic prescriptions. But we submit the grounds-of-justice approach in general and the Trade-As-One-Ground view of trade justice in particular as a philosophical plea for a New Global Deal, a better one than there has been so far: a just deal. This chapter has created the historical context before which to understand our plea. In spite of all the failures of implementing a New

Towards a New Global Deal  39 Deal for the world so far, there is enough wealth, and there are enough good ideas around, for there to be a point to such a plea.

Notes 1. The ways in which the world did so can be spelled out both historically in terms of the human–web approach and sociologically in terms of the world-society approach; see McNeill and McNeill, The Human Web; Krücken and Drori, World Society. 2. Mazower, Governing the World, 39. Mazower offers a helpful account of the last 200 years of efforts at global coordination. See also United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 2014, chapter 4. 3. For Marx’s speech on free trade given in Brussels in 1848, see Marx, Karl Marx, 295–6. The theme also appears in German Ideology, see Marx, 175–208. See also Mazower, Governing the World, 55. 4. Aaronson, Trade and the American Dream, chapter  1. Hull later became Roosevelt’s ­secretary of state and was much involved with the establishment of the UN. For him, enlarging trade and lowering trade barriers were life-long priorities. 5. Keynes, The Economic Consequences of the Peace, chapter VII.24. 6. Helleiner, Forgotten Foundations of Bretton Woods, 186–200. For Sun Yat-sen, see Sun, The International Development of China. 7. Borgwardt, A New Deal for the World, 304. 8. (1) The literature on the New Deal is voluminous; for a recent take, see Katznelson, Fear Itself. For the global dimensions, see Borgwardt, A New Deal for the World; Patel, The New Deal. See also Mazower, Governing the World, chapter  10; Frieden, Global Capitalism, chapters 10, 11. Borgwardt and Katznelson understand “New Deal” as covering the period of Democratic presidencies until Eisenhower. Regarding the “four freedoms” in the US and the world at large, see Engel, The Four Freedoms. Instead of a New Deal for the world, John Ruggie talked about the “embedded liberalism ­compromise.” As he explains, “unlike the economic nationalism of the thirties, it would be multilateral in character; unlike the liberalism of the gold standard and free trade, its multilateralism would be predicated upon domestic interventionism;” Ruggie, “International Regimes, Transactions, and Change,” 209. The point that freedom from fear and want depend on domestic and international context was already developed in Kant’s Perpetual Peace. (2)  Mazower explores how postwar international-relations realists worried about the naivete of technocratic dreams and universal reason; Mazower, Governing the World, 238–40. The primary example is Morgenthau, Politics among Nations. One response is to charter a middle course between realists and their opponents. For instance, John Herz argued for a “realistic liberalism” according to which even in a state system collective security, values, and international law play a role; see Herz, Political Realism and Political Idealism. Later, Robert Keohane and Joseph Nye theorized the increasing global interdependence; see Keohane and Nye, Power and Interdependence. In economics, in the late 1960s Richard Cooper argued that interconnectedness curtailed effective national economic policy; see Cooper, Economics of Interdependence. Later, in sociology some leading figures began to use terms like “world society,” “world polity,” “world

40  On Trade Justice system,” or “global culture.” John Meyer is one example, see Krücken and Drori, World Society. For these themes, see also Sargent, A Superpower Transformed, 167–70. 9. On Wallace, see Culver and Hyde, American Dreamer. For this episode, see Culver and Hyde, 347. For comparative assessments of the New Deal, see Schivelbusch, Three New Deals; Patel, The New Deal. On the turn away from more egalitarian ideals as the New Deal went on, see Brinkley, The End of Reform. 10. Mazower, Governing the World, chapter 7. 11. Murphy, The Emergence of the NIEO Ideology, 125. 12. Borgwardt, A New Deal for the World, 252. 13. On the Bretton Woods system, see Eichengreen and Kenen, “Managing the World Economy Under the Bretton Woods System: An Overview.” See also Borgwardt, A New Deal for the World, chapter 3. Ikenberry discusses the Bretton Woods system guided by questions of how ideas can change the world. His point is that a particular moment provided a transatlantic group of economists and policy specialists with an opportunity to shape various governments’ views of what the national interest was and how to pursue it; see Ikenberry, “Creating Yesterday’s New World Order: Keynesian ‘New Thinking’ and the Anglo-American Postwar Settlement.” For the postwar trading system, see also World Trade Organization (WTO), World Trade Report 2013. 14. For this view on the Bretton Woods negotiations as involving developing countries more than is often thought, see Helleiner, Forgotten Foundations of Bretton Woods. For a competing view that captures the more common understanding of Bretton Woods as marginalizing others, see Steil, The Battle of Bretton Woods. Jawara and Kwa use Bretton Woods as an ongoing reference point for criticizing the negotiations during the Doha Ministerial in November 2001. Their point is that not much has changed; see Jawara and Kwa, Behind the Scenes at the WTO. If Helleiner is right they are wrong: things have gotten worse. 15. Mazower, Governing the World, 213. 16. Toye and Toye, The UN and Global Political Economy, 2. See Wolf-Phillips, “Why ‘Third World’?” 17. For the UN, see Mazower, Governing the World, chapters 10–11; Toye and Toye, The UN and Global Political Economy. For economic discussions at the UN, see Rahman, World Economic Issues at the United Nations. South Africa under Jan Smuts supported both the League of Nations and later the UN. It did so largely to make sure peripheral white countries had their share; Mazower, No Enchanted Palace, chapter  1. South Africa was bitterly attacked by newly independent countries because of its treatment of non-whites. This is one illustration of the new dynamics. 18. For the link between free trade and international organization, see Toye, “The International Trade Organization”; Toye, “Developing Multilateralism: The Havana Charter and the Fight for the International Trade Organization, 1947–1948.” For why the ITO was rejected, see Aaronson, Trade and the American Dream. See also Zeiler, Free Trade, Free World. For a view of the Charter articulated by the deputy chair of the US delegation, see Wilcox, A Charter for World Trade. For the “unholy alliance” ­explanation, see Diebold, The End of the ITO. 19. For the treaty, see https://www.wto.org/english/docs_e/legal_e/gatt47_e.doc, last accessed December 14, 2018.

Towards a New Global Deal  41 20. Toye, UNCTAD at 50, 3. 21. Zeiler, Free Trade, Free World, 199. 22. For an overview of trade history, see World Trade Organization (WTO), World Trade Report 2013, chapter II.B. The point about de-industrialization appears on p 55. For the view that poverty was constructed, see also Lines, Making Poverty. 23. Fanon, The Wretched of the Earth, 98. 24. Fanon, 102. 25. Fanon, 313. 26. For the reparations argument during this time, see Murphy, The Emergence of the NIEO Ideology, 82–3. 27. On Prebisch, see Dosman, The Life and Times of Raúl Prebisch, 1901–1986. For Prebisch’s impact, see also Frieden, Global Capitalism, chapter 13. 28. Myrdal, An International Economy, Problems and Prospects; Myrdal, Rich Lands and Poor. The quote (fully italicized in the original) is from Myrdal, An International Economy, Problems and Prospect., 324. 29. For Hayek see his iconic The Road to Serfdom. Internationally neoliberal thinkers organized in the Mont Pèlerin Society founded in 1947. It was mostly with the ­political changes in the early 1980s that these ideas became effective domestically and globally. See Mirowski and Plehwe, The Road from Mont Pèlerin. On neoliberalism and its intellectual context, see also Harvey, A Brief History of Neoliberalism; Phillips-Fein, Invisible Hands; Plehwe, “The Origins of the Neoliberal Economic Development Discourse.” 30. Dymond, A Recent History of Recognized Economic Thought, 79. 31. Arndt, Economic Development, 81–2. 32. Frieden, Global Capitalism, 312. Whether developing countries at this stage should and could have done something else remained debated. Development economist T. M. Srinivasan, for one, writes: “Instead of demanding and receiving crumbs from the rich man’s table [. . .], had they participated fully, vigorously, and on equal terms with the developed nations in the GATT and had they adopted an outward-oriented development strategy, they would have achieved far faster and better growth”; Srinivasan, Developing Countries and the Multilateral Trading System, 27. The success of East-Asian countries proves this, he submits, whereas other countries had been obsessed with import substitution. But see Stiglitz, The Price of Inequality, 17–22. On success stories using export-oriented industrialization, see Frieden, Global Capitalism, chapter 18. For a warning not to oversimplify the range of ideas articulated by developing countries, see Scott, “Developing Countries in the ITO and GATT Negotiations.” Scott argues there is a subsequent tendency to overstate developing countries’ insistence on import-substituting industrialization to blame them for their failure. 33. Baran, The Political Economy of Growth. 34. Frank, The Underdevelopment of Development; Frank, Capitalism and Underdevelopment in Latin America. 35. Nkrumah, Neo-Colonialism: The Last Stage of Imperialism. See also Biney, The Political and Social Thought of Kwame Nkrumah, chapter 8. 36. Murphy, The Emergence of the NIEO Ideology, chapter 2. For the G77 see Williams, Third World Cooperation. Generally for institutions of the Global South, see BraveboyWagner, Institutions of the Global South.

42  On Trade Justice 37. Dosman, The Life and Times of Raúl Prebisch, 1901–1986, 398. 38. Prashad, The Darker Nations, 70. 39. On UNCTAD see Toye, UNCTAD at 50; Prashad, The Darker Nations, 62–74; Arndt, Economic Development, chapter 3. For UNCTAD within the UN, see Toye and Toye, The UN and Global Political Economy. For Prebisch, see Dosman, The Life and Times of Raúl Prebisch, 1901–1986, chapter 17. 40. Dosman, The Life and Times of Raúl Prebisch, 1901–1986, 383. See also Rothstein, Global Bargaining. 41. Dosman, The Life and Times of Raúl Prebisch, 1901–1986, 421–4. 42. Dosman, 441. 43. On OPEC, see Prashad, The Darker Nations, 176–90; Frieden, Global Capitalism, chapter 16. As Arndt put it, whereas an earlier goal was the internationalization of the welfare state or of protection, demands for the NIEO amounted to the internationalization of class conflict; Arndt, Economic Development, 140. 44. As quoted in Murphy, The Emergence of the NIEO Ideology, 1. 45. On the NIEO, see Murphy, The Emergence of the NIEO Ideology; Gilman, “The New International Economic Order: A Reintroduction”; McFarland, “The New International Economic Order, Interdependence, and Globalization.” See also Looney, “New International Economic Order”; Rahman, World Economic Issues at the United Nations, chapter  8. For the debate as seen at the time, see Bhagwati, The New International Economic Order. 46. For the former, see http://www.un-documents.net/s6r3201.htm, last accessed December 14, 2018; for the latter, see http://www.un-documents.net/a29r3281.htm, last accessed December 14, 2018. 47. http://www.un-documents.net/s7r3362.htm, last accessed December 14, 2018. 48. On the lack of cohesion in the developing world, see Prashad, The Darker Nations, 207–23. On the US, see Sargent, A Superpower Transformed, 175–82. For neoliberal responses to the NIEO, see Bair, “Taking Aim at the New International Economic Order.” For the argument that the NIEO failed because developed countries wanted it to fail, see Salomon, “From NIEO to Now and the Unfinishable Story of Economic Justice.” 49. Independent Commission on International Development Issues, North–South, a Programme for Survival, 25. 50. Independent Commission on International Development Issues, 288. 51. Dosman, The Life and Times of Raúl Prebisch, 1901–1986, 483. A meeting in Cancun in 1981 “turned out to be the last hurrah for the high-profile North–South meetings so prominent during the 1960s and 1970s”; Preeg, Traders in a Brave New World: The Uruguay Round and the Future of the International Trading System, 19. 52. “Ungleichheit ist nötig,” Wirtschaftswoche, March 6, 1981, cited in Schmidt, “Ein Modell für ‘Global Governance’? Die Vorschläge der Nord–Süd Kommission 1977–1983,” 260. 53. Brandt, Willy Brandt—Über Europa hinaus, 8:456–61. 54. Prashad, The Poorer Nations, 16. For the Brandt report, see pp. 66–76. See also Toye and Toye, The UN and Global Political Economy, chapter 11. 55. Mazower, Governing the World, 317. 56. Prashad, The Poorer Nations, 115.

Towards a New Global Deal  43 57. Toye and Toye, The UN and Global Political Economy, 273. For a short but informative discussion of the North–South divide, see Weiss, What’s Wrong with the United Nations and How to Fix It, chapter 6. 58. For the Uruguay round, see Preeg, Traders in a Brave New World: The Uruguay Round and the Future of the International Trading System. 59. Rawls, A Theory of Justice. 60. Beitz, Political Theory and International Relations. 61. Beitz, 3. Beitz prefaces the part of this book called “International Distributive Justice” with a short excerpt from the Declaration on the Establishment of a New International Economic Order, Beitz, 126. 62. Moyn, “The Political Origins of Global Justice.” 63. Nussbaum, Frontiers of Justice. 64. For a contrast, think of the theory of grounds of justice presented in Chapter 1, which draws on Risse, On Global Justice. We develop that approach in greater detail in Chapter 4. 65. Caney, Justice Beyond Borders. 66. Pogge, World Poverty and Human Rights. 67. Cohen, “Philosophy, Social Science, Global Poverty”; Risse, “How Does the Global Order Harm the Poor?”; Risse, “Do We Owe the Global Poor Assistance or Rectification?” 68. Pioneering pieces were Risse, “Fairness in Trade I”; Kurjanska and Risse, “Fairness in Trade II.” As far as books on trade in the analytical tradition of political philosophy are concerned, the pioneer is James, Fairness in Practice. 69. Singer, One World, 91. 70. United Nations Conference on Trade and Development (UNCTAD), Report of the Secretary-General of UNCTAD to UNCTAD XIII, 68.

3

Images of Trade 3.1  Four Views on the Moral Ontology of Trade Norms that should apply to trade depend on how we describe which actors matter for trading and how they do. We capture that thought in terms of the “moral ontology” of trade. The moral ontology of domain D is a description of D  that reveals what aspects of D matter, in what ways, for identifying moral principles applicable to D. Its moral ontology also illuminates how justice bears on trade. An “image” of trade is a view of the domain of trade that captures its moral ontology. As with any complex domain, several images are available. They differ in how they explain the ways in which justice enters into assessments of trade. Talk of “images” should be intuitive: they capture various ways of “looking at” trade that stress what is considered morally relevant about it.1 Four images have gained standing in philosophical reflection. First of all, there is the view that trade is interaction among a myriad of participating individuals, consenting adults making deals. One implication is often taken to be that there is little space for moral considerations to bear on trade. Considerations of justice enter at most to rectify wrongful starting points or market failures. This image— we call it Amoral Trade—is held by many economists and is strongly present in public life. It is also held by philosophical libertarians. A second view holds that trade matters morally only in terms of advancing other goals. Its moral evaluation should be done accordingly. Consequentialists view trade this way. They define rightness in terms of pursuit of certain consequences, and trade comes up for moral evaluation in terms of how it advances that pursuit. This view too is held by many economists, as well as by utilitarian philosophers. John Stuart Mill, pioneer of both utilitarianism and classical economics, represents such an approach. An instrumental view also captures the spirit of global egalitarianism as defended by Simon Caney. The distribution of gains from trade is assessed in terms of how it advances or captures an egalitarian distributive ideal.2 We call this image Instrumental Trade. Instrumental Trade accommodates a range of views of what trade is supposed to be instrumental to. But most commonly, this view appears in its utilitarian or global-egalitarian versions. The third view is that trade is an affair of states that should divide up the surplus thus generated. According to this Structural Equity view, gains from trading are a joint product to which participating states have equal claims, except that each may set aside what it could obtain in autarky. Aaron James prominently defends On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Images of Trade  45 this image. Unlike Amoral Trade and Instrumental Trade, Structural Equity holds that trading itself generates moral obligations.3 Finally, there is our view that trade is one ground of justice in its own right and involves a multiplicity of actors. Trade-As-One-Ground agrees with Structural Equity that trade itself comes up for evaluation in terms of justice. But our view does not bestow the same prominence upon states. Also, Trade-As-One-Ground does not assess obligations from trade in terms of dividing up a surplus, but in terms of nonexploitative conduct. Our view understands trade as one ground among several and so highlights questions about how trade interacts with other grounds.4 By developing our view by way of contrast with competing images we follow Rawls’s strategy in A Theory of Justice: we do not abstractly look at how to conceptualize trade, but consider a short list of alternatives.5 Or rather, we consider a short list of families of contenders bundled in terms of moral ontology. One disadvantage is that the family resemblance that allows us to group views together in terms of how they view trade is consistent with substantial differences within such families that pertain to matters other than trade. This chapter discusses Amoral Trade, Instrumental Trade, and Structural Equity. We then reach TradeAs-One-Ground, which Chapter 4 develops systematically.6

3.2  Amoral Trade Amoral Trade views trade as a large set of individual transactions. That fact is taken to limit the space for moral considerations to bear on market transactions. Trade occurs within the market system, which coordinates activities through interactions between buyers and sellers. So let us briefly review the general rationale of markets, which has been taken up in different ways by defenders of Amoral Trade and Instrumental Trade. Markets enable each person to choose from a range of ways to lead her life. But such choices divert resources from others. People must decide in light of such costs what they want most. In the early days of industrialization, Adam Smith made the case for markets in his Wealth of Nations.7 In Enlightenment spirit, Smith praised the soundness of ordinary people’s judgment and believed its quality should be harnessed for society. Division of labor is key to economic progress, and is put to better use through industrialization. Competition makes people do things better, which benefits society enormously. Smith saw trade as mutually beneficial to all parties involved.8 With such support for markets in place, trade theory teaches that each nation should produce goods for which it has a comparative advantage and use some of them to procure other goods. Economists have argued since David Ricardo’s 1817 Principles of Political Economy that barriers like tariffs and quotas obstruct mutually beneficial transactions. Countries are advised to undo them, even ­unilaterally.

46  On Trade Justice If country A is better at producing cheese than wine, it should obtain wine by trading cheese. If the reverse is true for B, B should trade wine for cheese. A can have a comparative advantage in cheese and B in wine, even if A is better at producing both. Trade allows A and B to concentrate on what they do best, and obtain other things by trading them in exchange for what they are best at providing (“best” compared to how good they themselves are at providing other things).9 The defense of markets and the argument from comparative advantage in support of free trade are pillars of neoclassical economics.10 Neoclassical economists see individuals as autonomous producers and consumers. They believe that in both roles individuals aim to maximize satisfaction. Individuals do so in mutually beneficial exchanges. Prices are determined by costs of material and labor needed for production, but perception of value also affects demand for a good and thereby the price. Competition is central. Everyone makes decisions based on fully informed utility assessments. Actors work for themselves, experiencing neither coercion nor intrusive government. In light of its underlying view of agency it is unsurprising that some have interpreted neoclassical economics as inimical to efforts to subject trade to ­considerations of justice other than to make sure background conditions are right for individuals to perform the roles envisaged for them. In any case, moral ontology is a normative enterprise. This market-based system is one way of offering such an ontology (especially) of trade. The comparative-advantage argument is simple and powerful. It creates a strong presumption for free trade. In some scenarios competing considerations might overrule the presumption, as claimed for instance by “infant-industry” arguments that insist nascent industries should be protected against market entry of foreign competitors. But unless such conditions apply a country should open its markets even if not all countries open theirs. Individuals and companies have good reason to trade, and states have good reason to let them. Considerations of fairness or justice barely get started. We now offer three reasons to reject Amoral Trade. First of all, this image neglects underlying international practices that must be presupposed to make such reasoning successful. Countries can unilaterally open or close borders. As the saying goes, one state’s hampering trade by blocking its harbors gives nobody else a reason to do so. But one country opening its borders makes trade possible only if some others also do so. Otherwise there is nobody to trade with. Accordingly, James considers Amoral Trade “revisionist” for omitting the fundamental role of states in maintaining trade.11 Not only does trade require partners, it also requires mutual guarantees that markets function over time. There needs to be what James calls international market reliance practices to ensure ships are not hijacked or burned in foreign harbors, companies know they get paid, and it makes sense to invest because there continue to be markets. These practices do not merely contribute to but constitute trade. Therefore, we ought to arrange these practices so they are acceptable to all participants.

Images of Trade  47 Secondly, we have not yet identified a satisfactory trade system once we see the efficiency advantages of trade at the level of whole countries. Country A might benefit only at the expense of parts of its population, with many more modest winners than devastated losers. The sheer fact that A benefits overall is insufficient to make free trade morally advisable. To address such issues, economists talk about the Kaldor–Hicks compensation criterion, which is satisfied if gains are large enough for there to be a compensation scheme from winners to losers that would make no one worse off and at least some people better off.12 But numerical possibility of redistribution is one thing, political practicality another. People tend to assume their own income is earned. They do not see accomplishments as enabled by a system put in place by political choices that can be made differently and thereby create different winners and losers.13 Still, actual redistribution may well be necessary to justify the system that has been chosen. It takes moral argument to determine whether it is, contrary to Amoral Trade. But once we see how reflection on domestic distribution bears on the rationale for free trade, it is natural also to think about distribution internationally. After all, trade is generated by shared practices that, much like domestic economies, could be arranged in various ways that generate different winners and losers. Moral argument enters to assess why certain norms are preferable to alternatives. The third reason for rejecting Amoral Trade recurs to our discussion in Chapter 1 of how trade has made the world all along. Steamships, railroads, and telegraphs unified and streamlined the global web of cooperation. The Industrial Revolution gave the last push for military, economic, and cultural penetration in nineteenth-century imperialism and became a cause of inequalities in wealth and power that have shaped the world after 1800. “Today,” historians McNeill and McNeill summarize, “although people experience it in vastly different ways, ­everyone lives inside a single global web, a unitary maelstrom of cooperation and competition.”14 The sheer importance of trade for the development of humanity makes it implausible that trade would not be subject to moral consideration. Trade is inevitably regulated one way or another, nationally and internationally, and generates different beneficiaries depending on just how that is done.15

3.3  Instrumental Trade According to the second image, trade is morally relevant only to the extent that it supports other goals. Trade as such does not generate moral obligations. Instrumental Trade covers a range of views, depending on what those goals are. Utilitarianism is covered, as is global egalitarianism. We are bundling views that are vastly different but have a family resemblance in terms of how they integrate trade. For utilitarians the goal promoted by trade is general well-being. For global egalitarians, it is some kind of global equality.

48  On Trade Justice No philosopher of similar rank has had more to say about trade than John Stuart Mill.16 Also a contributor to classical economics, Mill regarded trade a tool to advance well-being in a world of states, a tool with many indirect benefits. Market extensions improve production processes, and people work harder since trade offers possibilities not envisaged before. There are also “intellectual and moral” benefits that surpass the economic advantages. Trade facilitates the spread of ideas and practices, bringing people together and promoting peace.17 But with praise given where it is due, we now offer a general objection to Instrumental Trade. Even though Mill argues utilitarianism says everything worth saying about justice, the matter remains contentious.18 Our objection exposes principled difficulties of any variant of Instrumental Trade to illuminate trade justice. To set the stage, we distinguish relationist from nonrelationist views of ­distributive justice. We first argue that Instrumental Trade is implausible on a relationist understanding (owing to the significance of trade for human purposes), and then that relationism is per se more plausible than nonrelationism.19 Relationists think principles of justice only hold among persons who stand in some essentially practice-mediated relation. Nonrelationists think such principles may apply among those who stand in no such relation. A reference to practices keeps nonrelationism from collapsing into relationism. The relation of “being within 1000 km of each other” is not essentially practice-mediated, nor is, more relevantly, that of “being a fellow human.” We talk about “essentially” practicemediated relations since there may be practices associated especially with this latter relation that are dispensable to understanding its content. Paradigmatic nonrelationists base the applicability of principles of justice on shared humanity. Relationists base them on shared political structures. Globalists are relationists who think the relevant structures are global. Statists limit them to states (demands of justice apply one state at a time). For nonrelationists, justice is a property of the distribution of advantage. While for relationists individuals stand in a justice relationship if they have special claims within particular practices, for nonrelationists that relationship is distinguished by the absence of special claims. As formulated so far, relationism and nonrelationism presuppose a single ground of justice. However, our image, Trade-As-One-Ground, embeds trade as a ground into a pluralistic understanding of global justice. That is, there are multiple grounds of justice. The version of the multiple-grounds view in Risse’s On Global Justice, pluralist internationalism, recognizes both relational and nonrelational grounds. To present our argument against Instrumental Trade in a manner cognizant of pluralist internationalism we contrast nonrelationism with inclusive relationism, which holds that some grounds are relational. Nonrelationism holds there are no relational grounds. So inclusive relationism is the logical opposite of nonrelationism (either inclusive relationism or nonrelationism is true, not both). Inclusive relationism collapses into relationism as originally formulated if there is only one ground.

Images of Trade  49 In a nutshell, our objection is this: either Instrumental Trade draws on ­ onrelationism and thereby neglects the relevance of relations for justice to begin n with; or else it draws on an inclusive-relationist understanding and misses the significance of trade for the development of humankind. Within inclusive relationism, one must ask if trade is a ground of justice at all (thus one kind of context or relationship up for evaluation in terms of justice); and if so, how it should relate to other grounds. For present purposes, we merely need to show there is good reason to think trade is a ground. That in fact is the response to Instrumental Trade. In light of the importance of trade for the development of humanity, one cannot plausibly deny that trade constitutes such a ground.20 One might object that recognizing trade as a ground within an inclusiverelationist picture is consistent with Instrumental Trade, as follows. Inclusive relationists could admit trade is a ground but insist there are other over-arching grounds such that the requirements pertaining to trade per se are always overridden. Trade would be instrumental to that aim. Defenders could enlist our discussion of trade’s historical relevance to argue that trade is the prime instrument to achieve cosmopolitan justice. So it is false that, in response to Instrumental Trade, we merely need to show that it is plausible to think trade would be a ground to begin with; instead, how trade should relate to other grounds becomes immediately relevant for settling whether inclusive relationism and Instrumental Trade are compatible. But inclusive relationism and Instrumental Trade are not compatible in the way this objection suggests. Instrumental Trade holds trade matters morally only insofar as it advances other goals. But the original argument and the objection agree that trade should be treated as a ground of justice. Once relational grounds are available within a theory of global justice, the importance of trade (and that it constitutes a relationship) implies that it must be treated as such a ground. But then the instrumental stance becomes unavailable. What it means to treat trade as a relational ground is to recognize that those engaged in trade are subject to ­principles of distributive justice that apply within that relationship. Therefore the moral significance of trade cannot lie exclusively in its advancement of other goals. What might motivate the objection are various bits of equivocation. Certain relationships might be largely instrumental in nature, such as relationships between employers and employees. Moreover, somebody who sees trade as a ground can acknowledge that trade should advance well-being. But once trade is acknowledged as a ground, neither point implies that its moral significance is exhausted by instrumental connections. But suppose, the objector replies, somebody believes there are norms of justice internal to trading, and recognizes trade as a ground. She also believes in some cosmopolitan goal associated with common humanity as a ground. Achieving the requirements associated with common humanity comes at the cost of violating

50  On Trade Justice the internal norms. She believes norms relating to common humanity trump internal norms. In that sense trade is primarily an instrument. Our response above seems to imply this reasoning involves a mistake. But what mistake? According to our terminology this objector does not reply on behalf of Instrumental Trade. She concedes trade does not matter morally merely because of how it advances other goals. Instead, the objection is best understood as articulating the priority of concerns based on one ground of justice over those based on another, for some or all agents, whenever there are conflicting demands. So this objector brings up issues arising within our Trade-As-One-Ground: how to balance concerns of trade justice with other concerns of justice. This is one of our topics in Chapter 9. With that point made about the place of trade within inclusive-relationist views of distributive justice, why should one think that inclusive relationism captures the right view of distributive justice? There are two strategies to rebut nonrelationism. To begin with, it is hard to demonstrate the applicability of duties in the first place, especially duties of justice. Arguing that somebody ought to do X is to make the strong claim that he has a reason for doing X that is conclusive against most reasons (except those that themselves capture duties). Within relations in which individuals stand it is easier to grasp how duties surpass a basic level. Arguments in support of natural rights and duties of justice depend on natural attributes of persons and facts about the non-human world, and must be acceptable to all reasonable people. We need reasons why others ought to do, or provide, what is significant to the recipient. Nonrelationists can most readily meet that challenge if they focus on rights and duties pertaining to elementary human concerns, such as basic needs satisfaction. Relationists are better equipped to make such a case (for the applicability of any kind of duty). Relationists invoke derivations of transactional and ­associational duties. Such derivations use claims about persons having undergone certain transactions (e.g., promises, contracts), or about them living in certain associations that put demands on those involved. Associations can normally be organized in various ways. For a given arrangement to be justifiable to all, everybody must be granted certain entitlements.21 The second strategy is that human beings have reason to value relations, a fact that bears on the applicability of justice.22 Relations create responsibilities because having reason to value relations non-instrumentally just is to have reasons to see oneself under, and have, special obligations. Skepticism about such r­ esponsibilities succeeds only if we have no reason to value our relations non-instrumentally. That we have such reasons is straightforward for family and friendships, but perhaps less clear for political relations such as citizenship. Citizenship often seems to have less day-to-day relevance than family or friendships. But that is only because we easily forget the value of citizenship if police abuse, manipulated ­trials, or silencing of media is rare and exceptional. For much of history this has

Images of Trade  51 not been so anywhere. Much of the time, it continues not to be so in many places, and some of the time it continues not to be so almost everywhere. In valuing a status like citizenship, instrumental and non-instrumental aspects are intertwined. So this second strategy is not limited to personal ties but includes political relationships. For the reasons captured by these two strategies, inclusive relationism is more plausible than nonrelationism as a view of justice. If so, the earlier discussion about the significance of trade for human life shows that trade should be treated as a ground in its own right. Instrumental Trade is misguided. It is misguided in its consequentialist manifestation. Consequentialists cannot make sense of relationships the way we have suggested they should.23 It is also misguided in its global-egalitarian manifestation to the extent that it is based on a rejection of the relevance of relationships from the standpoint of justice, as for instance nonrelationism (e.g., global luck-egalitarianism) is. Consequentialism and nonrelationism differ in multifarious ways, but both suffer from the same deficit captured by our objection to Instrumental Trade.24

3.4  Structural Equity Structural Equity, as defended by James, understands trade as an activity among states.25 At least that is what matters most in terms of how considerations of ­justice apply. Trade delivers gains beyond what states could accumulate in autarky. Think of all gains from trade in a totality. Each state may remove what it could generate in autarky. The surplus is divided equally among participating states. James thinks equality has immediate intuitive appeal here. Different agents jointly produce a surplus. What is thus generated (minus gains in autarky) belongs to all. Let us go straight to our critical assessment, which is an assessment that does not only affect James’s egalitarian interpretation but also the more general attempt to look for substantive principles that assign to states a share in the amount of trade they generate together.26 It is coherent to think about what a country can do on its own at any given time: we can subtract how much it gains from trade beyond what it could accomplish in autarky. However, in a world that has been more or less densely interconnected for thousands of years, capability is a function of history. For autarky to play the role James assigns it, it must be clear that what people can produce by themselves is fully theirs, in the sense that it is not part of what should be commonly divided. But this makes sense only if different peoples existed in isolation, developed skills, and one day started interacting. Chapter 1 already noted that our world is not like this. But even for disconnected galactic empires that now start trading Structural Equity is implausible. The autarky baseline would apply, but some empires may reasonably reject equal division of the surplus. That would happen unless all

52  On Trade Justice contribute roughly equally to the volume of trade. Marginal contributors should not have the same claim as major engines of trade. The general difficulty for Structural Equity is this: interconnectedness is necessary for it to be appropriate for trading partners to demand equal shares of the surplus. But interconnectedness normally undermines the plausibility of autarky as reference point for determining what states need not share. “Normally:” except in worlds where interconnectedness does not over time shape trade potential, an unlikely scenario. But if autarky does plausibly determine what each state need not share, there will generally be no reason for states to accept Structural Equity. The view “autarky as baseline plus equality in dividing the surplus” fails: conditions that make the autarky part ­sensible do not render the equality part sensible, and vice versa. Within a view of global justice that takes a system of states as justified it is implausible to think of gains from trade as something to be divided up among states. For either states should add all such gains to the common pool, or not. If they should, we contradict the justifiability of states (see also Chapter 4, section 3), or it would be pointless to have states unless each state has some control over the policy domains that sustain it. States should not be deprived of all control over who immigrates, who enters its service, or how to design social systems. Nor should they be entirely deprived of control over trade policy. Otherwise (that is, if states should not add all gains to the common pool) we need a viable distinction between gains states can count as genuinely theirs, and gains they cannot so count. But then interconnectedness leaves no plausible way to proceed. So, assuming we grant the justifiability of states and limit theorizing to an interconnected world, we should avoid one avenue to assess what trade justice requires. That avenue is to look for principles assigning to states a share in the amount of trade they generate. That Structural Equity, Instrumental Trade, and Amoral Trade fail does not mean all their components do. As far as Structural Equity is concerned, we concur that trade comes up for moral evaluation on its own terms, and market reliance practices are partly constitutive of trade as a ground of justice. As far as Instrumental Trade is concerned, we agree with consequentialism on the relevance of outcomes, such as utilitarianism’s promotion of collective well-being. We agree with global egalitarianism that a notion of moral equality is globally ­imperative. Regarding Amoral Trade, we accept the basic case for free trade, with qualifications. Under imperfect knowledge, price systems convey information about surpluses and shortages. Prosperity as we know it presupposes markets of sorts. The basic argument behind comparative advantage is sound. But trade occurs under complex political and economic conditions: unemployment might ensue, competition crush infant industries, and inequality increase dramatically. Free trade is no panacea, and gains from trade ought to be shared justly.27

Images of Trade  53

3.5 Trade-As-One-Ground Trade involves states, individuals, businesses, and international organizations. It is before the background of market reliance practices maintained by states and international organizations (primarily the WTO) that individuals and companies trade, making a multitude of decisions that position them on markets. The moral ontology of trade must properly recognize all these entities. By doing so, our image is an amalgam of Amoral Trade and Structural Equity. As far as trade’s place within an account of global justice is concerned, our image captures trade as one in several grounds of justice. We call our image “Trade-As-One-Ground” as a suitable shorthand to evoke these structural features. Principles of justice that apply to trade we formulate in terms of exploitation. Trade justice is about precluding various types of exploitation, in any event to the extent they happen as part of the basic framework of rules for the trade regime. Exploitation can occur among all entities this image acknowledges. States exploit bargaining power in negotiations, bilaterally, or within the WTO. Unfair advantage taking occurs between individuals, for instance when on employment markets one party benefits inappropriately from another’s weakness. It occurs between firms and individuals if firms disregard safety standards and use bargaining power to shortchange workers on wages. Conversely, individuals exploit companies if, say, a member of the executive board takes advantage of flaws in the company’s strategic outlook to advance his in-laws’ interests. Our image has three distinctive features. First of all, it recognizes the significance of multifarious actors for trade, from individuals to international organizations. Secondly, it classifies trade as one in several grounds. That trade is a ground of justice means there are obligations that arise from trading. That trade is one ground among others means obligations from trade need to cohere with obligations based on other grounds, in particular domestic principles and human rights. Thirdly, we identify principles of trade justice in the first instance in the domain of transactional principles, specifically principles of exploitation. However, our account of exploitation in subsequent chapters also transcends purely transactional considerations. These features are logically independent but must be developed together to obtain an appropriate view of the moral ontology of trade.28 We now state three initial arguments in support of the basic plausibility of our image. These arguments capture reasons for why within the set of candidate images ours is philosophically preferred. (Ultimately our image must persuade in its detailed development and applicability to problems.) The first argument is that image by image, ours does not have the problems besetting the others. To begin with, Amoral Trade is subject to a revisionism charge, among other things for not recognizing the importance of market reliance practices. Trade-As-One-Ground acknowledges that the moral ontology of trade includes different types of actors

54  On Trade Justice so that investigations about their relations can become central. Such investigations then in particular make clear the importance of international reliance structures. Trade-As-One-Ground easily avoids the revisionism charge. Instrumental Trade does not properly capture the importance of relations generally. Trade-As-OneGround ipso facto does better by recognizing trade as a ground of justice. Finally, Structural Equity falls into inchoate theorizing by being guided by the idea that gains from trade must be divided among states. That charge too is easily avoided since our guiding idea is more procedural and less substantive. And where it is substantive (the reciprocity component) it is not about division of gains but about satisfaction of claims, which can be of various kinds. That our image improves on the others matters because each of them also captures much that is right. The second argument is this. A core aspect of exploitation—a central notion according to our image but not according to the others—is that it occurs even if the activity in question improves everybody’s fate and all participate voluntarily. Trade exhibits these features of the more general type of interaction and exchange where exploitation has proven to be a powerful tool. A moral analysis of trade that makes exploitation central therefore possesses naturalness of fit, an advantage beyond avoiding the pitfalls of other approaches. The third argument is that Trade-As-One-Ground can (and can only) be embedded into a theory of global justice in a way that accommodates an i­mportant insight, to wit, that not all duties arising in the context of trade arise from trading. Duties in the context of trade arise among people who trade with each other, in some sense because they trade with each other. Duties from trading are those duties in the context of trading that are generated by trading. “Obligations in the context of trade” are more general: obligations from trading are subsumed under obligations in the context of trade. Many people think those who make their clothes should not work in dilapidated buildings, or those who grow their coffee should earn enough to get by and not be abused. Trade links us to them. Many think this generates special duties. Upon reflection, most such people also care about those who run stores where workers buy provisions, or about the railway workers next door, who might be in equally dire straits but have nothing to do with trade. The point is to make sure everybody has enough. But then we are no longer talking about obligations from trading, but about duties of humanity that apply to everybody. At a general level, the holder of such duties is humanity as such. But that is mere moral book-keeping: we need some way of dividing up obligations to make that thought operative. Trade generates obligations of its own but also alerts us to some people’s plight, or selects agents who in a given case should shoulder burdens associated with general duties (i.e., those connected by trade who thus can help improve their lot). Here duties in the context of trading—to shoulder ­responsibilities for people to whom trade links us—do not arise from the trading.

Images of Trade  55 Duties of humanity—as well as those of shared citizenship—arise even if no charge of exploitation arises, even if trade ceases. So not all duties in the context of trade arise from trading. Let us show why our account can (only) be embedded into an overall theory of global justice in a way that accommodates this insight. Crucially, as we extend Trade-As-One-Ground to such a theory, we note that talk about exploitation among states, individuals, and so on—and talk about trade itself—presupposes the existence of individuals and states (and possibly other entities, e.g., corporations, whose importance this image recognizes). Thus in ideal theory, Trade-As-One-Ground—since its moral ontology includes i­ndividuals, states, etc., instead of limiting itself to either individuals or states—must assume we know what is owed to humans as such, and we know what is required as a matter of justice within states (and perhaps other things covered by justice, e.g., collective ownership of the earth). In a world of states, duties from trading arise only when duties of common humanity and shared citizenship (as well as duties arising from the existence of multiple states) also arise. Extending our image to a theory of global justice requires us to treat duties from trading as arising in addition to such duties. If we apply this way of extending Trade-As-One-Ground to the situation of factory or plantation workers, we find such an application reflects the aforementioned insight. We must ask what justice requires among fellow-citizens or in virtue of common humanity. Avoiding exploitation is required beyond what is required on other grounds. As the italics make clear, the emphasis here is not on the fact that trade as such generates obligations (a point that must be established ­independently). The emphasis lies on the fact that an account of trade justice that focuses on exploitation can, and indeed can only, be extended into a theory of global justice in a way that generates a properly nuanced analysis of problems arising in the context of trade. Put differently, by acknowledging trade as a separate ground, we are required to investigate what obligations of justice apply among humans as such as well as among states; for their existence is presupposed by trade as we understand it. Therefore, treating trade as a separate ground (and one among several) forces us to offer a properly nuanced analysis of obligations concerning trade. That it compels us to offer such an analysis we take as an argument in favor of treating trade in this manner to begin with. A “properly nuanced” analysis takes seriously the distinction between obligations from trading and obligations arising in the context of trade. Since it does so, Trade-As-One-Ground sensibly captures moral deliberation about trade. None of the other images can accommodate this distinction since none of them recognizes a multiplicity of grounds. Roughly, we submit Trade-As-One-Ground as the philosophically preferred image because it appropriately takes trade seriously as an area of moral inquiry, and takes it seriously in its own right rather than as instrumental to something

56  On Trade Justice else; because it makes the notion of exploitation central, rather than substantive principles that use accumulated gains from trade (independently of how they have arisen); and because it conceptualizes trade as part of a complex picture of global justice where distinctive demands of justice arise (often in the same ­situation) based on trading as well as on some other grounds. Our image takes seriously the role of various entities for determining principles for trade (states, individuals, companies). Whereas Amoral Trade minimizes the role of morality, Instrumental Trade grants no independent moral status to trade, and Structural Equity stresses the role of states in maintaining trade and proposes equal division of the surplus, we champion ideas of non-exploitation and formulate principles of trade justice for the whole range of actors involved. States, companies, i­ ndividuals, and other entities can exploit each other. Chapter  4 develops Trade-As-OneGround more systematically within an overall view of global justice.

Notes 1. In his celebrated analysis of the causes of war, Kenneth Waltz talks about images of war to classify work on these causes. This use of “images” differs somewhat from ours but is guided by the same intuition about why talk about images would be useful; see Waltz, Man, the State, and War. 2. Caney, Justice Beyond Borders. James Christensen has recently developed this view for trade; see Christensen, Trade Justice, especially chapter 6. For many philosophical purposes consequentialism (in particular utilitarianism) does of course require ­separate treatment from global egalitarianism. We run them together for their similarities in terms of what they make of trade. 3. James, Fairness in Practice. 4. Frank Garcia has proposed a different taxonomy, “three takes” on global justice and economic law. The first take approaches these matters from the standpoint of the liberal state and asks about how its foreign policy in the trade domain could reflect with integrity its basic commitments. The second is organized around the insight that globalization creates the possibility of social bonds at the transnational level. Trade ­justice draws on certain communal relations that now hold at the transnational and possibly global level. Going beyond the status quo more than the other two, the third take understands trade as a myriad of transactions among individuals and sees trade justice as bearing on those relations directly. Garcia’s “takes” could be understood as engaging the ontology of the grounds-of-justice view in Risse, On Global Justice. The grounds-of-justice view recognizes a number of relations, actors as well as states of affairs that generate obligations of justice. All three “takes,” however, disagree with our grounds-of-justice view in terms of how to conceptualize trade justice. Garcia, Global Justice and International Economic Law. 5. Rawls, A Theory of Justice, chapter 1. 6. (1) Images are concerned with agency constitutive of trading. Questions about ­connections between trade and environment or animals do not concern us here. For

Images of Trade  57 animals, see Christensen, Trade Justice, chapter 3. (2) In an earlier piece we took for granted that if justice applies to trade, it would be because trade is one ground in the sense of Risse, On Global Justice. (See Risse and Wollner, “Three Images of Trade,” 203.) We took for granted that if justice applies to trade, then there are principles that apply specifically to trade. This excludes Instrumental Trade from scratch. We now admit Instrumental Trade as contender, which means in our presentation our view becomes the fourth image, rather than the third, as in Risse and Wollner, “Three Images of Trade.” 7. Smith, The Wealth of Nations. 8. On Smith, see Irwin, Against the Tide, chapter 5. See also Griswold, Adam Smith and the Virtues of Enlightenment; Fleischacker, On Adam Smith’s “Wealth of Nations”; Rothschild, Economic Sentiments. For an introduction to global trade, see Helpman, Understanding Global Trade. In the twentieth century, some celebrated results of economic theory added support to the attractiveness of markets for coordinating human activities. The First Fundamental Welfare Theorem shows that under certain assumptions economic activity generates a Pareto-optimal price system. The Second Fundamental Welfare Theorem shows that in perfectly competitive markets, each Pareto-optimal outcome is achievable with a suitable distribution of initial endowments. For discussion of the welfare theorems in the context of partial and general equilibrium theory, see MasColell, Whinston, and Green, Microeconomic Theory. For a philosophical assessment, see Gibbard, “What’s Morally Special about Free Exchange?”; Sen, “The Moral Standing of the Market.” For a discussion of what should not be on the market, see Satz, Why Some Things Should Not Be for Sale. For the argument that, deplorably, markets bring out bad sides in humans, see Cohen, Why Not Socialism? 9. Ricardo, The Principles of Political Economy and Taxation. Comparative advantage is also discussed in Mill, Principles of Political Economy, chapter 17. For Mill, see Irwin, Against the Tide, chapter 6. On comparative advantage, see Negishi, Developments of International Trade Theory; Maneschi, Comparative Advantage in International Trade. See also Stiglitz and Charlton, Fair Trade for All, chapter 2; Irwin, Free Trade under Fire, chapter 2. 10. For introductions to neoclassical economics (at different levels of technical sophistication), see Mankiw, Principles of Economics, 7th Edition; Mas-Colell, Whinston, and Green, Microeconomic Theory; Krugman, International Economics. A major difference between the “classical” economics developed by the middle of the nineteenth century by Smith, Ricardo, Mill, and others and the later “neoclassical” economics consists in their understanding of value. In classical economics value was a property inherent in objects. The neoclassical perspective associated value with the relationship between an object and the person obtaining it (supply and demand). 11. James, Fairness in Practice, 193–201. 12. See Irwin, Against the Tide, chapter 12. For skepticism about arguments for free trade that disregard concerns about distribution, see Driskill, “Deconstructing the Argument for Free Trade.” 13. For a discussion of this phenomenon in the context of property and taxation, see Murphy and Nagel, The Myth of Ownership. 14. McNeill and McNeill, The Human Web, 5.

58  On Trade Justice 15. That trade would be subject to moral considerations does not by itself mean it is subject to principles of distributive justice. That point must be established separately. Resistance to such a move is classically expressed in Barry, “Humanity and Justice in Global Perspective,” 233. See also Blake, Justice and Foreign Policy, 100–1. Rawls’s foray into international justice, which is representative of a distributive approach, also does not address trade much; Rawls, The Law of Peoples. Nor does Miller’s in National Responsibility and Global Justice. For trade, see pp. 251–3. 16. On Mill generally, see Skorupski, Why Read Mill Today?; Ryan, The Philosophy of John Stuart Mill; Brink, Mill’s Progressive Principles. For a commentary emphasizing his work in economics, see Snyder, Reforming Philosophy. Mill’s predecessor Bentham had little to say about international economics; see Hoogensen, International Relations, Security and Jeremy Bentham, chapter 9. 17. Mill, Principles of Political Economy, 581. This discussion is in Book 3, Chapter XVII. 18. Mill, “Utilitarianism.” 19. This section draws on Risse, On Global Justice, chapters 3–4. 20. Chapter 4 elaborates on this point by exploring what a theory of distributive justice is in the first place. That chapter thereby provides the context in which this point about the significance of trade matters. 21. There is disagreement between the authors about how to understand this argument. Risse is committed to a stronger view: without relationships we cannot grasp how there could be obligations to more than basic-needs satisfaction; see Risse, On Global Justice, chapter 4. Wollner is open to the possibility that even absent relationships, egalitarian obligations arise, based on common humanity alone (perhaps in a luck-egalitarian manner); see Wollner, “Framing, Reciprocity and the Grounds of Egalitarian Justice.” This is a disagreement about how to develop a pluralist view of grounds of justice. Both authors think the argument above helps establish that there are relational grounds (and that trade is one). 22. Scheffler, Boundaries and Allegiances, chapter 6. 23. This is where we part from Mill. Consequentialists have much to say in their defense, see e.g., Kagan, The Limits of Morality. For the most prominent contemporary consequentialist standpoint and its applications, see Peter Singer’s work on utilitarianism, e.g., Singer, Practical Ethics. Singer elaborates on trade in Singer, One World Now, chapter 3. 24. This is where we part from Caney and Christensen, see Caney, Justice Beyond Borders; Christensen, Trade Justice. In his sixth chapter, Christensen argues for globalism by rebutting statism and points out that, as far as trade is concerned, there is convergence between globalism and nonrelationism. He offers a sustained engagement with Risse, On Global Justice, chapters 2–3. Christensen does not address whether trade should be treated as its own ground but assumes it must be subsumed under a global ­principle of justice. One might say, much as consequentialism has more tricks up its sleeve, the same is true for nonrelationism, especially global luck-egalitarianism: surely those views are not refuted because they do not get trade right. But that they fail to do so is symptomatic of bigger problems. This also reconnects to a disagreement recorded earlier (see endnote 21 of this chapter). Wollner thinks global luck-egalitarians may be able to incorporate our way of thinking about trade. Risse does not.

Images of Trade  59 25. James, Fairness in Practice. 26. See also Risse and Wollner, “Critical Notice of Aaron James, Fairness in Practice”; Risse and Wollner, “Three Images of Trade.” For James’s responses, see James, “A Theory of Fairness in Trade.” 27. For the case for free trade, see Krugman, International Economics, part 1; Dixit and Norman, Theory of International Trade. For non-technical statements, see Stiglitz and Charlton, Fair Trade for All, chapter 2; Irwin, Free Trade under Fire, chapter 2. For the argument that openness to trade must be seen in the larger context of policy design, see Rodrik, The Globalization Paradox, chapter  3. Rodrik calculates for the US economy that a move to fully free trade would have to involve $50 redistribution for every $1 of efficiency gains. Rodrik concludes that “deep trade liberalization cannot be relied on to deliver high rates of economic growth and therefore does not deserve the high priority it typically receives in the development strategies pushed by leading multilateral organizations,” Rodrik, One Economics, 221. For the claim that ­philosophers are too skeptical of free trade, see Teson and Klick, “Global Justice and Trade.” 28. We use the term “transactional” by way of contrast with James’s approach that focuses on aggregate gains from trade. At the core of trade justice, in our view, is that people are interacting in the right way, rather than that an overall amount of gains is allocated properly.

4

Trade as One Ground of Justice 4.1 Overview By arguing that trade is a ground of justice in the first place, we reject views that hold that trade is an exchange among “consenting adults” that comes up for little moral evaluation, or matters morally only insofar as it serves other goals. By arguing trade is one ground among several, we acknowledge that obligations from trading stand alongside demands of justice that arise on other grounds. What makes the grounds-of-justice view superior to others that extend distributive ­justice globally is that it captures both the global dimensions of distributive j­ustice and its internal complexity. Thereby it also creates a proper place for trade justice. Sections 4.2 and  4.3 discuss distributive justice to motivate the grounds-ofjustice approach. Sections 4.4–4.7 offer various considerations relevant to the argument that trade should be understood as one ground. Section 4.4 draws on trade’s historical significance. Section 4.5 elaborates on the nature of the relevant ground. Technically, the ground is not trade as such but subjection to the trading regime. Section  4.6 resists efforts to reduce trade to other grounds. Section  4.7 elaborates on differences between membership in states and subjection to the trade regime as grounds. Section 4.8 applies our image to a puzzle about exploitation. Section 4.9 clarifies the relationship between trade justice and fairness in trade, and thereby sets the stage for Chapter 5.

4.2  Distributive Justice Demands of justice are the hardest to overrule. To be fair, Kant goes too far in insisting that there is no point for us to continue living on earth unless justice prevails.1 Still, justice plays a central role in human affairs because it enables us to present claims of such stringency. A theory of distributive justice explains why certain individuals have particularly stringent claims to certain relative or absolute shares, quantities, or amounts of something. Whatever is to be distributed is the distribuendum. Rawls’s A Theory of Justice made distributive justice central to political philosophy as it had never been before.2 But distributive justice can only be so central if its distribuendum is not limited to material objects. Instead, distribution concerns any kind of thing whose relative or absolute holdings are questioned in a given context, where the matter is of sufficient importance to On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Trade as One Ground of Justice  61 justify the stringent language of justice. For instance, if we consider distribution in the context of shared citizenship, the discourse of distribution includes everything made possible and shared out through collaboration among citizens. Naturally then, in that context we are talking about rights, powers, and opportunities in addition to income and wealth. Principles of distributive justice are propositions about the distribution of some good in some population. They take this form: “The distribution of good G in population P is just only if . . . ” These principles entail further propositions about duties (for agents and institutions) and claims (of individuals). P is the set of ­people in the scope of the principle.3 Principles of justice have grounds. The grounds are those considerations or conditions based on which individuals are within the scope of principles. These are the features of the population that make it the case that the principle of justice holds. Every member of the population has a stringent claim to whatever their share of the relevant good is according to the just distribution. Principles, distribuenda, grounds, and scopes must form a coherent theory. Behind concrete experiences of justice and injustice, and behind its various articulations across cultural contexts, we can identify a more abstract underlying notion of justice. We submit that the perennial quest for justice is about making sure each individual has an appropriate place in what our uniquely human ­capacities to collaborate for the purpose of achieving shared goals and intentions permit us to build, produce, and maintain. The link between this notion and concrete experiences is that one’s community is where the accomplishments of humanity manifest themselves in concrete life-worlds, where these achievements become available or are denied. Just communities give each her own as a participant. Unjust ones fail to do so, more or less egregiously. Other species cooperate intensively but only humans have established complex webs of interaction among genetically distant individuals, webs loosely governed by social norms that allow for transmission of information among strangers. These webs also create preconditions for enduring collective learning that permits the integration of experiences and breakthroughs into shared pools of expertise. The great tale of humanity is about how such learning has unfolded and borne fruit. Justice captures claims of highest stringency because it is concerned with making sure each person gets to be involved in the right way in what our ­distinctive features make possible, and is respected for having the prerequisite human capacities. The concept of justice designates inquiries about what place in that world each person should have. We can appreciate authors writing in vastly different periods and multifarious languages as addressing roughly the same thing, to wit, the right kind of partaking in human accomplishments as well as recognition for the prerequisite capacities. What has concerned us most in the last 200 years or so is “social justice.” Social justice first became a topic in response to the “social question:” how to address

62  On Trade Justice challenges caused by the transition from agrarian to industrial societies since the late eighteenth century. Initially “social justice” captured the idea that recent upheavals, especially technological change and population explosion, required urgent responses, required them from the state, and required them in ways for which the language of justice was suitable. In time, the term has increasingly designated domestic society as one (possibly the most important) context of inquiry in terms of distributive justice. How political, legal, economic, or social ­mechanisms should channel advantages from cooperation and competition is a central question in modern societies. Since justice is concerned with making sure each individual has her proper place in what humanity has jointly accomplished, how each person fares in her society matters greatly.4 Social justice is a modern idea that arose after the Scientific Revolution revealed how much humans can achieve if they put their minds to it, after the Industrial Revolution opened new avenues of wealth creation through mechanization, and after the French Revolution showed how to radically redo social arrangements, rather than accept them as divinely ordained or practically unalterable. Samuel Fleischacker helpfully summarizes that social justice draws on five presuppositions:5 (a) each individual has a good that deserves respect and individuals are due certain rights and protections in their pursuit of that good; (b) some share of material wealth is part of every individual’s due and thus part of the rights and protections everyone deserves; (c) that everyone deserves this can be justified in secular terms; (d) the distribution of this share of goods is practicable; (e) the state, not merely private entities, ought to guarantee the distribution. While this notion has been available since the late eighteenth century, no ­philosopher of similar standing has made any notion of distributive justice central before Rawls did so. What is remarkable in the larger historical context of reflection on distributive justice is that Rawls integrates various approaches explored during the nineteenth and twentieth centuries. Need, desert, liberties, rights, opportunities, citizenship, political equality, and equal worth all matter in some way. If Rawls synthesizes reflection on domestic matters over about 200 years, the grounds-of-justice approach aims at unifying a broad range of thinking about global justice. We submit that any plausible contemporary theory of justice would deploy a notion of distributive justice that is global in scope (“Globality”), complex in structure (“Complexity,” as spelled out by the plurality of grounds of ­justice), stringent in its demandingness (“Stringency”), and extensive in a publicreason-oriented sense in its reach (“Public-Reason Extensiveness”). Globality and Complexity matter most for our purposes. Section 4.3 elaborates on them. Only two brief remarks on Stringency and Public-Reason Extensiveness are in order. Given how we have defined distributive justice (“making sure each person has a proper place in the accomplishments of humanity”), demands of justice would have to be the most stringent moral demands, provided we can develop the details suitably. One crucial aspect is an aptly extensive view of the range of topics

Trade as One Ground of Justice  63 distributive justice addresses. “Aptly extensive” means, on the one hand, that distributive justice can generate the most stringent moral demands only if it covers a sufficiently broad range of interaction. But distributive justice cannot be all-inclusive lest it loses its distinctive character. Its reach must be limited to allow for a reasonably sharp notion. But as we spell out what “aptly extensive” means we should recognize that any global account of justice is best developed as a public-reason account. That point is motivated independently from concerns with delineating its reach. But it also delivers the key to solving the problem with appropriate delineation. Over millennia humans have, inevitably, interpreted experiences in this world differently. As a result, a global account of justice should accept that there is a variety of moral doctrines. Such an account should provide resources for a discourse of ­justice that adherents of multifarious doctrines can conduct. Thereby, a global account of justice becomes public-reason-based. Such an account, ipso facto, constrains the range of topics that can be covered, and so can be aptly extensive.

4.3  Global Justice: Globality and Complexity Let us discuss Globality in more detail. The social question arose in response to the Industrial Revolution and subsequent advancements in technology and logistics. It was through these changes that the human web thickened to its current intensity. Expanding on the social question we can formulate a global question. That question challenges humanity to make sure everybody has an appropriate place in what human capacities make possible, in such ways that the presuppositions for our life on this planet are not undermined. Capturing a just approach to that challenge, global justice is to the twenty-first century what social justice was to the nineteenth. The late nineteenth century already witnessed tight interdependence. But ­technological change also enabled bitter competition among imperialist powers, fueled by passions unleashed by nationalism or capitalism. Political, military, economic, and social crises followed one another. The underlying conflicts erupted in World War I, the twentieth century’s original calamity. The Great Depression in the late 1920s was an international failure, reflecting insufficient institutional capacities to harness technological possibilities in a stable manner for collective benefit. After World War II global thinking developed rapidly, as we noted in Chapter 2. Engagement with global justice merely completes a challenge that arose through our increased technological abilities, once we comprehend that challenge properly in an interconnected world. Limiting justice to the domestic context is unstable. If the social question has an answer in terms of distributive justice at all, there is a global context to it. The global question is simply the social question plausibly expanded.

64  On Trade Justice Some thinkers hesitate to expand the scope of distributive justice globally. Thomas Nagel insists justice does not apply globally to begin with.6 Rawls applies the notion of justice globally but does not talk about distributive justice then.7 But the transition from the social question to the global context through the recognition of interconnectedness creates the suspicion that justice must have been about more than domestic matters all along. We get the sense that political philosophy has been too narrowly focused on structures and spaces where a kind of power was wielded that immediately involves physical force. But now that we ponder what claims people have against each other, this inquiry must be expanded beyond neatly defined political contexts such as states. We need a notion of j­ ustice that captures such endeavors. Let us continue with Complexity. With Globality in place the question becomes why internal differentiation would be called for. Why not insist any principles of distributive justice hold for all humans? The reason is that the point of view from which we are looking for an account of justice is a system of states embedded into a world society that has arisen from a history in which our species has advanced in concert, through the human web of cooperation. It is from within that world— a world where states continue to play a major role—that we realize a purely domestic understanding of social justice is no longer appropriate. We do not talk about justice in a vacuum. We discuss appropriate shares of the human endeavor while being informed by what kind of organizational forms humans have built. We have no alternative to a system of states that we understand sufficiently well for that alternative to guide action. There may well remain nagging doubts about whether there ought to be states at all; nevertheless, morally rather than merely pragmatically, we ought not to abandon states now. Levelheaded cosmopolitans who believe it is merely for fear of ensuing political chaos that we should hang on to states presuppose we have an action-guiding alternative. But since we do not, that thought understates the intellectual support for states. In conjunction with the fact that states solve public goods problems, the absence of action-guiding alternatives turns pragmatic acceptance into qualified moral endorsement. The point is not merely that we should not immediately seek to create a world without the kind of power centers constitutive of states. Rather, we should not now actively aim to create it at all, even step by step. After all, we do not understand well enough what such a world would be like. Perhaps states will wither away, and we must then reconsider what counts as realistically utopian. But saying that is very different from now urging reforms designed to create a world with a global demos.8 Recall that the grounds of justice are considerations or conditions based on which individuals are subject to demands of justice, or are in the scope of ­principles of justice. We may think of grounds in two roughly equivalent ways. First, as the properties of the population that make it the case that principles of

Trade as One Ground of Justice  65 justice hold. Second, as the premises that entail such principles. These premises are partly normative. One can also say grounds are reasons why claims of justice apply to a population. The considerations in support of Complexity prevent us from developing Globality in such a way that all grounds are global. States continue to matter from a standpoint of justice. Global justice is therefore best understood in terms of multiple grounds. Shared membership in states is one, and then there are others that are global in nature.

4.4  Trade as a Ground of Justice It is one thing to argue for multiple grounds and another to identify a specific list. The grounds in On Global Justice are membership in states; membership in world society; subjection to the trading system; common ownership of earth; and common humanity.9 Some are relational (membership in states, membership in world society, subjection to the trading system). They capture accomplishments our uniquely human capacities make possible. The others (common humanity, common ownership of earth) are non-relational. Common humanity recognizes the sheer presence of these capacities. Common ownership recognizes the relevance of humanity’s habitat for our extended existence. Understanding justice as making sure each individual has an appropriate place in what our capacities permit us to build, produce, and maintain leads to both relational and non-relational grounds to account for such a place. More could be said about why the list should include these grounds and ­possibly others. What concerns us most, however, is why trade should be on it. Chapter 1 recorded the historical significance of trade for humanity. We appeal to that point again to insist trade should be a ground of justice. That trade has made the world makes it a ground. Brian Barry is right that trade does not constitute an associate relationship characteristic of interaction in states.10 However, the proper response is not to exclude trade from what distributive justice covers but to recognize trade as one in several grounds. Philosophy has misunderstood trade by excluding it from the domain of distributive justice. Nowadays most trade is governed through the WTO. The agreements that legally structure trade create incentives and render economic interaction predictable and enforceable. These agreements affect the fate of billions. Even countries that are not WTO members have their possibilities restricted through the regime that has the WTO treaty at its core. Different agreements could be adopted that would change these possibilities. Not only has trade made the world; trade is also, at this stage, organized in conventional international structures. So what makes trade a suitable subject for a theory of justice is a pattern of characteristics: (a) its historical significance for our species and ongoing relevance for life prospects around the world; (b) its beneficial nature at the level of countries; (c) its highly

66  On Trade Justice structured nature; and (d) that these structures could be regulated in various ways that generate different winners and losers. States as well as organizations charged with supervising trade provide assurances to render markets reliable and predictable. Assurance practices are constitutive of trade. So what we consider a ground is not simply “trade”, but the trade that occurs before the background of and is structured by an international regime. In other words, the ground is subjection to the global trade regime.

4.5  Subjection to the Global Trade Regime In international relations, the term “regime” is used to capture the presence of some kind of authority. A regime consists of “sets of implicit or explicit principles, norms, rules and decision-making procedures around which expectations converge in a given area of international relations.”11 Trade cooperation is such a regime. Its principles and procedures imply obligations, even though these are often not legally enforceable. Regimes reflect patterns of cooperation over time based on shared interests. At the center of the trade regime is the WTO. As of 2019, the WTO had 164 members, representing more than 95 percent of world trade, as well as twenty-two observers, most seeking membership. The largest economies outside the WTO were Algeria and Iran, both observers. Countries that are neither members nor observers include North Korea, South Sudan, Turkmenistan, Eritrea, Palestine, and small island states.12 While the GATT had only dealt with tariffs for goods, other matters became pressing over time (including trade in services; concerns that bear on trade, such as sanitary standards; types of protection other than tariffs). The WTO treaty covers services, intellectual property, and investment measures, as well as, for instance, sanitary barriers to trade. Agriculture and textiles, absent from the GATT, are also under the WTO’s mandate.13 Members commit themselves to non-discriminatory practices, using a mostfavored nation rule: products made in one country should be treated no less favorably than “like” products (very similar ones) made elsewhere (with clear exceptions, such as preferential treatment for developing countries). A favorable status for one member with regard to some product applies to all. Members also accept national treatment for foreign goods, to treat them no less favorably than national ones: domestic taxes or similar measures must be levied equally. In ­addition, the WTO applies a principle of reciprocity. An underspecified balance criterion, reciprocity ensures countries do not unilaterally benefit from nondiscrimination but offer equivalent access.14 The WTO also deals with policy harmonization, entering domains of domestic decision-making and tackling issues classical free trade arguments do not cover. Most striking is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which mandates national regulatory standards as well as means

Trade as One Ground of Justice  67 of enforcing them. The GATT exempted developing nations from many duties (“special and differential treatment”), but in turn their concerns were absent from negotiations, notably agriculture and textiles. The inclusion of developing nations in the WTO, alongside the treaty’s “single-undertaking” character—all members must accept the treaty as a whole—terminated this two-tier system. But members cannot excuse themselves from, say, TRIPs. If one member accuses another of violations, and negotiations fail, the former may request adjudication. The dispute settlement mechanism permits retaliation via trade-related measures. Retaliation can occur across issues, and so can be deployed in hurtful ways. The GATT allowed losing parties to block decisions. WTO rulings can only be rejected unanimously. Compared to the GATT, the WTO’s dispute settlement mechanism is considerably strengthened. Not all plurilateral agreements that create reciprocal arrangements are under the WTO. Regional groupings of states also create them. Such arrangements compete with, or replace, WTO agreements. Examples include multilateral free trade areas such as those regulated by the North American Free Trade Agreement (NAFTA) involving Mexico, the US, and Canada, or the free-trade area including the ASEAN countries and China (ACFTA). Some agreements outside the WTO discussed during the Obama years were so colossal in terms of markets covered that the term “mega-regionalism” gained traction (see Chapter 10). In addition, there are custom unions such as the Gulf Cooperation Council that includes all states around the Persian Gulf except Iraq, or the customs union of Kazakhstan, Belarus, and Russia. Finally, there are common markets, free-trade areas in combination with both customs union and coordination of economic policies like monetary exchange, such as the EU and the Southern Common Market (Mercosur) in South America. Cartels—associations of producers or consumers formed to influence prices or shape political behavior or events—too are part of the international trade regime. The best known cartel is OPEC, an organization that controls about half of global oil production. In a broader view of the trade regime we should also list fair-trade organizations, which aim to stabilize prices and advocate for guaranteed (and presumptively fair) incomes to farmers. We should also include in the global trade regime industry lobbies, unions, and NGOs that aim to influence ­negotiations for various purposes (often to advance the status of the less-privileged). We also need to mention the numerous international organizations other than the WTO that foster multilateral trade cooperation. Examples include the IMF, International Labor Organization (ILO), International Bank for Reconstruction and Development (IBRD), various UN bodies such as UNCTAD (see Chapter 2), UN Development Program (UNDP), and the UN Economic Commissions, as well as specialized organizations such as the Bank for International Settlements (BIS), World Customs Organization (WCO), International Telecommunications Union (ITU), International Organization for Standardization (ISO), and the World International Property Organization (WIPO).

68  On Trade Justice When we say subjection to the trade regime is a ground of justice, we mean subjection to standards, rules, or norms set by this thicket of organizations. Jointly, these organizations determine what trade can occur, globally but also domestically (since domestic trade would follow the same norms). A ground is the set of properties of the population that make it the case that the relevant principle of justice holds. The pertinent properties here are those of being subject to these standards, rules, or norms. Some caveats are in order. To begin with, any two individuals would often be differentially subjected to these expectations, depending on what memberships their governments have accepted. Even WTO members are normally involved in additional plurilateral agreements. But we can generally disregard differential subjection to rules or assume for practical purposes that the relevant scope of individuals includes all those in countries that are members of the WTO. However, even North Korea is a member of several organizations listed above and is thus not fully outside the regime. Individuals who do not live in WTO member-countries are subject to the regime constituted by these treaties: their possibilities are constrained by the fact that others made commitments to each other. Also, our account depends on contingent facts about the world. Our argument for the view that trade is a ground appeals to trade’s historical importance. Moreover, what we treat as a ground is subjection to the trade regime. One could construct counterfactual scenarios where trade does not have the relevance it has in our world. Or one might think of trade interactions in periods before the contemporary trade regime and wonder if our account can diagnose trade injustice for such periods. There might also be intuitive cases of trade injustice the groundsof-justice view has difficulties capturing. Of these possibilities, the first is unproblematic since we mean to present a ­political philosophy concerned with this world. (This is a feature, not a bug of our approach.) Our approach cannot analyze the second kind of case since our approach essentially appeals to the existence of a trade regime. But earlier interactions can be immoral in numerous ways, including exploitation (the hallmark of trade injustice), understood appropriately in reference to contemporary circumstances. (A feature again.) The third possibility captures an unavoidable flaw in an effort to bring systematicity to the complex phenomena connected to distributive justice. This flaw strikes us as bearable in light of the theoretical advantages this approach has otherwise. (A bug that does not derail the project.)

4.6  Reducing Trade to Other Grounds? With the basic case for discussing trade under distributive justice in place, we add two supporting considerations in this section and the next. One might think that, once all principles associated with common humanity, shared citizenship, and

Trade as One Ground of Justice  69 possibly other grounds are realized, so is trade justice. Trade justice would apply only non-ideally, not in ideal theory.15 If so, this would speak against recognizing trade as a ground in its own right. Instead, problems of trade justice arise from other grounds in non-ideal theory. This objection concerns the connection between domestic justice and trade justice. But let us ask: what would a just world be like? Rawls’s principles (or something like them) would apply in each country.16 Trade injustice would then be largely absent—largely, that is, with an exception we introduce shortly. Domestic justice constrains social and economic policies by subjecting them to demands of fair equality of opportunity as well as the Difference Principle. All this implies a level of workforce protection that largely renders moot specific trade-related demands. Domestic justice eclipses trade justice to the extent that trade justice concerns domestic matters. In addition to principles of justice ­limited to the domestic context, in a just world principles associated with other grounds apply. Human rights (membership rights in the world society) are realized. Every country controls proportionate shares of resources if ideal theory also respects what can be reasonably expected rather than exclusively what is just. In a world envisaged by ideal theory, there would still be markets.17 In a just world as sketched here, we could still have exploitation. So trade ­justice must also be theorized in ideal theory. Chapter 5 discusses exploitation, but to make our point, let us distinguish, in a preliminary way, between two ways for exploitation to occur. Think of exploitation as unfair advantage taking of sorts. One way in which a company might exploit is discretionary: this is behavior which companies could stop without putting their own business at risk (e.g., abusive behavior by management). But exploitation might also occur structurally. Were company A to cease such exploitation, this would undermine its operations due to the conditions under which it operates (e.g., small profit margins).18 We said trade injustice is largely absent in a just society. In virtue of the Difference Principle, just societies prevent domestic non-discretionary exploitation. But there could be discretionary exploitation. Moreover, countries might exploit each other. The just world as discussed so far (without adding trade justice) might be highly unequal, with unequal bargaining power in trade negotiations reflecting differences in size and economic success of countries. Possibly, also, to build on this point about countries, workers for multinational corporations might be exploited vis-à-vis workers in other countries. Worker X in country A might not be treated unjustly vis-à-vis worker Y in A but vis-à-vis Z in B who works for the same corporation. In some countries wages might be kept artificially low, in ways that do not violate standards of  domestic justice but become problematic in international comparisons. This might be so if compressed salaries help with fair equality of opportunity or equal political rights, goals that take priority over regulation of assets according to Rawlsian principles.

70  On Trade Justice For these reasons an account of exploitation is part of ideal theory. None of the examples listed might count as trade injustice all things considered. But such cases do suggest that trade justice is not reducible to other principles of justice. Ideal theory requires engagement with trade since principles associated with other grounds do not automatically realize trade justice. This discussion anticipates our discussion of the relationship between fairness and trade justice below. In this regard, we note that (a) trade justice is part of an account of global justice in ideal theory and that (b) domestic justice eclipses trade justice in the sense that domestic interactions, in ideal theory, will not be regulated by principles concerning exploitation. Broader domestic principles cover trade-related i­nteractions. Point (b) explains why many matters normally classified as fairness issues do not rise to the level of trade justice. Moreover, (a) and (b) together explain why trade justice in ideal theory does not register domestically but does register internationally.19

4.7  Capturing the Significance of Trade for Global Justice Section  4.5 addressed an objection that denied a theory of global distributive ­justice should treat trade as its own ground. Conversely, one may object that our account underappreciates trade. Might trade justice not be so important that its demands outweigh demands of justice arising in other ways? Since we insist political philosophy has unduly neglected trade, it behooves us to investigate the matter.20 Recall our distinction, in Chapter 3, between relationsim and nonrelationism. Relationists think principles of justice apply among people connected through practices. Nonrelationists do not believe applicability of justice has anything to do with shared relations. Also recall that, to fend off nonrelationism, relationists draw on two strategies. First, it is hard to demonstrate applicability of duties to begin with, especially duties of justice. Nonrelationists most readily meet the challenge for rights and duties pertaining to elementary concerns, such as basicneeds satisfaction. The second strategy insists that having reasons to value relations non-instrumentally just is to have reasons to see oneself under, and have, special obligations. Now let us contrast shared membership in a state and shared subjection to the trade regime as grounds of justice. The former is characterized by certain forms of coerciveness and cooperativeness, which we call the state’s legal and political immediacy. The legal aspect consists of directness and pervasiveness of law enforcement. State enforcement agencies have direct, unmediated access to bodies and assets. Since many facets of dealings of citizens among each other (including all property dealings, ranging from a coffee purchase to ownership of firms and conditions on inheritance and bequest) are regulated, enforcement is pervasive for most individuals subject to it. The political aspect consists of the

Trade as One Ground of Justice  71 significance of the environment the state provides for the realization of basic moral rights, a significance that captures the profundity of this relationship. The state is also cooperative in particularly intense ways. The extractive, regulative, and distributive capacities central to any modern state and its system of courts, administration, and military free us from the need to protect ourselves continuously from physical attack. They also guarantee access to legally regulated markets and establish and stabilize a system of property rights and entitlements. This system is maintained by taxation, various forms of political participation, as well as compliance with legal regulation. The term “reciprocity” characterizes the way in which the state is a cooperative endeavor.21 These aspects of immediacy are normatively relevant because they provide ­reasons that individuals can make claims on shares of collectively produced benefits. Profundity and pervasiveness of coerciveness impose burdens on those who are subject to states. They also characterize the significance shared membership in a state has for them. Membership is participation in a state’s maintenance and reproduction, an intensely cooperative, reciprocal endeavor coercively regulated as captured by the two aspects of immediacy. These are ways of articulating how persons are in relevant ways equally and significantly invested in and subject to a state, and in that sense, as participants in this endeavor, fundamentally alike. This fundamental alikeness creates a default status for an equal distribution of what citizens achieve together, placing a heavy burden of proof on those preferring an unequal distribution. The WTO is characterized by weakened versions of the conditions that apply to states. First, members have not joined because of threats, but at the same time, arguably, categorically staying away is not an option. The state’s coerciveness is profound and pervasive. The WTO dispute settlement system too is coercive because it imposes sanctions. However, it falls short of profundity and pervasiveness. Similarly, although the WTO deals with trade in a broad sense, this falls far short of the reciprocity in states. While the WTO does not generally regulate property, it does regulate intellectual property, and indirectly regulates some prices (e.g., through anti-dumping or countervailing duties). So we respond to the challenge explored in this section as follows. To begin with, we enlist those two strategies to support relationism. Secondly, we turn to the account of shared membership in a state to show that, via those strategies, that particular relation generates especially demanding duties of justice. If the strategies work at all, they support stronger (that is, more comprehensive) obligations among those who share membership in a state than among those who merely share the same trading regime. The strategies that support the very family of relationist views entail that, as far as justice is concerned, there are relevant differences between domestic context and trade. Those who share membership in a state have obligations in addition to those that apply in virtue of subjection to the trading system. Trade justice does not outweigh demands arising in other ways.

72  On Trade Justice

4.8  Trade-As-One-Ground: Putting the View to Work To illustrate how our view works, consider the following scenario offered by Matt Zwolinski.22 Suppose company A exploits workers abroad but improves their situation vis-à-vis their status quo ante. Many would disapprove, but people do not generally disapprove of B for not outsourcing labor and for not improving anybody’s situation abroad. Nor would they disapprove of A for not aiding people indirectly connected to its operations (as bus drivers or bakers are connected to a factory through the equipment they use). “Can it be permissible,” Zwolinski asks, “to neglect workers in the developing world, but impermissible to exploit them, when exploitation is better for both parties?”23 To the extent that people like the drivers and bakers have claims, it is presumably because human rights are violated, including possibly the right to subsistence living. The duty-bearer is the world society as such, with a suitable distribution of obligations among specific actors. The home state should shoulder a fair amount of responsibility to realize human rights of the people who live there, but so should international organizations, other states, and businesses. B might be blameworthy for not getting involved internationally, to make its contribution, or B’s government might have to shoulder responsibility to help people elsewhere rise above a certain level of well-being (which may involve B). A might be blameworthy for not doing enough for people whose lives it affects (e.g., drivers or bakers). For these matters, unlike the exploitation, A is singled out only because A is actually in a position do something for which there is a collective responsibility. By aiding its workers and others who live around its production facilities A would take up some of the shared responsibility. If their standard of living falls below subsistence level, A could be asked to help not because employers as such must always make sure workers can live above a threshold, but because A might be the most suitable agent to execute a collective obligation. This duty arises in the context of trade, not from trading. However, in virtue of standing in a commercial relationship with its workers, A also assumes a special responsibility to them. So A might be guilty of exploitation while also living up to human rights obligations as an entity in the world society.24 So we should modify our initial judgments about A and B. B shares blame for the indifference with which the world society approaches human rights deficiencies. If B does nothing we should disapprove of its performance. The more ­plausible it is that B specifically should rectify failures, the more pressing this judgment becomes. Of A we would approve to the extent that A assumes shared responsibilities, and disapprove to the extent that in the process it violates obligations not to exploit. Pluralism about grounds is appealing because of its accommodating nature: we  can integrate a broad range of considerations that are plausibly put under the  heading of distributive justice, to wit, those that motivate Globality and

Trade as One Ground of Justice  73 Complexity. But pluralism also ushers in the possibility of conflicts as well as questions about priority for agents among different grounds. It is one thing to say duties of justice are of highest stringency; it is another to explain how they reflect a complex structure of multiple grounds. The complications might cloud the clarity that should accompany assignments of duties. These questions arise generally for a pluralist understanding of justice, and specifically when we assess how trade aligns with other grounds by way of generating duties for particular agents. Later chapters explore these matters when assessing obligations of states and companies.

4.9  Justice, Fairness, and Trade Trade is commonly discussed in terms of fairness, and Chapter 5 formulates our principle of trade justice in a manner involving the notion of fairness. So we must investigate the relationship between fairness and justice.25 Often fairness discussions concern distributions of concrete goods, such as inheritances, offices or kidney (offered up for donation), as well as burdens, such as taxes or chores. “Fairness in trade” is more abstract, but similar issues arise. Discussions about fairness also concern processes governing distributions of goods or burdens, but we set aside procedural fairness. One can assess such distributions in multiple ways: one may ask which one maximizes welfare; inflicts the least harm; or best satisfies external goals. But one assesses distributions in terms of fairness if one seeks to ensure people receive what they are owed. Burdens or benefits are distributed unfairly only if they fail to realize stringent claims that capture what people are owed. Furthermore, fairness does not aim to satisfy stringent claims per se but to do so proportionately. Suppose we all equally need a medication, and the more we take, the more we recover. No considerations other than medical need apply. Nobody can complain about unfairness if her claim is not fully satisfied if all claims are satisfied equally.26 Various questions arise. What are the bases for stringent claims, that is, why would anything be owed? If stringent claims arise on different bases, how should we compare them? What does it mean to satisfy such claims “in proportion?” Fairness-talk generically is unspecific in this regard. Claims may well be (and normally are) stringent (i.e., owed) merely in a broad, pragmatic, or context-­ dependent sense. Individuals may offer many considerations to support claims to tax relief, exemptions, rewards, etc. Such claims might be stringent only where, for instance, institutional precedent matters. Considerations of justice overrule such claims. This use of fairness in situations where what is at stake is the proportionate satisfaction of claims that are not matters of justice reflects the fact that the weightiness pertaining to justice is colloquially less associated with fairness. In this pragmatic sense fairness-talk frequently enters discussions about trade.

74  On Trade Justice But then there is also a narrower, justice-related meaning of fairness where stringency is understood in the distributive-justice sense explored earlier. Then the bases are the grounds of justice, such as shared membership in a state or membership in world society. Fair distributions in this narrow sense may not be just since justice requires full satisfaction whereas fairness requires proportionate satisfaction. A situation where everyone’s right to free speech is equally violated might be fair but not just. Generally, suppose it is impossible to satisfy all stringent claims. Injustice prevails. A second-best scenario is to satisfy stringent demands in proportion. Fairness prevails where justice cannot. A just distribution is fair: if stringent claims are fully satisfied, they are satisfied proportionately. Conversely, an unfair distribution is unjust (if indeed considerations of justice apply to this distribution). However, if a situation is unjust, it may not be unfair (as in the free speech example). Justice captures stringency, fairness a kind of balance. Where all stringent claims are fully met, there is balance. Where there is imbalance, some stringent claims are unsatisfied. But there might also be balance in the manner in which stringent claims fail to be realized. So “fairness in trade” has three different meanings once we match colloquial fairness-talk with the grounds-of-justice view. Talk about fairness in trade inherits complexities that arise once we have a pluralistic view of grounds in place and endorse Trade-As-One-Ground as the right image of trade. “Fairness in trade” can mean, first of all, the proportionate satisfaction of claims arising in some pragmatic, context-specific sense somehow involving trade. It can mean, secondly, the proportionate satisfaction of claims of justice that arise in the context of trade, and are thus based on grounds other than trade. Some have demands on their government since trade worsens their situation vis-à-vis others, possibly affecting their status as equal citizens. People elsewhere might have complaints if a country’s policies deprive them of income, or on the basis of common humanity. The basis of their claims differs from that of citizens. But it is the third sense that concerns us most: fairness in trade understood as the proportionate satisfaction of claims arising from trading within subjection to the trade regime as a ground of justice. In this sense, “fairness in trade” simply is “trade justice.” In the context of claims arising from trading, the notion of full satisfaction has no place. In cases where A and B cooperate subject to the international trade regime, to satisfy the cooperation-relevant claims of A and B fully simply is to satisfy them proportionately. To preview then: Chapter  5 develops a view of exploitation and argues that exploitation is a kind of unfairness (in the generic sense presupposing some understanding of what is owed, if only a context-specific one). When occurring specifically within the trade regime such unfairness is an injustice (and its absence justice) because subjection to that regime is a ground of justice, for reasons explored earlier. Trade justice is the absence of exploitation, and thus the absence of a certain lack of proportionality. In this case then there cannot be any “fairness

Trade as One Ground of Justice  75 without justice.” Trade justice—stringency of claims participants in trade have vis-à-vis each other—is captured as a kind of balance already, so balance and realization of claims that arise based on this ground cannot come apart (as they might if stringency of claims is independently understood in ways not inherently involving any of kind of proportionality).27

Notes 1. Metaphysics of Morals, 6:332. The material in this section and the next is developed at length in Risse, On Justice: Philosophy, History, Foundations. 2. Rawls, A Theory of Justice. 3. The principle says “only if ” because the right-hand side states a necessary condition of the distribution on the left-hand side being just, not a sufficient condition. This leaves space for there being multiple principles of justice: there could be several even for the same good and population. 4. For recent literature on social justice, see Jackson, “The Conceptual History of Social Justice.” Important contributions to that literature include Huston, Securing the Fruits of Labor; Fleischacker, A Short History of Distributive Justice; Raphael, Concepts of Justice; Jones, An End to Poverty? 5. Fleischacker, A Short History of Distributive Justice. 6. Nagel, “The Problem of Global Justice.” 7. Rawls, The Law of Peoples. Others have expanded ideas of distributive justice to the global level, ranging from Charles Beitz to Thomas Pogge, Simon Caney and Kok-Chor Tan; (Beitz, Political Theory and International Relations; Pogge, World Poverty and Human Rights; Caney, Justice Beyond Borders; Tan, Justice without Borders.) But those theorists did not pay heed to the complexities as discussed next. 8. For the argument in support of states drawing on limitations of utopian reasoning, see Risse, On Global Justice, chapter 16. 9. Instead of theorizing the world society, On Global Justice still talks about the global order. 10. Barry, “Humanity and Justice in Global Perspective.” 11. Krasner, “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” 2. 12. https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm, last accessed December 9, 2018. 13. On the WTO, see Howse, The WTO System; Trebilcock, Howse, and Eliason, The Regulation of International Trade; Narlikar, Daunton, and Stern, The Oxford Handbook on the World Trade Organization; Hoekman and Kostecki, The Political Economy of the World Trading System. For a short introduction, see Narlikar, The World Trade Organization. For the political history of the trade system, see Barton et al., The Evolution of the Trade Regime. 14. On reciprocity, see Brown and Stern, “Fairness in The WTO Trading System.” Developing countries often lack the market shares required to respond if developed countries open markets to them. In Chapter 5 we use a notion of reciprocity to spell

76  On Trade Justice out what we mean by (absence of) exploitation. That will be a richer notion than the one deployed by the WTO. 15. Recall from Chapter 1 that ideal theory unfolds under circumstances when people are fully willing to comply with moral principles and not prevented from doing so by deprivation. 16. These two principles are: 1. Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all. 2. Social and economic inequalities are to be arranged so that they are both (a) attached to offices and positions open to all under conditions of fair equality of opportunity, and (b) to the greatest benefit of the least advantaged (Difference Principle). 17. For some disagreement between the authors on this point, see Chapter  1. For the distinction between what is just and what can reasonably be expected, see Risse, On Global Justice, chapter 1. What matters here is only that the set of demands of reasonable conduct is broader than the set of demands of justice. 18. For the discretionary/structural distinction, see Mayer, “What’s Wrong with Exploitation?”; Mayer, “Sweatshops, Exploitation, and Moral Responsibility.” The topic is also discussed in Chapter 7. 19. Andrew Walton has argued that all principles we claim (or, alternatively Aaron James claims) are principles of trade justice are best understood as general natural duties (e.g., not to harm) or duties arising from cooperation that is not trade-specific. At best, such trade-independent principles take a particular form when applied to trade but they are not generated by it. See Walton, “Do Moral Duties Arise From Global Trade?” While we emphasize the difference between our approach and James’s, Walton picks up on their similarities. But there are three reasons for rejecting Walton’s reductionist approach. To begin with, Chapter 3 showed how to establish relationist principles in the first place. Secondly, we have argued for the historical significance of trade. Finally, we just encountered some considerations to the effect that worries about exploitation do not vanish in ideal theory. Taken together these points imply that trade justice should not be reduced the way Walton suggests. Perhaps a reduction is technically possible. Still, the philosophically preferred way is to treat trade ­separately. We agree with Walton that the kind of non-exploitation we make central to trade justice applies to a broader range of situations than those involving trading. But we do not consider this an objection. 20. James’s language suggests he recognizes several grounds, but only theorizes one. Perhaps he holds that theorizing trade precedes other matters. This section draws on Risse, On Global Justice, chapters 2–3. 21. Here we follow Sangiovanni, “Global Justice, Reciprocity, and the State.” 22. Zwolinski, “Structural Exploitation.” See also McKeown, “Sweatshop Labor as Global Structural Exploitation.” 23. Zwolinski, “Structural Exploitation,” 167–8. See also Wertheimer, Exploitation, 289–93. 24. It is a different question whether a company deserves praise for taking up a share of global responsibilities if it does so only in pursuit of profit. Presumably it does not. 25. Risse previously published on fairness in trade, see Risse, “Fairness in Trade I”; Kurjanska and Risse, “Fairness in Trade II.” See also Walton, “What Is Fair Trade?”

Trade as One Ground of Justice  77 Walton understands fair trade “as an attempt to offer interim global market justice in a non-ideal world,” Walton, 441. 26. Here we draw on Broome, “Fairness.” For more extensive discussion, see Risse, “Fairness in Trade I.” 27. For an extended list of demands for fairness in trade, see Risse, “Fairness in Trade I”; Kurjanska and Risse, “Fairness in Trade II.” In the discussion of trade in chapter 14 of On Global Justice, only one principle of trade justice appears: that gains from trade must be distributed such that no country enjoys gains “at the expense” of people involved with trade, appropriately elaborated. This limitation to one principle occurs because hardly any of the fairness demands qualifies as a demand of justice. Some of them were fairness demands in the pragmatic sense. While others were demands of justice, they did not arise from the trading, but arose in the context of trade.

5

Exploitation as Unfairness Through Power 5.1  Our Approach We have discussed four images of trade and identified Trade-As-One-Ground as superior. We now argue that the principle of justice associated with trade as a ground, the principle regulating the internal workings of trade, requires absence of exploitation; that is, the distribution of gains from global trade is just only if these gains have been obtained without exploitation.1 This chapter has two parts. The first introduces and motivates our approach. We explain why the notion of exploitation captures trade injustice (section  5.2). We posit its conceptual core identifies a moral defect of voluntary and mutually beneficial interactions that is reducible to neither the outcome nor the process of the interaction (section 5.3). We distinguish among several conceptions of exploitation (section 5.4), each of which accounts for the core wrong-making feature of exploitation, and explain how debates among them unfold (section  5.5). The second part of this chapter defends our preferred conception. We introduce its general version of exploitation as unfairness through power (section 5.6), explain its trade-specific version of exploitation as power-induced failure of reciprocity (section  5.7), and argue that different types of actors can be both exploiters and exploitees (section 5.8). Our account is ecumenical in two senses. In a value-pluralist sense it accounts for multiple exploitation-complaints familiar from alternative conceptions and explains various judgments about when interactions are exploitative. It is ecumenical also in an actor-pluralist sense by allowing for various actors to figure in exploitation-relationships. It is not merely individuals who exploit. Chapters 5 and 6 develop our exploitation-based approach abstractly. Later chapters apply our reasoning to states and firms. This is a heavy-duty chapter but the reward for the labor is what strikes us as a plausible account of trade justice displaying both unity and nuanced complexity.

5.2  Exploitation, Justice, and Fairness Generically, to exploit is to take unfair advantage. By taking unfair advantage of another party in mutually beneficial transactions, exploiters violate the demand On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Exploitation as Unfairness Through Power  79 that everybody gets what they are owed. The ensuing wrong can be reduced to neither the resulting distributive pattern nor the treatment of victims. Why would it be plausible to think about trade justice in terms of exploitation? The long answer is this book as a whole: our account weaves together a broad range of plausible judgments about trade justice. The short answer first reminds readers of the shortcomings of alternative images. In a second step we point to the fit between the phenomena of trade and the type of wrong exploitation captures. Many relevant wrongs can be captured as violations of principles arising in the context of trading but not from trading. Though much broader in scope than trade, “exploitation” captures moral requirements arising from trading. That notion also addresses complaints about a type of interaction for which trade is paradigmatic: it explains what may go wrong when transactions are voluntary and mutually beneficial. Consider how such reasoning applies to wider issues of global economic justice. A long-standing controversy concerns the sense in which the global rich harm or wrong the poor.2 Some think there is no harm or wrong involved because the poor are better off than some decades ago. They cite declining poverty in India and China or point out that the poor cooperate with the rich. These are complex matters, but enlisting exploitation furnishes one response. A theory of exploitation explains how exchanges that are voluntary and mutually beneficial can still be morally wrong.3 How does exploitation relate to justice and fairness? Recall from Chapter 4 that “fairness in trade” has three meanings: first, the proportionate satisfaction of claims arising in some pragmatic, context-specific sense somehow involving trade; secondly, the proportionate satisfaction of claims of justice arising in the context of trade, based on different grounds; and thirdly, the proportionate satisfaction of claims arising from trading subject to the trade regime as a ground. In this third sense “fairness in trade” is the same as “trade justice.” This chapter offers an account of trade justice (fairness in trade in that third sense) in terms of exploitation. Trade justice—justice pertaining to the trading itself, rather than the context of trade—is the absence of exploitation.

5.3  The Conceptual Core The notion of exploitation is closely associated with Marxist theory. Marx and Engels wrote only decades after the Industrial Revolution started to upend ­traditional social and economic patterns. Rural populations were compelled to seek employment in newly established factories in cities. Rigid schedules, long hours, and the dullness accompanying a refined division of labor determined daily life.4 Describing the appropriation of surplus labor by capitalists who own the means of production (factories), the notion of exploitation became essential to socialist thought.

80  On Trade Justice Recent Marxist thinking has contemplated what Marx precisely meant, whether he had several notions of exploitation, whether his views are tenable, and whether contemporary Marxists should care. As a result the notion of exploitation has increasingly been relegated to a concept that is at best secondary (perhaps by picking out exchanges occurring before an unjust background, where the nature of the injustice is pertinent), and at worst hopelessly intertwined with the labor theory of value (which reduces a product’s value to that of the labor needed for its production) that most theorists now consider defunct.5 Time and again, however, philosophers have formulated notions of exploitation beyond Marxist theory that make center stage the idea that exploitation is unfair advantage-taking.6 The Marxist notion might then reappear within a broader debate.7 Exploitation is ubiquitous in moral discourse, and activists’ manifold complaints about one or the other interaction being exploitative seem animated by a common spirit. Still, competing philosophical conceptions vary greatly. We now explore why the lay of this land is so variegated and identify what we consider its conceptual core. Exploitation is a complex notion with descriptive and normative components.8 The descriptive ones delineate the phenomenon and determine when acts count as exploitative. These components must settle questions such as these: Must somebody intend to exploit for acts to be exploitative? Should we speak of exploitation only if it makes exploiters better off? The normative components capture its wrongness and explain why exploitation constitutes at least a pro tanto moral wrong. Exploitation may for example be considered a wrong because it constitutes a failure of respect, is unfair, or because exploiters violate some other duty. Normative and descriptive components are intertwined. What acts one considers exploitative depends on why exploitation is wrong. One’s account of its wrongness will be informed by judgments about what actions to object to on grounds of exploitation. These links also matter for the dialectic among conceptions. Competing conceptions identify different acts or relationships as exploitative, offering varying accounts of its wrongness. Advocates for a particular conception reject alternative conceptions if those fail to properly register instances of exploitation. This failure may take one of two forms. Critics may object that a conception underproduces judgments of exploitation, delivering false negatives and classifying acts as innocent that are exploitative. Or the conception might overproduce judgments of exploitation, delivering false positives and identifying innocent acts as exploitative. Yet there is a common-sense understanding that bestows unity upon multifarious conceptions: to exploit is to take unfair advantage. This colloquial account comprises a claim about an act or interaction (“taking”), as well as one about an outcome, distribution, or transfer that arises through the interaction (“advantage”). Exploitation is a moral defect of a distribution and its history that is not reducible to a defect of either the distribution or its history. The defect of a history or interaction that would count as coercion, oppression, or domination may count as

Exploitation as Unfairness Through Power  81 exploitation only if it generates a particular outcome, a certain distribution or transfer of advantage. The defect of a distribution that would count as allocative unfairness qualifies as exploitation only if it arises from a certain kind of interaction. Exploitation is a hybrid wrong with a combination of interaction and allocation at its heart. In an attempt to capture its core, we understand exploitation as a transfer T or distribution D between parties A and B, which arises as a consequence of interaction I, enabled by some ex ante features F, violating some moral principle P, such that the overall moral defect cannot be readily reduced to a defect of either T, D, I, or F. This view captures the structure of ordinary discourse. Paradigmatically, the moral defect of exploitation lies in the joint occurrence of a certain process and a particular outcome. It also helps explain the nature of the disagreement among competing conceptions. Such disagreement is about how to fill in A, B, P, T, D, I, and F, how to combine them, and to which one to assign explanatory priority. The most fundamental disagreement is about P: what is the wrong of exploitation?

5.4  Competing Conceptions While its wrong combines the defect of an outcome with that of a process, exploit­ ation may violate different norms or principles. According to competing conceptions, exploitation may be a violation of reciprocity, distributive justice, respect, duties of beneficence, rights, voluntariness, or a prohibition against harming.9

5.4.1  Exploitation as Violation of Reciprocity Exploitation may be wrong because exploiters fail to reciprocate appropriately. P is a principle of reciprocity. The intuition is simple: reciprocity requires that if  others incur costs to provide benefits one voluntarily accepts, one should reciprocate.10 Suppose fellow villagers work ten hours building a dam to contain floods. If our house will be protected as a result, we should help. The fellow villagers’ contributions earn them claims to ours. What counts as failure of reciprocity needs spelling out. Do we fail to reciprocate if we do not provide proportionate benefits, such as not adding a certain number of sandbags? Or if we do not incur costs similar to those of others, for example by not spending as many hours working on the dam? Reciprocity-conceptions take different forms. But at their heart is a principle of ordinary morality: to exploit is to wrongfully take advantage of others by benefitting from their actions while failing to reciprocate.11 Exploitation as violation of reciprocity underpins several conceptions in the literature. Exploitation as “excessive profit taking” captures failures of reciprocity in terms of providing benefits:12 the benefit one party provides in mutually beneficial exchanges is disproportionately great compared to what it receives in return.

82  On Trade Justice Exploitation as violation of the doctrine of “just price” captures a failure of reciprocity in terms of costs that transacting parties incur to provide the benefit.13 When prices fail to reflect production costs, “the party who has not received a just price for what he has contributed to the transaction has accordingly been exploited.”14

5.4.2  Exploitation as Violation of Distributive Justice According to a related yet different conception, the wrong lies in the injustice of the distribution from which exploitative transactions arise or to which they lead. The violated norm is one of distributive justice.15 Amongst analytical Marxists fond of this conception, the relevant norms could be luck-egalitarian standards according to which no one should be worse off than anyone else through no fault or choice of one’s own.16 To distinguish distributive-justice from reciprocity conceptions, suppose A engages in unreciprocated exchanges with B that nonetheless lead to a just distribution of the relevant good. The reciprocity conception classifies this as exploit­ative. The distributive-justice conception considers it innocent. The former appeals to standards internal to the transaction: it matters whether benefits or  costs associated with the transaction are comparable. The latter appeals to external standards: it matters if transactions are enabled by or achieve a particular distribution. Again the intuition is plain: the wrong is associated with an unjust distribution of assets. The distributive-justice conception illuminates aspects of Marxist exploitation. Analytical Marxists G.A. Cohen and John Roemer advocate for this conception. It links exploitation and the underlying distribution of productive assets. That is, the wrong of capitalist exploitation stems from the unjust distribution of means of production. For Roemer: a group of economic agents [is] exploited if they would be better off under a redistribution of assets in which everyone in the society were endowed with exactly the same amount of alienable assets, and if their complement [the group with whom they interact economically] in society would be worse off (in terms of income) under this distribution.17

5.4.3  Exploitation as Violation of Respect Another conception focuses neither on the distribution of benefits in the transaction nor on distributive justice in the background, but on how exploiters treat victims. The wrong is violation of respect. In using vulnerability as an opportunity for self-enrichment, or by dominating victims to get them to perform acts they

Exploitation as Unfairness Through Power  83 otherwise would not do, exploiters fail to treat victims with respect. The difference vis-à-vis reciprocity- and distributive-justice conceptions plays out with regard to the underlying rationale, but also when it comes to classifying interactions as exploitative. After all, exploiters might dominate for self-enrichment and take advantage of vulnerability even if there is no injustice in the fact that exploiters have such power. Versions of this conception vary in how they define vulnerability and power.18 Vrousalis, for example, understands vulnerability not in absolute terms as depriv­ ation but in relative terms, as the flipside of power. An individual is vulnerable with respect to somebody else insofar as that other has power over her. But all accounts share the intuition that to exploit is a failure of respect and that exploit­ ation impairs the relationship between exploiter and victim.19

5.4.4  Exploitation as Violation of a Duty of Beneficence Yet another conception regards exploitation as violation of a duty of beneficence or the requirement to protect the vulnerable.20 Even though this account also builds on the observation that in exploitative transactions one party is vulnerable, the wrong is failure to assist where assistance is called for. Vulnerability creates conditions under which vying for advantage should be suspended. The intuition is clear: it is wrong when instead of helping the needy, exploiters further their advantage. Two observations explain the difference between exploitative and non-­ exploitative failures of beneficence. First, to exploit is not just to withhold benefits or protection where provision is required but to try to engineer transfers from victim to exploiter where the opposite is called for. Moreover, the failure involves more than a violation of a general duty. The duty to assist and protect has been rendered specific through the interaction. It is a particular party to whom its execution is assigned. Once one becomes a duty-holder through such interactions, it is wrong not to help.

5.4.5  Exploitation as Benefitting from Rights Violations This account sees the problem of exploitation in the fact that exploiters stand in a particular relationship to a rights violation. Exploiters do not directly violate rights but reap benefits from such violations which they would not reap otherwise. Suppose A can purchase goods for a low price from B. Suppose this is so because potential buyer C, who would otherwise pay more, had her money stolen. A exploits B.  Similarly, A exploits B if B’s rights have been violated such that she accepts a lower price than she otherwise would. Each time the exploiter is better off because somebody’s rights were violated. The wrong is benefitting from rights violations.

84  On Trade Justice Violation-of-rights conceptions come in variants, depending, for example, on the underlying view of rights. Suppose a narrow understanding reduces rights to property rights. Let us also assume a narrow view of how such rights are violated, for instance only through theft. Then relatively few transactions are exploitative. Relying on a wider notion and including additional ways of how rights are violated generates larger sets of exploitative transactions.21 What matters is the combination of history and transfer. Without violations in its history the transaction would be innocuous with regards to exploitation. Without particular distributions or transfers in comparison to counterfactual baselines there would be no exploitation.

5.4.6  Exploitation as Violation of Voluntariness Proponents of a penultimate conception argue that (perhaps appearances notwithstanding) exploitative transactions are not fully voluntary. It may not be obvious that transactions occur under duress. On the surface, entering sweatshop contracts seems voluntary. Workers are free to work elsewhere, start businesses or do subsistence farming. But voluntariness could still be violated. There are deficits of voluntariness, for example, if one’s range of options is severely limited. Given the difficulty of starting a business and the dismal subsistence level farming permits, it may be rational to enter transactions with sweatshop owners. However, given the limits and nature of the option set, the transaction may fail to be relevantly voluntary. Exploitation here is a coerced way of apportioning a cooperative surplus.22 There are different ways for coercion to coexist with apparent voluntariness and free choice. Jeffrey Reiman argues that if a choice set (e.g., with the option of interacting on disadvantageous terms or not interacting at all) is forced upon you, the choice itself is forced.23 Choices between working in a shoe factory or a t-shirt factory merely appear free if the owner of both presents these options after eliminating alternatives. Cohen argues that persons who are individually free to choose may be collectively unfree to choose.24 While workers may individually start a business, they may not be collectively free to do so if the economy only sustains a small number of such businesses.

5.4.7  Exploitation as a Way of Harming A final conception builds on the observation that there is a difference between two ways of harming somebody. The first is harming somebody by adversely affecting her interests if the realization of her interests impedes the realization of  one’s own interests. The second is harming somebody by adversely affecting her interests because her involvement is instrumental to realizing one’s own interests.25 Consider how this distinction appears in the ethics of defensive killing.

Exploitation as Unfairness Through Power  85 An instance of the first kind of harming could be lethal deflection of a person hurtling towards oneself from a great height. An instance of the second kind could be killing innocent bystanders by using them as shield to protect oneself. That the former may be permissible while the latter is not is explained by the fact that the latter is exploitative: using somebody as a shield is taking unfair advantage.26 To understand the wrong of exploitation as one party benefitting by harming another such that the first party benefits only because of the second party’s sheer existence has purchase on economic transactions. Guy van Donselaar has developed a conception of exploitation as parasitism.27 Exploitation occurs when one party harms another by utilizing their existence in particular ways. Whereas pollution by upstream producers merely harms downstream farmers, producers who get farmers to pay them for not polluting the river exploit the farmers by instrumentalizing the farmers’ presence for their own ends. The producers benefit from the farmers’ existence. The farmers would be better off without them.

5.5  The Argument among Conceptions Advocates of different conceptions argue that since alternatives fail to properly register instances of exploitation, these mischaracterize its wrong-making features. As discussed previously, arguments among different conceptions usually unfold around two strategies. The first identifies cases where competing accounts classify interactions as exploitative that are in fact non-exploitative, that is, they produce false positives and misconstrue sufficient conditions of exploitation. The second identifies cases where competing accounts fail to classify interactions as exploit­ ative that actually are. This strategy argues an account produces false negatives and hence misconstrue necessary conditions. This section illustrates how these strategies are deployed against each conception discussed above. Critics of the first conception argue failure of reciprocity cannot be the wrongmaking feature because there can be such failures without exploitation. To see why violations of reciprocity may not be sufficient and why it thus overproduces judgments of exploitation, consider the practice of gift-giving.28 When A offers B gifts, the exchange violates reciprocity. Failure of reciprocity is arguably essential to gift-giving, but it would be mistaken to argue one party exploits another. Giftgiving belongs to a class of cases where non-reciprocal exchanges are innocent. Consider another example: poor locals may sell souvenirs to rich tourists at high prices, giving rise to unequal exchanges and violating reciprocity. It would be odd to argue the locals wrongfully exploit them.29 Finally, there are relevant differences that those seeing failure of reciprocity as sufficient for exploitation cannot capture. A violation that is merely an instance of free riding is less of a moral problem than if un-reciprocated exchange occurs through force. For the reciprocity conception, both are on a par.

86  On Trade Justice Critics of the distributive-justice conception argue background injustices cannot be the wrong-making feature because there is exploitation without failures of distributive justice. To see why such a failure is not necessary consider the tale of the ant and the grasshopper. Having saved for the future, the hard-working and prosperous ant makes an exploitative offer to the happy-go-lucky but now needy grasshopper. Since there is no injustice in the distribution of assets, the grasshopper’s predicament after all reflects his choices, the distributive conception registers no complaint.30 But there is something specifically wrong about certain ways of relating to others independently of the justice of the background distribution. A view of exploitation unable to capture that wrongness fails. Critics of the respect conception argue that failing to respect by dominating or taking advantage of vulnerability cannot be the wrong-making feature because there are instances of such advantage taking without exploitation. To see why agents may take advantage of somebody’s vulnerability without exploiting her, suppose electricity providers have power over consumers who need to store medicine at low temperatures. As long as the distribution of the benefits created by the transaction is fair, there is no exploitation even though electricity providers take advantage of consumers’ special needs and vulnerabilities. Considering the transaction between provider and user exploitative overproduces judgments of exploitation.31 The respect account registers many apparently innocent transactions as exploitative. There is nothing inherently wrong with taking advantage of vulnerabilities. We do not exploit butchers or bakers using their dependence on our demand to satisfy desires.32 To see why disrespectful exercise of power is not necessary, consider cases where unfair advantage is taken in its absence. Suppose unemployed musicians offer lessons to high-school students. They do not drive hard bargains whereas oblivious students offer low wages. The underpaid musicians suffer unfair disadvantage. And yet the judgment that they are exploited is unavailable on the respect conception.33 Critics of the beneficence conception argue that failing to benefit the vulnerable cannot be the wrong-making feature because one may benefit the vulnerable while (and possibly only through) exploiting them. Somebody might be able to engage in mutually beneficial transactions with a person in need only on exploit­ative terms. Textile producers who insist they can offer poverty-reducing employment only under sweatshop conditions illustrate the point: if their empirical claims survive scrutiny, exploitation might be a way of being beneficent. Critics of the rights conception argue that rights violations in the transaction’s history cannot be the wrong-making feature because there might be such violations without the transaction being exploitative and there are exploitative transactions without such violations. To illustrate the first case, consider a sailor who offers to rescue a drowning swimmer only if she agrees to pay a large amount. A modified version sports two sailors. The first is on a boat with two life vests, the second has no vests. Before encountering the swimmer, the second steals a vest.

Exploitation as Unfairness Through Power  87 The transaction with the swimmer differs from what would occur absent that ­violation. Instead of the first sailor rescuing her for a large sum, the sailors undercut each other’s offers. Eventually the swimmer is rescued for a sum barely reflecting the first sailor’s opportunity costs. The rights-based conception mistakenly classifies the rescue as exploitative. To illustrate the second option and show why a rights violation is not necessary recall the ant and the grasshopper. The ant exploits the grasshopper even though no rights have been violated. Critics of the failure-of-voluntariness conception insist there is exploitation without violations of voluntariness, and there are such violations without exploit­ ation. To see why such violations are not necessary consider cases where an interaction occurs on exploitative terms even though there are reasonable alternatives. Suppose welfare-state provision offers such alternatives to wage labour. There could then be no exploitation within welfare-state capitalism, a judgment Marxists especially would loathe accepting. Many market transactions satisfy standard conditions of voluntariness and still seem problematic. The aforementioned musicians may transact with students freely and voluntarily. Yet they might be taken unfair advantage of. Insisting exploitation is a failure of voluntariness means dropping the tools to capture the wrongness of these transactions. The welfare-state example also reveals why non-voluntariness is not sufficient. Contributions are non-voluntary, and welfare-state provisions involve transfers from the rich and working to the poor and unemployed. The latter would exploit the former. Critics of the harm conception argue harming victims in a particular way cannot be the wrong-making feature because the relevant harm can occur without exploitation. There could also be exploitation without such harm. For this second objection, consider two farmers working on a commons. After privatizing parts of the commons and inventing efficient farming, the first farmer offers the second farmer employment. Using the power of her superior bargaining position, the inventor offers unfair terms of employment. But even though the wage would be exploitatively low, it would leave the second farmer better off than working the commons. This would not be an instance of opportunistic harming as set out above, since the second farmer would not be better off without the first farmer’s existence. Nonetheless the first exploits the second.34 At the same time, opportunistic harming cannot be sufficient to define exploitation if it occurs under circumstances of ordinary and fair competition. Suppose a company invents technology to outcompete rivals but ultimately sells its patents to a rival. For the rival, buying the patents is better than losing customers. This case seems innocuous. How to respond to the predicament that several competing conceptions of exploitation are available? Three responses are available. A reconciliatory response is that different conceptions divide up normative terrain differently without dis­ agreeing on substantive issues. Even where advocates disagree on whether transactions are exploitative, they may converge on the level of all-things-considered

88  On Trade Justice judgments and agree the transactions are permissible. And even though advocates of one conception may identify actions as exploitative that others consider non-exploitative, they may agree the actions constitute a pro tanto wrong. That transactions between, say, a utility company and clients are all-things-considered permissible is compatible with their being exploitative. Pro tanto wrongness may be outweighed by other considerations. That transactions, say, between a music teacher and her students is morally problematic is compatible with their not being exploitation. A different wrong might render them problematic. A second response sketches different ways to defend conceptions against charges of not getting the sufficient conditions right and thereby overproducing judgments. First, advocates may supplement their conception with materials drawn from alternatives. Advocates of the respect conception may argue, for example, that exploitation occurs when exploiters use power and resulting transfers violate reciprocity. Secondly, advocates may try to avoid false positives by emphasizing that exploitation is a particular violation of relevant norms and by refining under what circumstances violations are exploitative. Advocates may argue exploitation occurs only if violations of reciprocity are enabled by ex ante features F, and so on. A final response explains how best to react to the problem of not getting the necessary conditions right and, as a result, underproducing judgments. To deal with false negatives one may embrace an ecumenical account. Exploitation is a complex concept, with a hybrid wrong not reducible to process or outcome at its core. Taking the manifold exploitation complaints in ordinary discourse seriously, one should not insist that whenever there is exploitation one and the same norm is violated in the same way. A plausible conception should be ecumenical and make room for multiple concerns. All three responses inform our preferred account of exploitation.

5.6  The General Account: Unfairness Through Power We defend a general conception of exploitation as unfairness through power, and a trade-specific interpretation of this general conception, as power-induced failure of reciprocity. Our account is ecumenical in a value-pluralist sense: it accommodates multiple exploitation-complaints familiar from alternative conceptions and explains judgments about when interactions are exploitative. It is ecumenical also in an actor-pluralist sense by allowing for various variables to enter the exploit­ ation relationship. It is not merely individuals who exploit. Group agents and nonagential groups can be exploiters and exploited. Structures too can be exploitative. One ought to embrace our account of exploitation as unfairness through power, first, because it is the best response to the disagreement among different conceptions. It tracks occurrences of exploitation-talk that are prominent in ordinary

Exploitation as Unfairness Through Power  89 life. We should take this plurality at face value, rather than eliminate it at the cost of failing to match ordinary talk. Secondly, our account provides a flexible but unified toolkit to capture normative concerns about trade. The general account is not concerned with justice or trade per se but deals with exploitation broadly. The specific account, exploitation as power-induced failure of reciprocity, is the general one spelled out for trade as a ground of justice, where it serves to formulate the principle of justice associated with that ground. Finally, our account explains when, notwithstanding its pro tanto wrongness, exploitation may be permissible or even required, questions we discuss in Chapter 6. Understanding exploitation as unfairness through power possesses the dual virtue of achieving conceptual unity and making room for a variety of exploitation complaints. It maintains the unity and specificity of the type of wrong targeted by judgments of exploitation by capturing the common structure of relevant instances of unfair advantage-taking. The wrong of exploitation cannot be reduced to complaints about distributions but involves joint violations of distributive and interactional norms. There is unity and specificity to the wrong of exploitation because instances are failures of fairness produced and facilitated by use of power. At the same time, there is variety and pluralism contained in understanding exploitation as unfairness through power. Use of power may violate different norms, and requirements of fairness may fail in various ways. We first motivate our account by explaining the basic intuition underlying it, then introduce the notion of power, and thirdly revisit our account of fairness to show how it accommodates insights from alternative conceptions. Finally, we argue our account of exploitation is the best response to disagreements among competing conceptions.

5.6.1  Basic Intuitions We build on the observation that exploitation sits in the “realm between coercion and unfairness.”35 Victims do not merely suffer from unfairness—generically, as explained in Chapter  4, the failure to satisfy at least in proportion something owed to them—but are also taken unfair advantage of. Exploiters do not just benefit from unfair distribution but also treat victims in particular ways, making or at least inducing them to do things they would not otherwise do. Without the ensuing unfairness, that treatment would be another instance of questionable “ways of getting people to do things,” 36 no different from coercion or domination. Similarly, victims do not merely suffer coercion, oppression, or domination. They suffer setbacks to interests or frustration of fairness-claims. Crucially, the wrong is joint violation of an interactional and a distributive norm such that the violation of the distributive norm results from the violation of the interactional norm. Exploitation complaints are twofold complaints about unfairness and about being treated in certain ways. Exploitation is unfairness through power.

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5.6.2  Power Unpacked The wrong of exploitation resembles that of coercion. For even though the notions differ in underlying mechanics and descriptive components, they are instances of somebody exercising power in which similar norms are violated. Considerations that speak against coercion also speak against exploitation. Conceptualizing exploitation as unfairness through power recognizes that exploiters exercise power over exploitees. An analysis of power in general and as a component of exploitation in particular comprises four elements.37 To begin with, there are the features establishing the power relationship. The exploitee’s interests and the exploiter’s capacity to affect them normally explain why exploiters have power over exploitees.38 Power is the ability to get people to do things they otherwise would not do, do differently, or do for other reasons, by affecting their interests or incentive structures.39 So analyzing power presupposes, secondly, an understanding of what people have reason to do independently of power relationships.40 Thirdly, there are different ways in which (here) exploiters may affect interests or incentive structures, that is, different modes of exercising power. Power may be exercised by setting back interests, through force, or through threats. But as exploitation scenarios illustrate, it is also possible to get people to do things by advancing their interests.41 Interests may be affected when individuals decide among options, at earlier stages of determining the range of options, or by influencing what parties perceive as their interest.42 Finally, there are the outcomes exploiters can achieve that way, for example, a particular distribution or transfer. Exploiters have the “power to” achieve results in virtue of having “power over” exploitees.43 Exercise of power by exploiters constitutes a pro tanto wrong in virtue of violating important norms. These norms are grounded in the victim’s status as an agent. They prohibit acts that constrain agency, including norms against interference or imprisonment. More precisely, norms against violating agency protect the ability to act for one’s own reasons. In using power exploiters make it impossible for victims to act on their own reasons. The ability to get others to act for reasons which are not their own is what coercers, oppressors, and dominators share with exploiters.44

5.6.3  Fairness Revisited Fairness requires proportionate satisfaction of claims, something that is owed to people. We can render the concern for fairness in our conception more precise by examining the interactive settings within which exploitation occurs, by establishing what counts as a relevant benefit, and what counts as a basis for claims. Generically, exploitation occurs when in cooperative interactions the distribution

Exploitation as Unfairness Through Power  91 of the surplus fails to satisfy all relevant claims. The nature of the cooperative interaction or relationship matters for how we should understand benefits and claims. Benefits may be provisions of public goods or cooperative surpluses. Claims to benefits may arise on account of contribution, effort, or need. Failures to proportionately satisfy all relevant claims generate unfairness. There is exploit­ ation if such failures are due to one party’s power.

5.6.4 Pluralism In what sense is exploitation as unfairness through power pluralist and ecumenical? Our answer comes in two steps: first by explaining the mechanisms through which several normative concerns can be integrated, and secondly by showing how to accommodate exploitation complaints underpinning the alternative conceptions discussed previously. Power is exercised in multifarious ways, by different kinds of actors, and norms violated by exercise of power can be embraced from various perspectives. Modes of exercising power include taking advantage of bargaining positions, force, violence, or elimination of options. The fact that some ways of exercising power may violate more stringent norms than others, or that norms may be violated to varying extents, explains why some instances of exploitation are worse than others. Importantly, the norm against exploitation (i.e., not to violate the victim’s status by getting her to perform acts she otherwise would not do) can be embraced from different angles. It might be based in self-ownership, separateness of persons, or the maintenance of valuable relationships. A second source of pluralism in our account comes from the idea of fairness claims. There are different kinds of claims whose proportionate satisfaction may be required as a matter of fairness. Depending on context and type of interaction, claims of need, contribution, or sacrifice may require such satisfaction, generating different types of exploitation complaints. Complaints about exploitation expressed by earlier conceptions reappear in three ways. First, exploitation as unfairness through power captures a subset of the complaints other conceptions register. Consider the reciprocity, respect, beneficence, and voluntariness conceptions. Failure of reciprocity may be failure of a particular kind of fairness and qualifies as exploitation if it arises through power. Exploitation as failure of respect is straightforwardly captured by exercise of power. On our account, failure of respect is exploitation where it produces unfairness. Concerns underlying exploitation as a failure of beneficence register as failure to proportionately satisfy claims of need. Failure to proportionately satisfy claims of need is exploitative if it is due to power. Similarly, non-voluntary unfairness qualifies as exploitation to the extent that non-voluntariness is due to power. Each time, the relationship between our account and others is the same.

92  On Trade Justice Those conceptions focus on aspects of exercise of power or on unfairness. Ours focuses only on the intersection: exploitation occurs where unfairness arises through power. Secondly, and conversely, other conceptions identify subsets of the complaints our view covers. Exploitation as a way of harming is structurally similar to our view. Victims suffer setbacks by being instrumentalized. However, that account is too narrow, merely offering one instantiation of unfairness through power. Suffering harm at the hands of exploiters is a severe kind of unfairness. But sometimes instrumentalization generates unfairness that benefits both parties. The conception of exploitation as a way of harming, unlike our conception, cannot accommodate such cases. Finally, familiar conceptions are linked to ours indirectly. Exploitation as unfairness through power is not simply a narrower version of the distributivejustice or violation-of-rights conceptions, nor are those conceptions partial or specific instantiations of ours. Yet they do throw light on exploitation-enabling conditions (feature F). The distributive-justice account illustrates that distributive injustice might enable exploitative transactions by empowering exploiters. While its wrong cannot be reduced to distributive injustice, some instances of exploit­ ation arise against the background of distributive injustice. While we disagree with the violation-of-rights conception by insisting the wrong of exploitation cannot be reduced to that of benefitting from rights violations, such violations explain the wrong of exploitation in some instances. Transactions with rights violations in their history are exploitative if the violation explains a power differential that creates unfairness. We preserve such insights in our account by integrating distributive injustice and violation of rights as factors that give exploiters power.45

5.6.5  The Argument Why adopt our account? In short, it offers the best response to the disagreement among competing conceptions. The longer answer has three parts. Exploitation as unfairness through power addresses the problem of false positives, supports a promising strategy for dealing with false negatives, and combines advantages of various other conceptions. We avoid false positives by denying that failure of fairness or use of power are individually sufficient for exploitation. Conceptions focusing exclusively on failures of respect or exercise of power generate false positives where interactions constitute innocent transactions in light of power asymmetries. Recall the utility company offering services at reasonable prices to the vulnerable, or the butcher and baker being instrumentalized by customers. Our conception avoids identifying such transactions as exploitative by recognizing that even though actors exercise power, unfairness does not necessarily ensue. Conceptions focusing exclusively

Exploitation as Unfairness Through Power  93 on failures of reciprocity or claims of needs generate false positives where standards of reciprocity or requirements to satisfy needs are violated in innocuous ways, including gift-giving or ordinary competition. Standards of reciprocity or requirements of beneficence are violated, but not via exercise of power.46 Not all unreciprocated exchange is exploitative. Our strategy for dealing with false negatives comprises two elements. We agree that some conceptions (e.g., exploitation as a way of harming or as failure of voluntariness) underproduce judgments of exploitation. Our account avoids false negatives by offering a more general version of the accounts in question, and by virtue of its pluralist nature. The harming conception underproduces judgments since there might be exploitation without harming, for example where worker and capitalist are better off transacting. The voluntariness account does so because exploitation may occur even in voluntary transactions, for instance when individuals voluntarily accept job offers, maybe even against the background of a functioning welfare state. We incorporate the harming and voluntariness accounts but avoid such false negatives. While harm understood as setback to interests could be a severe failure of fairness, there can be unfairness in mutually beneficial transactions. While genuine involuntariness is one way in which power is exercised, there are others that render a transaction exploitative. In other cases we disagree that an account underproduces judgments. The alleged wrong of exploitation then is not genuinely one of exploitation. This is the reconciliatory strategy from section 5.5. Consider false negatives allegedly generated by the respect conception, where substantive unfairness arises without anyone exercising power or treating anyone disrespectfully, as in the case of the music teacher. These cases are best accommodated by not insisting on the specific wrong of exploitation. There can of course be unfairness, or any moral wrong, without exploitation. The wrong of unfairness might be aggravated by arising through power. But piano teachers may receive unfair wages without being exploited. Our account combines advantages associated with familiar conceptions. First, it differentiates among more or less severe instances. Certain ways of exercising power constitute graver violations than others. Unfairness through power that violates more fundamental claims is more severe than other instances of unfairness through power.47 Secondly, our conception distinguishes among types of exploitation across contexts. Examining how exploiters exercise power, for example through violence or bargaining advantages, and checking what fairness claims are at stake, generates different modes of exploitation. Various modes matter differentially for different types of interactions or relationships, within interpersonal relationships or market transactions, delivering a conception that offers a unified perspective on exploitation in a large domain of activities. For trade, exploitation as unfairness through power is best interpreted as power-induced failure of reciprocity.

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5.7  The Trade-Specific Account: Power-Induced Failure of Reciprocity Applying our conception to trade requires answering three questions: What are the relevant fairness claims? What are paradigmatic modes of exercising power? And what actors can exploit and be exploited? Our answers support the view that in the context of trade, exploitation should be understood as power-induced failure of reciprocity. This section answers the first two questions. Section  5.8 addresses actors and agency. On our general understanding, fairness may be concerned with different claims, including claims of need, desert, and so on. But what are the relevant claims in the domain of trade? We respond in four steps. The first relies on the nature of trade as a ground of justice and delivers the idea of reciprocity as fairness in cooperation. The relevant claims now are those arising from trading rather than merely in the context of trade. Since trade is a particular type of structured cooperation for mutual gain, fairness requires all cooperation-relevant claims be satisfied proportionately. Within structured cooperation for mutual gain, the basis of claims is provision of benefits to cooperators. Actors have a claim of fairness to reciprocation against those whom they benefit and who voluntarily accept. Questions of fairness arise as questions of reciprocity. The second step renders reciprocity more precise. There are two ways for provision of benefits to generate claims of reciprocity. Cooperators have claims both in virtue of providing benefits and of incurring costs for doing so. To assess what proportionate satisfaction requires, the two should be combined (e.g., in a notion of net benefit, subtracting costs from benefits received, or adding costs incurred to benefit provided). But they should be kept separate in the initial analysis. There could be failures because actors bear disproportionately large costs of cooperation, or because others receive disproportionate benefits. The third step explains how to understand costs and benefits when reciprocity in trade is at stake. Considerations of well-being and agency both matter with regard to individuals as well as collectives that jointly pursue important interests. Considerations of well-being are readily subsumed under gains from trade. They might accrue directly to individuals, as consumers or producers, or indirectly to  collectives to which individuals belong, including states that formulate trade policy. Where individuals and collectives find their well-being advanced, trade generates benefits. Where they find it decreased, trade creates costs. Agency considerations matter too because trade policy bears on what individuals or groups can do. Where individuals and collectives find option sets enhanced, they benefit. Where they find them contracted, trade creates costs. Finally, failures of reciprocity need not occur within one transaction at one time. There are synchronic failures, but there are also diachronic ones, for example where reciprocity requires that different actors take turns occupying particular

Exploitation as Unfairness Through Power  95 roles or performing tasks. As far as trade is concerned, fairness is a matter of reciprocity, demanding that claims from cooperation be satisfied proportionately. These claims arise because individuals and collectives create benefits and incur costs. How are such failures induced by power? It is, first, important to understand what features enable power. Distributive injustices or past violations appear in our discussion above. However, other factors, such as accidents, may similarly generate bargaining differentials or relationships where some wield power over others. Secondly, there are various modes of exerting power. Power may be exercised formally, for example where official rules bestow decision-making power, or informally, where, say, some actors can alter somebody else’s option set. Power may be exercised directly, through force, or indirectly, for example through threats. Wealthy states may use bargaining power to uphold trade barriers while poorer countries are required to reduce them. Companies may trigger failures in reciprocity if they benefit disproportionately at the expense of workers. Later chapters say more about these matters. Next we explain how actors like states and firms figure in exploitation relationships to begin with. But first let us review how we connect justice, fairness, exploitation, and trade. This chapter has developed a general account of exploitation in terms of unfairness through power. That account deploys the generic sense of fairness as satisfaction of claims to something one is owed (in some, possibly only context-specific, sense). When applied to trade the relevant claims of reciprocity are grounded in trade between actors who are subject to the international trade regime: unfairness-through-power turns into power-induced failure of reciprocity. Trade is a ground of justice, so not to bring about power-induced failures of reciprocity is a demand of justice. That there be no exploitation understood as power-induced failure of reciprocity is the principle associated with trade as a ground of justice, the principle of trade justice. So we define trade justice in terms of exploitation, which is absence of a particular kind of unfairness, spelled out in terms of reciprocal demands that those involved in the trading have. In addition to trade justice (concerned with claims of justice that arise from trading) we also encountered (1) demands of justice arising in the context of trade, which turn on other grounds in addition to trade, (2) demands of fairness arising in the context of trade which require proportionate satisfaction of claims identified under (1), and (3) fairness-in-trade demands which are loosely understood as involving context-specific demands to something owed to people and are somehow connected to trade.48

5.8  Actor Pluralism On many conceptions, exploitation occurs among individuals. Our account is ecumenical also by moving beyond such an understanding. Group agents can

96  On Trade Justice exploit and be exploited. Exploitation might also occur where exploiter, exploited, or both are non-agential groups. Structures too can be exploitative.49

5.8.1  Non-Individual Exploitation We can readily extrapolate non-individual exploitation from an account of individual exploitation because any agential prerequisites required for individual exploitation have analogues at the level of groups. In a second step we explain why it makes sense to speak of group agents as exploiters and exploitees even where there are no individual exploiters or exploitees. One reason for keeping the individualist paradigm might be a belief that the nature of the wrong restricts who can exploit or be exploited. Exploitation, one may argue, can occur only among agents. We grant this for now but note that there are ways to make sense of non-individual agency. Let us consider one, starting with a twofold characterization of agency.50 To begin with, agency requires the ability to form beliefs and desires, as well as the ability to act on them. Secondly, agency implies normative standards (e.g., rationality), and warrants modes of interaction such as criticizing and blaming. Individuals satisfy both conditions. But within suitably structured groups, too, independent attitudes emerge at the collective level, supervening on individual attitudes, and generating normative standards and agent-like modes of interaction. Such groups include states, firms, universities, unions, or international organizations. Demystifying group agency is demystifying non-individual exploitation. Group agents can take unfair advantage and be taken advantage of. But are not cases where group agents exploit always cases where (some or all) individual members exploit? Are not individuals the victims where groups are exploited? There are at least two ways for group exploitation to emerge as a phenomenon in its own right. To begin with, exploitative interaction I may be appropriately ascribed to groups. The action-guiding attitude might emerge at the group level. Apparel companies might pay low wages without any associates intending to do so. Similarly, exploiters might primarily manipulate a group agent and only derivatively get individuals to act in certain ways. A company using power to get suppliers to produce at low prices primarily exploits them as group agents. Secondly, sometimes exploitative transfer T or distribution D generates benefits that are collective rather than individual. Abolishing regulation benefits companies rather than any employee. Similarly, disadvantages might be understood as suffered by groups rather than any individual. Reducing a state’s votes in decision-making of international organizations harms the collective rather than any citizen. Those skeptical of non-individual exploitation may insist that whenever there are group agents taking unfair advantage, there are individual exploiters such that apparent instances of non-individual exploitation are reducible to individual

Exploitation as Unfairness Through Power  97 exploitation. So, to illuminate how exploitative interaction I can be genuine group action, imagine a case where attitudes relevant to exploitation exist at the group level without any member having them. Suppose individuals A, B, and C form group G.  Whether they individually have attitude Z depends on whether they have necessary attitudes W, X, Y.51 The group attitude emerges from aggregating W, X, and Y:  

W

X

Y

Z

A B C G

Yes No Yes Yes

Yes Yes No Yes

No Yes Yes Yes

No No No Yes

Where the exploiter is group G, G develops exploitation-relevant attitude Z by aggregating individual attitudes W, X, and Y (each exhibited by a majority of A, B, and C), such that G exhibits Z even though no individual does. Suppose G is a company and A, B, and C are partners. G contemplates employing workers in sweatshops (Z). The decision depends on three factors. Is it profitable (W)? Is it morally permissible (X)? Is it sustainable (Y)? They will go ahead only if answers to all questions are affirmative. Each partner believes the answer to at least one is  negative. Hence no partner endorses sweatshop employment and no such employment should occur. But for each question a majority answers affirmatively. If they vote on W, X, Y and accept whatever follows for Z, G implements Z although no partner wishes to do so.52 To check if non-individual exploitation is an independent phenomenon, one must answer several questions: Is it an individual or group who exploits? Who violates obligations not to exploit, and whose behaviour or functioning therefore ought to change to end exploitation? Trade features many cases where group actors, most importantly companies and states, are exploiters. Workers in developing countries are exploited by companies. Farmers from the Global South are taken advantage of through protectionist policies. Group exploitation is an independent phenomenon.

5.8.2  Non-Agential Exploitation Let us turn to non-agential exploiters and victims. First, we rebut resistance to the idea of non-agential exploitation. Secondly, we illustrate how non-agents can be exploiters and victims. One reason to insist only agents can exploit is that only intentional advantage-taking is wrong: If exploitative interaction I is wrong, if I can be wrong only if intended, and if only agents can intend I, then there is no nonagential exploitation. However, whether somebody is wronged is not a function of

98  On Trade Justice attitudes of exploiters. Interaction I could be wrong and still be non-intentional, for example if exploiters merely foresee that by performing I, they benefit at somebody’s expense. Most exploiters deny they intend to take unfair advantage. They may intend to advance their well-being, or raise funds to cure neglected diseases. Exploitation is a foreseen and unfortunate side effect of other (intended) acts. Exploiters would much prefer proceeding without exploitation. But that benefitting at someone’s expense is merely foreseen does not make it innocent. Actions can be exploitative even if no wrong is intended. Critics might accept non-intentional exploitation but insist that there still must be agents who actually perform interaction I, for instance in the sense of foreseeing I and being able to avoid it. But first and generally, it is wrong to move from “interaction I counts as exploitative only if produced through agency” to “interaction I counts as exploitative only if produced by an agent.” Just as it would be wrong to move from “climate change is man-made” to “there is some man or woman who made it,” it would be mistaken to conclude from the claim that exploitation is intended, foreseen, or avoidable that there is one agent who intends, foresees, or can avoid it. The notion of agency is ambiguous here. That there are agents who together exploit does not mean there is an exploiting agent. Secondly, more specifically, foreseeability and avoidability do not presuppose agency. We can think of a group as foreseeing aggregate effects of its actions without that group being an agent. Non-agential groups (e.g., social classes) can coordinate activities, anticipate consequences, and advance common interests without exhibiting features characteristic of agency at the group level. Those who believe only agents can be victims may rely on similar reasoning: being the victim presupposes agency because the wrong of exploitation can only be committed against agents. The norms P violated in exploitation are interactional norms that apply to conduct vis-à-vis agents, including not to direct and control actions of others in certain ways and to respect their agency. But, to begin with, violations may consist in reshaping patterns of actions of individuals who do not form a group agent, but who—as a consequence of exploitation—act together in ways different from what they would otherwise do. Consider demonstrators who do not form a group agent but nonetheless coordinate activities and depend on each other for success. Officers who provoke them so they can test their water cannon take unfair advantage of that group, rather than any individual within it. That is so even though no group agent is targeted. Secondly, exploitation-enabling feature F might consist in the absence of agency and the advantage accruing to exploiters might be to prevent formation of  agency. Consider workers in a factory who do not qualify as a group agent because they cannot coordinate activities. Employers might take unfair advantage of their inability to unionize. Then lack of agency enables exploitation. The victim is a non-agential group.

Exploitation as Unfairness Through Power  99

5.8.3  Three Ways for Non-Agential Exploitation to Occur First, there are cases in which a division of labor entails that no individual takes unfair advantage but the coordinated activity of non-agential groups does. Consider individuals A, B, and C: A is a good swimmer, B is drowning, and paraplegic C needs a kidney. Suppose A offers B to rescue her if B gives C a kidney. A does not exploit B because A does not benefit at B’s expense. Nor does C exploit B because C has no power over B. But A and C together exploit B. The features characteristic of exploitation appear in the pattern of A’s and C’s actions. Exploitation in market economies will be closer to such a division-of-labor model than to the individualist paradigm. A division of labor may unfold along several lines. In economies where management and ownership of firms come apart, those who direct actions of the exploited are not necessarily those who benefit. Non-agential exploitation occurs because a pattern of action (amounting to unfair advantage taking) emerges through coordination among agents who do not constitute a group agent but perform various parts in some pattern. Advantage is taken without any unified agent doing so. Secondly, and focusing on victims, consider cases where groups are primary victims of transfer T or distribution D.  Suppose one hundred individuals (“­residents”) are about to sell houses to a developer (“Mister T”). If only a few do, the value of each house remains V. If many do, the value after the sales will be the much higher V*. This is so because to potential buyers (“yuppies”), the neighbourhood is more desirable without these residents. Separately and simultaneously entering negotiations with Mister T, many sell for V.  Mister T then sells to yuppies for V*. No individual resident is taken unfair advantage of: when transacting each received full value. But since the combined value of all houses sold exceeds the sum value of each house sold individually, the residents as a group do not receive full value. T takes unfair advantage, not of any one resident, but of the group. Finally, there are cases in which the enabling feature is a collective rather than individual feature. Exploiters might have power because they cooperate. An individual at the top of a pit might be unable to issue an exploitative offer to rescue victims at the bottom for lack of a rope. But suppose there is a second individual at the top. Instead of throwing a rope one could reach down while being held by the other. Cooperation gives them exploitative power. The feature rendering victims vulnerable might also be associated with group membership.53 Suppose twenty individuals are at the bottom. Somebody with a rope makes an exploitative rescue offer. There are ten fragile ladders in the pit but each can only be used once. No individual seen in isolation is vulnerable. Each could climb up if no more than half do. But collectively they are vulnerable because there are not enough ladders for everyone. If people at the bottom have a group-related reason

100  On Trade Justice to remain together, this reason renders them vulnerable. Exploiters take unfair advantage of the group rather than of anyone individually.

5.8.4  Structural Exploitation Sometimes exploitation is attributable to structures. Structures can be understood in terms of function, substance, or relationship to individual agency. Functionally, structures determine costs and payoffs for acts, giving individuals reasons for action and thereby shaping lives.54 Substantively, structures may take different forms. They comprise coercive and non-coercive elements, such as laws and informal rules, as well as designed elements and aggregate effects, such as institutions or prices. While structures are produced and maintained through patterns of individual actions, individuals must normally accept them as given.55 Structures are exploitative by turning individuals into exploiters or exploited. An individual is an exploiter if her position within the structure compels her to take unfair advantage of others to optimize revenue. She is exploited if her position compels her to be taken advantage of to maximize revenue. A structure counts as exploitative if it features either exploiters or exploited. Structural exploit­ ation occurs where constraints or rewards no individual can alter make it rational for some to exploit, or for others to subject themselves to exploitation.56 Three features are associated with this understanding of structural exploitation. To begin with, its presence makes a difference for normative assessments of transactions. Owing to the structural setup, individuals may face a choice between exploiting and thus benefitting from a transaction, and not transacting at all. But they cannot transact on non-exploitative terms. Complaints about exploitation would then be about structures rather than individual behaviour.57 Secondly, structural exploitation may be statistical exploitation. Instead of featuring identifiable exploiters or victims, exploitation may arise when it is merely clear that somebody will exploit and somebody will be exploited.58 Structures may ensure all roles within it are occupied without determining who occupies them. There might be different mechanisms for ensuring a pattern of exploitative transactions without fixing the identity of transacting parties. For example, imposing rewards and constraints affects the probabilities that certain actions occur. By generating high probabilities to perform certain transactions for sufficiently many individuals, structures make sure all transactions occur without determining who does what. Exploitation on labour markets often takes this form. Structural features like regulation, low numbers of employers, or large supply due to lack of alternatives may ensure all positions are filled without determining who fills which position. Thirdly, structural exploitation is a modally robust notion. Moral complaints can be levelled against structures that make it rational for individuals to exploit even if nobody does. The complaint is that structures generate reasons to exploit regardless

Exploitation as Unfairness Through Power  101 of whether anyone acts on them. An economy is exploitative if it is set up such that some of the participants in the economy must exploit to maximize while some others must submit to maximize. Such an economy should be so criticized even if the first half opts not to exploit or the second half fails to submit.

5.9 Conclusion Why think about trade justice from the vantage point of our conception of exploitation as power-induced failure of reciprocity? The long answer draws on arguments developed throughout the book: our approach makes it possible to integrate a theory of trade justice into a theory of global justice, helps identify responsibilities of relevant actors, avoids difficulties befalling alternative accounts and delivers compelling judgments in particular cases. But we can throw additional light on this matter drawing on what this chapter has done while anticipating themes of later chapters. To begin with, the conceptions combined in our ecumenical account of exploit­ ation can analyze pertinent questions in trade. Consider frequent complaints against corporations employing workers at low wages under adverse conditions. They feature a desperate workforce with few options, whereas employers are in a powerful position, uniquely offering opportunities, able to threaten relocation, etc. Here one party deploys power to get the other to do things it otherwise would not do, leading to violations of reciprocity. Workers bear a disproportionately large share of costs of production while corporations benefit disproportionately. Without actor pluralism we cannot understand exploitation with groups or collective agents as transacting parties. Some economists argue that trade liberalization sometimes harms prospects for growth or poverty alleviation.59 Some such cases are exploitative. Powerful actors engage in exploitation when they require particular institutional set-ups or pursue policies detrimental to weaker actors. To the extent that some use power over others, relationships among countries are exploitative by violating norms of respect and recognition. Without incorporating groups and structures, the concept of exploitation fails to capture what happens in such cases. An account that recognizes that mutually beneficial exchanges may be problematic when at least one party is a state, corporation, international institution, or possibly even the world society, must embrace actor pluralism. An actor-pluralist conception also properly ascribes responsibility and remedies. There are cases where somebody is taken unfair advantage of without any individual being responsible. Instead, a company or state is. Without an account of actor-pluralist exploitation such instances remain unrecognized. In these cases it is groups that should act to end exploitation. In other cases altering structural constraints is how to expunge exploitation.

102  On Trade Justice It is through an account of exploitation as unfairness through power in general and power-induced failure of reciprocity specifically that trade justice factors into global justice. Such an ecumenical account is the best response to disagreement among different conceptions. Our account provides a flexible but unified toolkit to capture normative concerns about trade. It also helps answer the question of when, in spite of its pro tanto wrongness, exploitation may be permissible or even required. Given our broad view of exploitation it is not always wrong to exploit, all things considered, at least temporarily. It may even be the case that (structural) exploitation is required for now, as a moral cost of improvement. To these issues we turn now.

Notes 1. Our discussion improves on Risse, On Global Justice, chapter  14. Note that on the grounds-of-justice approach, principles of justice are formulated as necessary conditions since other principles are in play that might affect the distribuenda of any given principle. 2. See Pogge, World Poverty and Human Rights. For discussion, see Cohen, “Philosophy, Social Science, Global Poverty”; Risse, “How Does the Global Order Harm the Poor?”; Risse, “Do We Owe the Global Poor Assistance or Rectification?” 3. Our perspective resembles Richard Miller’s approach. Miller identifies the “moral flaw” of globalization as “taking advantage” and argues that “individuals, firms and governments in developed countries currently take advantage of people in developing countries,” Miller, Globalizing Justice, 59. 4. See Polanyi, The Great Transformation. 5. For recent Marxist debates, see e.g., Cohen, “The Labor Theory of Value and the Concept of Exploitation” (who argues exploitation can be captured without the labor theory of value), and Roemer, “Should Marxists Be Interested in Exploitation?” (who argues Marxists should care little about exploitation). About exploitation in Marx, see Arneson, “What’s Wrong with Exploitation?”; Buchanan, “Exploitation, Alienation, and Injustice”; Holmstrom, “Exploitation”; Wolff, “Marx and Exploitation”; Wolff, “Karl Marx.” For excerpts from Marx’s extensive writings see David McLellan, Karl Marx: Selected Writings. 6. “At the most general level, A exploits B when A takes unfair advantage of B”; Wertheimer, Exploitation, 10. For the multifaceted nature of exploitation see the introduction to Deveaux and Panitch, Exploitation. For the importance of power differentials for an account of exploitation, see Miller, Globalizing Justice, chapter  3; Miller, “Unequal Bargaining Power and Economic Justice: How Workers Are Exploited and Why It Matters.” 7. Wertheimer and Zwolinski, “Exploitation”; Wolff, “Marx and Exploitation.” 8. Our discussion follows Wollner, “Anonymous Exploitation.” 9. Nicholas Vrousalis pursues a similar strategy, distinguishing among three classes of exploitation theories (teleological, respect, and freedom theories). Each identifies a

Exploitation as Unfairness Through Power  103 different wrong-maker and again considers several variants, e.g., there is the harm-­ variant of the teleological theory or the rights-based version of the respect theory, see Vrousalis, “Exploitation.” 10. For an account of reciprocity in a different context, see Rawls, A Theory of Justice, 112. 11. In the WTO context, reciprocity is understood in a quid pro quo sense. Reciprocity in that sense requires mutual concessions in tariffs and other commercial restrictions. During the GATT era this kind of reciprocity was not asked of developing countries. Such countries received special and preferential treatment instead. This chapter develops a richer notion of reciprocity common in moral and political philosophy. 12. Arneson, “Exploitation and Outcome,” 393. 13. Reiff, Exploitation and Economic Justice, chapter  2. See also our discussion in Chapter 1 and Chapter 12. 14. Reiff, 73. 15. While we now merely introduce the distributive justice conception of exploitation as advocated by others, it can be integrated into our exploitation-based account of trade justice without circularity. An understanding of exploitation as interactions arising against the background of unjust distributions may feature as part of an account of trade justice in non-circular ways, as long as the relevant injustices are associated with grounds of justice other than trade. 16. Cohen, “On the Currency of Egalitarian Justice.” 17. Roemer, “RP Wolff ’s Reinterpretation of Marx’s Labor Theory of Value,” 81. 18. They include Wood, “Exploitation”; Sample, Exploitation; and Vrousalis, “Exploitation, Vulnerability, and Social Domination.” 19. Arneson suggests the idea is associated with an ideal of democratic equality, Arneson, “Exploitation, Domination, Competitive Markets, and Unfair Division,” 13. 20. Goodin, “Exploiting a Situation and Exploiting a Person.” 21. For a fairly pure libertarian version, see Steiner, “A Liberal Theory of Exploitation.” For a slightly more expansive version, see Steiner, “Liberalism, Neutrality and Exploitation.” 22. Vrousalis uses a similar formulation: “Exploitation theory is largely concerned with the control and distribution of the surplus from positive-sum transactions;” Vrousalis, “Exploitation,” 1. 23. Reiman, “Exploitation, Force, and the Moral Assessment of Capitalism,” 14 ff. 24. Cohen, History, Labour and Freedom, chapter 13. 25. Quinn, “Actions, Intentions, and Consequences: The Doctrine of Doing and Allowing.” 26. Quong, “Killing in Self-Defense.” 27. Van Donselaar, The Right to Exploit. 28. Vrousalis, “Exploitation,” 5. 29. Vrousalis, 8. 30. Vrousalis, “Exploitation, Vulnerability, and Social Domination,” 150. 31. For similar cases, see Arneson, “Exploitation, Domination, Competitive Markets, and Unfair Division,” 10. 32. Goodin, “Exploiting a Situation and Exploiting a Person,” 179. 33. For a similar case see Arneson, “Exploitation, Domination, Competitive Markets, and Unfair Division,” 27.

104  On Trade Justice 34. 35. 36. 37.

For a discussion of Roemer and a similar case, see Vrousalis, “Exploitation,” 7. Vrousalis, “Exploitation, Vulnerability, and Social Domination,” 151. For that notion, see Julius, “The Possibility of Exchange,” 362. Here we draw on Dahl, “The Concept of Power”; Dowding, Keith, Rational Choice and Political Power; Lukes, Power: A Radical View. 38. See our ex ante features F in the terminology developed above. 39. See our interaction I in the terminology above. 40. See Julius, “The Possibility of Exchange”; Vrousalis, “Reclaiming Domination,” 12. 41. Zimmerman, “Coercive Wage Offers.” 42. This reflects Lukes’s three faces or dimensions of power. See Lukes, Power: A Radical View. 43. Power “to” and “over” are discussed in Lukes, 34. Power need not be exercised to achieve the outcome and the outcome may not be achieved even though power is exercised. Using earlier terminology, the outcome may be captured in terms of distribution D or transfer T. 44. Julius, “The Possibility of Exchange,” 363. 45. For how to dispel circularity worries associated with such an integration, see footnote 15 above and footnote 48 below. 46. We do not go through the full list of false positives in section 5.5 but can deal with all of them. For illustration, consider another one. The familiar false positive of the sailors who steal each other’s life vests and thereby enable competition is also avoided: the rights violation matters only in so far as it gives rise to power which then generates unfairness. 47. This is important for the force of exploitation discussed in Chapter 6. 48. At this point, one might raise two worries of circularity. First, we encountered one conception of exploitation already defined in terms of distributive justice. But for one thing, that conception is not ours but one of the specific conceptions in the literature that we integrate. So there is no circularity. For additional clarity, one may think of  distributive justice to the extent that we integrate the respective conception of exploitation, as drawing on grounds of justice other than trade. Secondly, one may worry we are going around in a circle by defining trade justice as absence of exploit­ ation, while understanding exploitation as a particular kind of unfairness, which in turn is concerned with proportionate satisfaction of claims that might be claims of justice. But note the following: particular claims of fairness become claims of justice because we have independent reasons to understand trade as a ground of justice, while trade justice as non-exploitation spells out the principle associated with that ground, such that the power-induced failure to proportionately satisfy these claims gives rise to injustice. So again no circularity arises. 49. This section follows Wollner, “Anonymous Exploitation.” We are grateful for the permission to re-use this material here, the copy-right owner is the Association for Social Economics. 50. Here we follow List and Pettit, Group Agency, 19 ff. 51. This case has the structure of a “discursive dilemma,” see Pettit, “Responsibility Incorporated,” 182.

Exploitation as Unfairness Through Power  105 52. To illuminate cases where the exploitee is a group, imagine a group harm or benefit, where harm consists of frustration of certain preferences that prevail at the group level without any member partaking of them. The structure of the case is similar to the one of group agents as exploiters. G has preference Z (frustration of which constitutes harm). No individual has that preference because each lacks one of the necessary preferences W, X, or Y. 53. This case resembles the locked-room case in Cohen, History, Labour and Freedom, 264. 54. Haslanger, Resisting Reality, 317 ff. See also Elster, Explaining Social Behavior, 427 ff. 55. Julius, “Basic Structure and the Value of Equality,” 337. 56. This account draws on Elster, Making Sense of Marx, 166ff. 57. For discretionary versus structural exploitation, see Mayer, “Sweatshops, Exploitation, and Moral Responsibility,” 609 ff. See also McKeown, “Sweatshop Labor as Global Structural Exploitation.” 58. For a similar account see Reiman, “Exploitation, Force, and the Moral Assessment of Capitalism,” 12. 59. E.g., Rodrik, One Economics.

6

The Moral Force of Exploitation 6.1  Permissible Exploitation? The principle of distributive justice associated with trade is this: the distribution of gains from global trade is just only if they have been obtained without ­exploitation. But by taking unfair advantage exploiters may still provide some benefit to exploitees compared to the prior status quo or realistic alternatives. Perhaps exploitation is the only way to help, when the alternative is no interaction at all.1 This observation generates several questions: What is the moral force and weight of the requirement not to exploit?2 Are there circumstances where ­exploitation is permissible or even required? This chapter develops a line of argument that lets us distinguish between two kinds of cases: first, cases of exploitation we can tolerate temporarily in a decent progression from the current unjust state of the world to a more just one, and secondly, cases we cannot put in perspective this way and must terminate forthwith. Section 6.2 argues that the principle of non-exploitation generates three types of duties and introduces the perspective of constrained agency, capturing the idea that actors in the domain of trade generally have to choose from a ­limited set of options. Section 6.3 examines what an argument for the claim that e­ xploitation may be all-things-considered justified must look like. Section 6.4 discusses one important premise in such an argument, examining the idea that exploitation might be necessary for development. Section  6.5 assesses a second premise, examining the idea of permissible exploitation. Section 6.6 identifies several paradigmatic mistakes advocates of all-things-considered permissible exploitation must avoid. Section 6.7 concludes by reconnecting these themes to trade justice.

6.2  Duties of Non-Exploitation and the Perspective of Constrained Agency Trade justice requires absence of exploitation. This requirement leads to three types of duties. Relevant actors in the domain of trade ought to “refrain from violating” the principle of trade justice, “respect” and “support” it.3 Yet taking seriously the perspective of constrained agency, most actors must choose what to do from a limited set of options. Sometimes to exploit is all-things-considered the right thing to do. On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

The Moral Force of Exploitation  107 All agents, from individuals and companies to states and international ­ rganizations, are expected to “refrain from violating” trade justice. According to o this presumably least controversial duty, there are constraints on what states, firms, and other agents can do when interacting in the domain of trade. The duty to which they are subject is a direct negative duty in the sense of requiring agents not to perpetrate trade injustices. They ought not to use power to induce failures of reciprocity. All agents are also asked to “respect” trade justice. To “respect” demands of justice generates an indirect negative duty in the sense of requiring agents not to support violations committed by others. For example, firms must refrain from facilitating or supporting trade injustices committed by states in which they do business or by suppliers with which they cooperate. To “respect” trade justice means not to become complicit in violations.4 Finally, and presumably most controversially, firms, states and international organizations ought to “support” trade justice by seeing to it that it is realized. Support may assume different forms and generate positive duties. Firms may have to assist other actors, such as states, realize demands to which they are subject. States may have to get other actors to live up to requirements of justice if those actors are unwilling to do so. All actors may be asked to pick up slack where ­others fail to “refrain from violating” or to “respect” trade justice.5 The precise content of these duties, especially the last one, varies substantially across different kinds of agents. We will spell out what they imply for states and firms in Parts II and III. Here we explore the complication that acting on these duties may not always be the all-things-considered right thing to do. From the point of view of the universe the requirement not to exploit demands everybody cease to do so immediately.6 However, questions of how to create a just world do not arise for global planners with awesome powers. They arise for decision ­makers who, no matter how powerful, merely control some components of a global state of affairs. Requirements of justice apply to actors occupying positions of constrained agency. All actors involved in trade occupy such positions. For any actor, ending her exploitative interactions may not move us closer to a world without exploitation. Instead, other exploiters may take her position, the situation of the exploited might deteriorate, and macro-efforts to improve the world derail. May violations of trade justice then be all-things-considered permissible?

6.3  The Structure of Our Argument Exploitation is ubiquitous, especially in trade, most notoriously through sweatshops. But those employed under such conditions are often better off than under their next best option. International trade helps with alleviating poverty and achieving development. Over the past thirty to forty years the number of

108  On Trade Justice individuals in absolute poverty has fallen dramatically.7 It is widely agreed that trade and export-led growth contributed greatly to this. Given these enormously beneficial effects at both micro and macro levels, it is tempting to agree with New York Times columnist Nicholas Kristof that “the challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.”8 We now explore how to transform the widespread view Kristof articulated in plain, powerful language into a convincing argument.9 The structure of such an argument appears simple and familiar. Committing a moral wrong may be all-things-considered justified because of the effects the wrong would trigger. Famous cases from moral philosophy exhibit a similar structure. Should traveler Jim accept the offer to kill an Indian to rescue a larger number the sergeant would shoot otherwise?10 Or should bystanders redirect a trolley onto a track where one person would die to save a larger number on the current track?11 Some arguments in political philosophy unfold along similar lines. Invoking the “cunning of history,” Nagel argues unjust and illegitimate institutions of global governance might be necessary to eventually achieve legitimate and just institutions.12 Lesser-evil justifications of torture similarly appeal to effects of rights violations.13 Rawls’s defense of his Difference Principle may be cast in a similar light. While an unequal distribution of economic rewards would be unfair as a function of morally arbitrary factors like talent, such a distribution seems permissible where it benefits the worst-off.14 The moral wrong of the unfairness is outweighed by benefits unavailable without it. There are important differences between some of these arguments and the claim that exploitation may be all-things-considered permissible. The exploited may consent, and normally exploitation is better than killing. Yet the underlying mechanics are similar. Violation of the norm not to kill, the norm not to govern illegitimately, or the norm not to exploit is acceptable in light of the good the violations cause, such as rescuing many people, eventually establishing just global institutions, or lifting people out of poverty. This is what Kristof must mean. Owing to its benefits we should welcome exploitation. It is helpful to distinguish between two versions of this argument. The first is a temporal or diachronic one, delivering what we call the “stepping stone” argument. Exploitation may be morally acceptable as a stepping stone towards a future without exploitation. The path from an unjust to a just world may have to pass through stages of injustice. The second version is non-temporal or synchronic, delivering the “price worth paying” argument. Exploitation may be morally acceptable or a price worth paying since it benefits victims. On the stepping stone version, violations are acceptable temporarily because they help make it possible to later establish a state of affairs of non-violation. The exploitation will vanish eventually. On the price worth paying version, the wrong is permissible because it still confers benefits that otherwise would not occur. Exploitation is permissible even if it lasts.15

The Moral Force of Exploitation  109 Two ideas are central to both of these arguments. First, the wrong is justified by its outcome only if exploitation is necessary to achieve it. On the stepping stone argument, exploitation must be a necessary stage on the path to non-exploitation or justice generally. On the price worth paying version, exploitation must be ­necessary to generate the benefit. To assess when exploitation would be necessary in this sense, one must answer questions about why alternative ways of generating benefits or ending exploitation are unavailable. Secondly, exploitation is justified by its outcome only if it is permissible to exploit.16 On the stepping stone argument, traversing periods of exploitation must be permissible. On the price worth paying argument, exploitation must be the kind of wrong the benefits render allthings-considered permissible. Ascertaining when exploitation is permissible raises non-consequentialist concerns, including questions about rights and the separateness of persons. Consider two cases to see how necessity and permissibility distinguish between instances in which committing a wrong is all-things-considered permissible and instances in which it is not. Sometimes coercive administration of painful ­vaccination is all-things-considered permissible even if pro tanto wrong. This would be so if vaccination is necessary to generate important benefits (e.g., to protect ­others against fatal diseases). Vaccination is permissible because accompanying violations of bodily integrity are minor and the vaccinated themselves benefit. Suppose somebody said—to lead our reasoning ad absurdum—that homicide is permissible as a stepping stone towards enhanced security because security will only be improved in times of crises. But those welcoming high crime rates as preconditions for, say, mobilizing political will for higher security budgets run afoul of the necessity condition. For there would normally be other ways to generate such political will. Moreover, killing is not (normally) the kind of wrong outweighed by the good of policy improvements. For either the stepping stone or the price worth paying versions to succeed for exploitation, exploitation must resemble the vaccination rather than the homicide case. No such argument works unless we reject the standpoint of the universe. From that standpoint, we would identify the primary wrong in a situation and generate the straightforward moral demand of all-powerful moral agents to prevent that wrong. Applied to one of the examples familiar from above, from the standpoint of the universe, the sergeant should spare all Indians, or Jim should prevent him from shooting any Indian. Questions about stepping stones or prices worth paying fail to arise. Faced with injustice and exploitation, we ought to deliver justice instantly without moving through exploitation. From this standpoint, Kristof ’s argument fails. Demands for more sweatshops must turn into demands to lift people out of poverty in non-exploitative ways. Rejecting the standpoint of the universe leads to the perspective of constrained agency. As outlined previously, that perspective assumes the standpoint of particular agents, accepts that others commit wrongs, and takes for granted that

110  On Trade Justice there are constraints on what one can do to create change for the better. If we accept that others violate norms and that, absent an omnipotent social planner, it is necessary to navigate an imperfect world, the question becomes which available course of action is morally preferred. This perspective introduces some agentrelativity that becomes important below. The notion of necessity possesses an agent-relative dimension because agents must choose from various options and control different factors. Permissibility is also agent-relative because, depending on their nature or situation, agents may be subject to conflicting requirements. Thus several presuppositions are needed to turn Kristof ’s point that “sweatshops don’t exploit enough people” into a convincing argument. The challenge is to spell out necessity and permissibility from the standpoint of constrained agency for the context of trade. Thereby we would render convincing the stepping stone or price worth paying rationale in support of exploitation, offering conceptual resources to distinguish between all-things-considered permissible and impermissible exploitation.

6.4 Necessity Exploitation is necessary in the relevant sense only if there is no alternative and morally preferable way to achieve the good in question. Exploitation may be ­necessary when alternative paths to a just world are unfeasible. To make claims about feasibility is to assess probabilities that agents performing some appropriate action produce the desired outcome.17 Three components are crucial: agents, probabilities, and relevant constraints. Feasibility claims are relative to a group of agents and incomplete until a group is specified. To say outcomes are unfeasible is to say no agent or coalition within a relevant group can bring them about. Moreover, feasibility claims involve two types of probabilities, that of an agent performing an action to begin with as well as that of an action generating the desired outcome.18 Finally, feasibility claims distinguish among various probability-lowering factors (or, put differently, among types of impossibility) and identify some of them as irrelevant.19 At least four kinds of impossibility matter for feasibility: conceptual, scientific, technological, and practical. Conceptual or logical impossibility rules out options that are conceptually inconceivable or violate laws of logic. Scientific impossibility excludes options if their realization requires acting against laws of nature or settled scientific facts. Technological impossibility rules out options beyond the reach of technology. Practical impossibility excludes options based on shortcomings associated with human action, including our psychological or motivational setup, collective action problems, or epistemic limitations. Political impossibility is a salient kind of practical impossibility. Reaching a goal is politically impossible when there is insufficient support among those with power to make it happen.

The Moral Force of Exploitation  111 Not all types of impossibility matter for feasibility judgments and thus for anchoring claims of necessity. A full-blown theory of feasibility must endorse an understanding of “ought implies can.”20 Our concern is more limited. When may exploitation be considered necessary to achieve some good because any morally superior way of doing so is unfeasible? Whenever an actor under conditions of constrained agency makes a stepping stone or price worth paying argument, we need to inquire whether the necessity condition holds, as well as whether the right type of impossibility is invoked. How then should we understand the claim that exploitation is a necessary stepping stone or a price worth paying because morally preferable alternatives to achieve the good in question are unfeasible? Assuming the perspective of constrained agency, we argue that whether the necessity justification applies depends on who offers it. Moreover, it succeeds only if those who offer it can neither individually nor jointly attain benefits or achieve a state of non-exploitation in nonexploitative ways, owing to factors for which they are not responsible. First, it makes a difference whether the necessity justification is offered to justify one’s own action or actions of others. Others may be able to choose from another set of options or exercise control over a different range of factors than I can. Moreover, I must take actions of others as given in ways I cannot take my own. Accordingly, I may accept another party’s exploitative action as necessary in ways I cannot do with my own. So Kristof may invoke necessity to justify ­exploitation committed by others, for instance because he has to accept actions and motivations of employers as given. But these employers may not do the same to justify their own action, where how to interact is what is at stake.21 Assuming the perspective of constrained agency means that it does not follow from the fact that some agent can offer the necessity justification, that others in different situations could do so as well. Others might be able to interact nonexploitatively. Also, that individuals lack non-exploitative alternatives does not mean the same is true of a relevant group to which they belong. While individual entrepreneurs might have no feasible alternative to offering exploitative terms, the industry as a whole might. Secondly, and relatedly, some factors should not count as constraints on what course of action individuals could permissibly choose or as diminishing the probability that the action generates the desired outcome. It is especially constraints within the category of practical impossibility that should not so count. Consider motivational constraints. It would be odd if higher wages were considered ­unfeasible because the boss’s greed does not let him pay more. Similarly, one could hardly argue that eradicating poverty is unfeasible because any proposed measure, such as tariff reductions, would be ineffective due to the impact of domestic institutions on economic development, if those in a position to reduce tariffs could alter the setup of domestic institutions. Generally, if the factors constraining choice or lowering the probability of an agent’s actions achieving desired outcomes in non-exploitative ways are under her

112  On Trade Justice control, those factors should not classify alternatives as unfeasible. A conceptual and two moral arguments explain why. Conceptually, it would be odd to say agent A cannot bring about outcome O because of constraint C if A could remove C. A’s ability to trigger O might be indirect in the sense that she would first have to remove C. But an additional action in the chain leading to O does not undermine A’s ability to bring about O.22 As a first moral argument, allowing factors under an agent’s control to undermine her ability to do what is morally required would let her “off the moral hook.”23 No moral code should let individuals escape its demands by knowingly creating, entering, or failing to escape circumstances in which moral requirements cease to bind.24 As for the second moral argument, note how our point about the relationship between feasibility and factors under one’s control ­illuminates the normatively salient distinction between structural and discretionary exploitation.25 Clear cases of problematic discretionary exploitation are those where exploitation is unnecessary to attain some greater good. As we introduce factors constraining feasibility or the possibility of transacting on non-exploitative terms (a typical example in the context of trade being pressure through competition) discretionary exploitation becomes structural, where exploiters may be excused or even justified. Distinguishing among different kinds of impossibility helps explain the uneasiness one may feel about the claim that firms have no f­easible alternative to exploiting workers: Are higher wages strictly impossible? Are factors that prevent firms from paying them really beyond their control? To sum up, the price worth paying and stepping stone arguments rely on the idea that exploitation is necessary to attain benefits otherwise unattainable, or else to achieve non-exploitation eventually. Exploitation is necessary in the relevant sense only if non-exploitative alternatives are unfeasible. Whether this necessity/feasibility justification succeeds depends on who offers it. Moreover, it succeeds only if (due to factors they are not responsible for) those who offer it, neither individually nor jointly, can attain the relevant benefit or achieve the state of non-exploitation in non-exploitative ways.

6.5 Permissibility Exploitation can be all-things-considered permissible only if exploitation is necessary. But further conditions must hold for this argument to succeed. ­ Whether the good achievable only through exploitation renders exploitation ­permissible depends on moral costs associated with exploitation, the magnitude of the good and probability of securing it that way, the possibility of feedback and interaction effects, and on whether the balancing logic solves the separatenessof-persons problem. Exploitation is justifiable only if its moral costs remain below the value of the good secured thereby. These costs depend on the nature of exploitation: what

The Moral Force of Exploitation  113 norm or principle is violated? The account of exploitation as unfairness through power from Chapter 5 helps assess exploitation’s moral weight by distinguishing between more and less severe instances. A more severe violation of the norms prohibiting unfairness through power, say exploitation involving physical force, is worse than less severe violations, say where unfairness reflects bargaining positions that give some power over others. On the price worth paying argument, questions about the good achieved through exploitation appear simple. All we need to ask is: Is the good significant enough to warrant a wrong? Complications enter on the stepping stone version. The good achieved through exploitation is a future good, and its attainment thus less than certain. For development or poverty alleviation to justify exploitation, additional conditions must hold. The mechanism by which exploitation translates into development must be identifiable and well understood. The probability that exploitation delivers intended benefits must be sufficiently high. Those who justify exploitation should propose a development trajectory associated with interactions on exploitative terms.26 When balancing moral costs against the good achieved by exploitation, one must also look beyond immediate and direct effects of the transaction. Feedback and interaction effects, for example between the permissibility and necessity conditions, must be considered. A problem about the wider effects of recognizing exploitation as permissible arises: moral acceptance of exploitation may render alternatives practically infeasible, turning necessity into a self-fulfilling prophecy. If sweatshops offer a permissible strategy, why bother with aid or reform? When deciding if exploitation is permissible on the stepping stone or price worth paying logic, such interaction effects should be considered. Finally, there is the separateness-of-persons problem, which plays out in dimensions of space and time.27 There are differences between justifying e­ xploitation to achieve a good if the exploited stand to benefit and cases where they do not. Instrumentalizing victims to help others is problematic. On the temporal version of the problem, the separateness of persons fails to be taken seriously if beneficiaries are future individuals. On the spatial version, this separateness is not taken seriously if beneficiaries, say, live elsewhere or are employed in a different industry. On the temporal dimension, the problem is avoided by ensuring the benefits materialize within short time-spans, say, one generation. On the spatial dimension, it can be avoided by redistributing benefits between regions or industries, making sure those who suffer the wrong partake in the benefit exploitation helps achieve. But are there other solutions? To respond to the separateness-of-persons criterion one needs a justification for each exploitee. Such justification could take different forms beyond the straightforward solutions just sketched. First, the separateness-of-persons problem could be muted by showing that, initial appearances notwithstanding, benefits do accrue to the exploited. On a more expansive understanding, individuals could be said to benefit not only by receiving direct

114  On Trade Justice material benefits but also by having preferences satisfied, for instance, that somebody else benefit. Exploited parents may want to make a sacrifice for their children. This reasoning could extend to other cases, including benefits accruing to community members, compatriots, etc. Secondly, exploitation to benefit others may be permissible if exploitees consent. Consent weakens objections against exploitative treatment. It will be crucial if exploitees could plausibly be understood as consenting to their role in a stepping stone or price worth paying logic. Finally, exploitation to benefit others may avoid the separateness-of-persons charge if exploitees cannot reasonably reject being exploited. On an influential account individuals cannot reasonably reject an option if their complaint is smaller than anyone else’s complaint about alternatives.28 There might well be cases where A’s complaint about exploitation is smaller than B’s or C’s complaint about A not being exploited, for instance where B and C are significantly worse off than A. To ascertain whether necessary instances of exploitation are permissible, all things considered, one must put all of these considerations together. Instances of exploitation where few and less significant norms are violated, the exploited consent to violations, and benefits accrue to the exploited are most readily ­permissible. Instances that violate more fundamental norms, occur involuntarily, and where beneficiaries are distinct from the exploited are harder to justify. There are some respects in which the stepping stone argument is less likely to succeed. Permissibility is harder to justify under this argument because future beneficiaries are not (necessarily) those currently exploited.29 But there are also respects in which the price worth paying argument is less likely to succeed. The number of those who currently benefit from exploitative employment is lower than that of those who will benefit from ending poverty in the long run.

6.6  Moral Mistakes Necessity and permissibility impose a tall order. It is only under specific circumstances that exploitation can be a stepping stone towards justice and non-­ exploitation or a price worth paying for benefits that otherwise would not materialize. We now identify three paradigmatic cases where, appearances notwithstanding, necessity is violated, and three cases in which permissibility is. In these cases, invoking either condition to justify exploitation would be mistaken. The conditions are logically independent: necessity might be met while ­permissibility is violated, and vice versa. First, there is the mistake of inferring that exploitation is necessary for development or generation of a benefit from the observation that exploitation suffices for such outcomes. There are many ways of achieving development.

The Moral Force of Exploitation  115 Exploitative trade may be one, but others are morally preferable. Kristof ’s claim that we do not have enough exploitation fails as long as there are other ways of achieving the goods it may bring. This reasoning becomes more forceful once development is understood in terms of empowerment, comprising not only avoidance of poverty but also strengthening of political freedoms.30 Exploitation may even be detrimental to this wider aim, despite advancing material welfare. Secondly, advocates of stepping stone or price worth paying arguments might make a scope mistake in specifying the group to which their judgment applies. They might erroneously infer a claim about collective or universal inability to achieve some good in morally innocent ways from individual inability to so.31 But that some individual cannot change the terms of the transaction does not mean collective action cannot do so. Similarly, the fact that a group of entrepreneurs cannot further development other than by exploiting does not entail that there is no other group that could. Policymakers, for instance, may have better means at their disposal. It is doubtful whether we really do not have enough exploitation to achieve development, or whether the problem is instead lack of trade on non-exploitative terms, lack of reform of the international system, and so on. Different agents are placed differently. We must take the agent-relativity of necessity and permissibility seriously in line with conditions of constrained agency. Thirdly, advocates of stepping stone or price worth paying arguments might be guilty of what one could call the first-person mistake. Those claiming alternatives are infeasible cannot appeal to constraints for which they are responsible. Sweatshop entrepreneurs cannot claim exploitation is necessary by appealing to their motivational setup and claim “if we paid higher wages, our profits will be too low.” Individuals might make the first-person mistake without realizing it. One is easily tempted to identify external factors as rendering wrongdoing ­necessary although it is actually necessitated through one’s own action or shortcomings. One ought to check attempts to justify exploitation by invoking a necessity claim for ideological infatuation and self-serving mistakes.32 Consider next the first paradigmatic failure of permissibility. Some instances of exploitation constitute the kind of moral wrong no immediate or future benefit could outweigh, especially when the exploited are not the ones who benefit. To be sure, some types of exploitation meet the separateness-of-persons requirement via the extended-benefit, consent, or reasonable-rejectability route discussed above. But there are others that development prospects or higher wages cannot render all-things-considered permissible. Examples include aspects of sweatshop labor, including severe violations of health and safety standards.33 Such measures would be impermissible even if benefits accrued to many people or to the workers’ own families. Secondly, permissibility is violated if links between exploitation and development are specious. If exploitation is justified by offering development prospects, the role exploitation plays in achieving development must be well understood and

116  On Trade Justice offer a clear trajectory. Chances of success must be high enough. The burden of proof lies with those who think links between sweatshops and development are tight enough and sufficiently well supported by evidence to accept exploitation as a stepping stone. Thirdly, permissibility might be violated because the separateness-of-persons requirement fails in one of its dimensions. Too much of a time lag between exploitation and generation of benefits blocks answers to the requirement’s temporal dimension. Inability to compensate victims of exploitation blocks solutions to its intra-generational dimension. Whether extended-benefit, consent or reasonable-rejectability solutions succeed depends on the context. The order is tall.

6.7  Conclusion: Reconnecting to Justice and Fairness We have inquired about the moral force of requirements not to exploit. Is nonexploitation always required, or can exploitation be permissible or even required? Answers depend on whether exploitation is necessary and permissible as a stepping stone towards development or a price worth paying for benefits. Recall again that “fairness in trade” has three meanings: first, proportionate satisfaction of claims arising in some context-specific sense somehow involving trade; secondly, proportionate satisfaction of claims of justice in the context of trade, based on different grounds; and thirdly, proportionate satisfaction of claims arising from trading within subjection to the trade regime as a ground. In this third sense “fairness in trade” is the same as “trade justice,” that is, non-exploitation in a particular domain of interaction. Trade injustice is exploitation in that domain. Considerations regarding the moral force of exploitation apply to all these senses of fairness in trade, including trade justice. Moral challenges arise for agents in the world who are unlike global planners with unrestricted capacities. Accordingly, we cannot move in a heartbeat from the current state of injustice to one of justice. Regarding subjection to the trade regime we must inquire about the necessity and permissibility of violating a principle of distributive justice. Given the especially weighty character of justice, permissibility will be particularly hard to obtain. A convincing moral ontology of trade recognizes multiple relevant actors, most importantly companies and states. All of these actors are in a position to wrongfully exploit in the context of trade, and all of them occupy positions of constrained agency. They are thus subject to non-exploitation requirements of fairness and justice in trade and must reckon with the moral force of non-­ exploitation duties. Companies can violate the requirement of non-exploitation, for instance by exploiting workers or suppliers, or fail to support trade justice, for instance by failing to remove exploitation-enabling conditions where they could do so. Part  III discusses companies. States too may violate requirements of non-exploitation, for instance by taking unfair advantage of other states or

The Moral Force of Exploitation  117 i­nternational institutions, as well as fail to respect and support trade justice, for instance by maintaining institutions and background conditions that make exploitation possible. Part II, to which we proceed now, discusses states.

Notes 1. The idea that a consensual and mutually beneficial transaction is better than no transaction is discussed by Alan Wertheimer under the label of “non-worseness;” Wertheimer, Exploitation, 289, ff. See also Zwolinski, “Sweatshops, Choice, and Exploitation,” 711. For tensions between fairness and welfare, see Ferguson, “The Paradox of Exploitation.” 2. According to Wertheimer, questions of the moral weight of exploitation are about the intensity of its wrongness. Questions of its moral force are about the upshot and ­reasons for action parties to the transaction or others may have in light of exploitation. See Wertheimer, Exploitation, 15. We are interested in a particular question of moral force: whether potential exploiters have permission to exploit all-things-considered. We assume its moral force in this sense is, among other things, a function of its moral weight. 3. We use quotation marks to demarcate the slightly technical vocabulary introduced here. 4. For complicity, see Kutz, Complicity; Lepora and Goodin, On Complicity and Compromise. 5. Miller, “Taking up the Slack?” 6. The formulation “point of view of the universe” is associated with Sidgwick, see Lazari-Radek and Singer, The Point of View of the Universe. Another formulation to capture that standpoint is sub specie aeternitatis (“from the perspective of the eternal”), which stems from Spinoza. 7. According the World Bank, the number of people in extreme poverty fell from 1.85  billion in 1990 to 767 million in 2013, see World Bank, “Poverty and Shared Prosperity 2016: Taking on Inequality,” 36. For growth in China and India as factors mitigating global inequality, see Milanovic, The Haves and the Have-Nots, chapter 3. 8. Kristof, “Where Sweatshops Are a Dream.” 9. For a further example, see Krugman, “In Praise of Cheap Labor.” For another attempt to integrate the economists’ argument into a theory of trade justice, see the discussion in chapter 10 of James, Fairness in Practice. 10. Williams, “A Critique of Utilitarianism.” 11. Foot, “The Problem of Abortion and the Doctrine of Double Effect.” 12. Nagel, “The Problem of Global Justice,” 147. 13. Ignatieff, The Lesser Evil. 14. Rawls, A Theory of Justice, chapters 2–3. 15. These two arguments mirror different versions of the idea of the second-best, an important concept from economics. On the stepping stone argument, exploitation is acceptable transitionally on the path towards justice. On the price worth paying argument, it is because it is the best option from the currently feasible set. See Simmons, “Ideal and Nonideal Theory,” 25. 16. For “permissibility” in Rawlsian non-ideal theory, see Simmons, “Ideal and Nonideal Theory.”

118  On Trade Justice 17. This subsection draws on Wollner, “On the Claims of Unjust Institutions: Reciprocity, Justice and Non-Compliance.” This paragraph and the next draw on Lawford-Smith, “Understanding Political Feasibility*.” 18. For a discussion of actions and outcomes, see Lawford-Smith, “Non-Ideal Accessibility,” 656 ff. 19. A probability of zero would constitute impossibility. But often factors delivering a sufficiently low probability render an action or outcome unfeasible. 20. Philosophers disagree about the stringency of this requirement. One extreme view is held by James Griffin who thinks the most relevant sense of “cannot” is that something cannot be done by someone in ordinary circumstances with suitable, settled dispositions in a sustainable social order; Griffin, Value Judgement, 90. Jon Elster takes an opposing extreme view according to which what we ought to do is limited only by biological and physical impossibilities; Elster, Making Sense of Marx, 201. He says that if taken in the broader sense of historical possibility, “ought-implies-can” can be turned around: that something is perceived as obligatory may help make it historically feasible, given its physical possibility. 21. For such speaker-relativity, see Cohen, Rescuing Justice and Equality, chapter  1. See also Frick, “What We Owe to Hypocrites: Contractualism and the Speaker-Relativity of Justification.” 22. Lawford-Smith discusses a similar issue under the heading of “diachronic feasibility” where the different actions occur sequentially. See Lawford-Smith, “Understanding Political Feasibility*,” 249 ff. 23. Lawford-Smith, 254. 24. For a related discussion, see Pogge, “Loopholes in Morality.” 25. Mayer, “Sweatshops, Exploitation, and Moral Responsibility.” 26. Conducting trade with a view to “raising standards of living, ensuring full employment and a large and steadily growing volume of real income” is the WTO’s founding mission; see “Agreement Establishing the World Trade Organization,” https://www.wto. org/english/docs_e/legal_e/04-wto.pdf, last accessed March 14, 2019. For ­skepticism about the potential of trade to deliver on this promise, see Rodrik, One Economics. 27. Rawls appeals to separateness of persons to object to utilitarianism, Rawls, A Theory of Justice, 27. For discussion, see Norcross, “Two Dogmas of Deontology: Aggregation, Rights and the Separateness of Persons.” A concern for the separateness of persons also seems to underpin James’s discussion of labor exploitation in James, Fairness in Practice, 308 ff. 28. For the idea of reasonable rejectability, see Scanlon, What We Owe to Each Other. 29. Our account is open to the possibility that exploitation is permissible even though those exploited do not directly benefit. In this respect, we differ from James who insists that those exploited must themselves benefit. See James, Fairness in Practice, 311. 30. See Sen, Development as Freedom. 31. For further issues that arise when moving from individual to collective feasibility judgments, see Lawford-Smith, “The Feasibility of Collectives’ Actions”; Stemplowska, “Feasibility.” 32. For self-servicing necessity claims in the context of war, see the discussion of realism in Walzer, Just and Unjust Wars, 4 ff. 33. Here we agree with James’s verdict, see James, Fairness in Practice, 314.

7

The State as an Agent of Trade Justice 7.1  Transitioning to Part II Part I established our general theory of trade justice. Trade is one in several grounds of justice. Trade injustice consists in exploitation among actors that are subject to the international trade regime. The principle of distributive justice associated with that ground is this: the distribution of gains from trade is just only if the gains have been obtained without exploitation. Exploitation consists in unfairness through power. Specifically for trade, exploitation is power-induced failure of reciprocity. Trade justice prevails if power is not deployed to undermine reciprocity. Parts II and III explore how the principle of trade justice bears on actors, specifically the state (II) and companies (III). As the most powerful ­entities linked to this ground, states must shoulder the lion’s share of trade-related obligations. Since those obligations are shared among multiple states, states ought to support (and in fact found) an international organization to meet them. But some duties remain in their direct care. Chapter 2 put our discussion into the historical context of creating a postwar system of trade governance. This book is a philosophical plea for a New Global Deal that aims for a regime where power is not deployed to undermine ­reciprocity. Our view reconnects to some of the moral ideas that drove postwar efforts to create a New Deal for the world. We say “reconnect” to highlight that our plea for a New Global Deal (the grounds-of-justice view and its emphasis on trade ­specifically) is work in that tradition, while also standing on its own foundations. Part II develops these foundations for the state. This chapter theorizes the state as a major actor within our theory. A theory of global justice that recognizes multiple grounds requires a differentiated vocabulary to outline obligations of different agents, some designed to fit the role and importance of states for global justice, and some designed for other actors. We will reconnect to the constrained agency approach from Chapter 6, which started to work with some of that vocabulary. Chapter 8 develops one particular duty of states, to build an organization charged with trade justice. In our world, a trade organization already exists, the WTO. However, the current WTO is exploitative because it is a forum where power is deployed to undermine reciprocity. The WTO stands in need of substantial reform to be the agent of justice it should be. Chapter 9 discusses several justice- and fairness-related problems in the domain of trade as they occur in our world. Chapter 10 deals with mega-regionalism, the On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

122  On Trade Justice phenomenon that large parts of the world might conclude their own internal trade agreements rather than continue to try to get the WTO’s multilateralism to succeed. Section  7.2 of this chapter explores how a principle concerning trade in any sense could matter equally, say, vis-à-vis one involving human rights. We must address that question to defend our stance that trade should be treated in terms of justice in the first place. The remainder of this chapter returns to the perspective of constrained agency to theorize the state as an agent of trade justice. Section 7.3 offers reasons for duty-bearers to give some partiality to their own concerns of justice. In particular, a state may, within limits, prioritize domestic over global justice. Section 7.4 offers a general scheme of thinking about how obligations apply to agents within a theory of multiple grounds. In light of section  7.3’s argument that entities can prioritize their own concerns, section 7.5 explores what to say about rank-ordering remaining principles of justice. Section  7.6 sketches a vocabulary to differentiate among agents and explain the nature of their obligations, as a function of their nature, with individuals having rather different obligations from institutions. While the state is our focus throughout, section 7.7 applies these ideas squarely to the question of how states specifically should rank obligations of purely domestic justice vis-à-vis obligations from trade. To establish a view on that matter is the goal of this chapter. But we only get there by investigating agency in a pluralistic theory of global justice at a general level.1

7.2  Justice and the Standpoint of the Universe Pluralism about grounds is appealing for its accommodating nature: we can integrate a broad range of considerations plausibly arranged under distributive ­justice. But pluralism also opens up possibilities of conflict as well as questions about priority among obligations. It is one thing to say justice is of the highest stringency; it is another to explain how agent-specific obligations reflect a complex structure of multiple grounds. Complications in the transition from the detached standpoint of impartiality to constrained agency might cloud the clarity that should accompany any assignment of obligations. These complications arise specifically when we need to assess how trade meshes with other grounds by way of generating and ranking duties for particular agents. The standpoint of impartial detachment is also known as the standpoint of the universe, by way of contrast with that of any entity within that universe.2 Each ground is associated with principle(s) of distributive justice. To have several such principles implies that, from the standpoint of the universe, they somehow matter equally. Consider the list of principles associated with different grounds, including that of trade justice:

The State as an Agent of Trade Justice  123 1. Shared membership in a state: (1) Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all. (2) Social and economic inequalities are to be arranged so that they are both (a) attached to  offices and positions open to all under conditions of fair equality of opportunity, and (b) to the greatest benefit of the least advantaged.3 2. Common humanity: The distribution in the global population of the things to which human rights (understood as rights needed to protect the ­distinctively human life) generate entitlements is just only if everyone has enough of them to lead a distinctively human life (and thus if those rights are satisfied). 3. Collective ownership: The distribution of original resources and spaces of the earth among the global population is just only if everyone has the opportunity to use them to satisfy their basic needs, or otherwise lives under a property arrangement that provides the opportunity to satisfy basic needs. 4. Membership in the world society: The distribution in the global population of the things to which human rights (understood as membership rights) generate entitlements is just only if everyone has enough of them for these rights to be realized. 5. Trade: The distribution of gains from trade among states is just only if they have not arisen from exploitation among actors subject to the international trade regime. But before proceeding further one might well wonder: how could a principle involving trade in any sense matter equally, say, vis-à-vis one involving human rights? Without clarity on this matter, there would be little point to explore the constraints on agents of trade justice, especially the state. To have a plausible response we borrow from ethical theory to be able to say trade justice is on a par with other matters of justice. Crucially, we interpret the relation of moral principles “mattering from the standpoint of the universe” as a relation with four values rather than three. For principles P1 and P2, P1 might matter more than P2, P2 more than P1, they might matter equally, or, fourthly, they might be “on a par.” Two items are on a par if neither is preferred in the relevant sense, their differences preclude their being equal, and yet they are ­comparable in that regard. Introducing parity permits for comparability among alternatives that also differ in the respects in which we compare them. Consider comparing Mozart and Michelangelo in terms of creativity. Plausibly neither is less creative than the other. However, they display creativity in such dissimilar fields that it seems inapt to assert they are equally creative. Yet they do seem ­comparable with respect to creativity. That makes it sensible to say they are on a par, and to think of parity as a fourth value of comparability in terms of creativity.4

124  On Trade Justice Parity is most commonly discussed for the relation of goodness. However, the considerations that render the articulation of a fourth value appropriate also apply to the relation of mattering from a certain standpoint. It might sound peculiar that from the standpoint of the universe a principle concerned with human rights matters as much as one of trade justice. But this means human rights protection and just sharing of benefits from exchange in some sense are comparable in importance notwithstanding enormous differences (as between Michelangelo and Mozart in terms of creativity). The motivating thought is the tremendous ­relevance of trade for our species, as discussed before. All principles associated with different grounds above are principles of justice, with their respective stringency vis-à-vis other principles. But distributive justice covers an enormous range of human activity. Inevitably contents of principles of justice vary as much as Mozart’s and Michelangelo’s creativity. So indeed, trade justice and human rights do not matter equally. Nonetheless they are on a par from the standpoint of the universe. None matters more than another from that viewpoint. In that sense, it makes sense to say that trade is as much a matter of justice as, for instance, human rights are. This impartial standpoint of the universe then contrasts with the constrained agency of any given actor. We encountered that perspective in Chapter 6 and develop it more now.

7.3  Duties and Agent-Partiality Every agent and institution has the duty to do what they can, within limits, to create the necessary conditions of just distributions, as described in principles associated with various grounds. From the standpoint of the universe, achieving justice is no more important in some distributions than in others. Fully detached impartiality generates no ranking among principles. But there is a multiplicity of duty-bearers in the domain of justice. Each has a range of responsibilities reflecting their nature and ties to various grounds. Each must act from within a perspective of constrained agency. In particular, institutions have certain purposes, limited time and resources, and more power and competence to influence things in some areas than others. They have their own concerns of justice that do not stand out from the standpoint of the universe but to which—as we argue now— entities may nevertheless show some partiality while executing the general duty to do what they can to bring about justice. In what follows, when we talk of an agent’s own concerns these are concerns of justice, by way of contrast with matters of justice that do not concern the agent. We never mean selfish concerns by way of contrast with concerns of justice. Agents can show some such partiality: this section offers arguments in support of such partiality, whereas we later encounter some adjudication principles that help agents navigate conflicts among principles of justice. Adjudication principles

The State as an Agent of Trade Justice  125 also constrain the extent to which agents can show partiality to their own concerns of justice. One should therefore think of the arguments in support of partiality to their own concerns not as arguments that establish a conclusive priority. Rather, they offer dialectic considerations—considerations one can raise in a given context to push into a certain direction—that support such priority as a default but must be weighed against, and might be overruled by, competing considerations captured by adjudication principles. Having such competing considerations in sight is especially important given that justice is realized in degrees. Without adjudication principles, a priority of one’s own concerns might mean that even a small increase regarding almost fully realized principles could matter more than the fulfillment of principles that are barely realized. But that should not be so. Taken together these considerations generate a dialectical system of push and pull factors. We must be cautious when talking about an agent’s own concerns of justice. One point of our pluralist approach is to transcend the common understanding of obligations of justice, which we think is too narrowly tailored. To preview, for individuals there are their own concerns of justice (limited as they are because they are individuals), and concerns of justice that do not apply to them; for institutions (e.g., states or international organizations), there are three types of concerns or obligations of justice: their own, narrowly conceived, which arise because of a special linkage to a ground; additional obligations from grounds to which institutions are less closely linked; and concerns that do not apply to them. To elaborate, on the grounds-of-justice approach individuals are seen as citizens, members of the world society, participants in the trading system, co-owners of the earth, as well as human beings. In all of these capacities they have duties appropriate to them being individuals. Their nature must be spelled out, but these duties are limited because individuals as such can only do so much. Individuals have no duties, for instance, as far as rights of citizens of other countries are concerned to the extent that those are not human rights or otherwise associated with grounds shared across these countries.5 Our account generates a distinction between individuals’ own concerns and other concerns of justice. For individuals that difference is the same as that between concerns of justice that apply to them and those that do not. For institutions the matter is more complicated. Institutions are “humanly devised constraints that shape human interaction. In consequence they structure incentives in human exchange, whether political, social, or economic.”6 Since institutions are humanly devised, we can ask what obligations arise among people partaking of them. For institutions, too, a distinction between their own and other concerns of justice arises. But it is by one degree more complicated than for individuals, depending on whether a ground is linked with them. An actor or institution may be “linked” to a ground in direct or indirect ways. There is a direct link if the institution is constitutive of the ground and establishes a justice

126  On Trade Justice relationship among those in the scope associated with that ground. The state is an actor that in this sense is constitutive of a ground. There is an indirect link if the operations of the institution are primarily directed at, or most directly affect, ­people in the scope associated with that ground. The state is also in this indirect sense linked to trade as a ground.7 Obligations associated with shared membership in a state are the state’s own concerns, narrowly conceived. They arise from the purposes for which these constraints—the state—were put into place. Obligations thus derived are those obtained when we consider one ground in isolation. These are the institution’s own concerns narrowly conceived since others will be added, which also appertain to that institution, making them its concerns of justice broadly conceived (or all things considered). There are also obligations pertinent to the state because membership in a state as a ground is embedded into other grounds, in a sense in which the state might be embedded into (and thus be part of) the trade regime. Section  7.4 defines embeddedness formally. To summarize, for individuals there are their own concerns of justice, and concerns that do not apply to them. For states and other institutions linked to a ground, there are three types of concerns or obligations: their own (narrowly conceived); additional obligations generated by embeddedness (which, alongside the first type, are their obligations or concerns of justice broadly conceived), and concerns that fail to apply to them.8 We assume justice can in principle be realized in our world. That is, all ­principles of distributive justice can be satisfied simultaneously within a world of multiple states. There are enough resources. Our current world is nothing like the post-apocalyptic scenario in Cormac McCarthy’s harrowing The Road, where people become cannibals to survive.9 Moreover, human capacities to reason suffice to recognize justice. Unlike in Augustine’s account of justice-after-the-fall it is not conclusively unknown how each should fare in terms of justice. Finally, it is within reach of institutional design to get people to be motivated to support ­justice so that all principles of justice are satisfied. In light of these assumptions the problematic aspects of granting partiality towards one’s own concerns of ­justice (narrowly conceived)—especially the problematic aspects of granting this for states, the most powerful actors—are less troublesome than they otherwise might be. Nevertheless, we still need positive arguments for permissibility of partiality. First of all, each agent can generally prioritize his/her/its projects to some extent because they are his/her/its. This is widely, though not universally, accepted. One argument to this effect starts with revisiting the separateness-of-persons argument often made against consequentialism (and deployed also in Chapter  6). Taking seriously the “fact of our separate existences” delivers a case for partiality.10 As each person has her own life to live and costs to someone cannot simply be offset by benefits to someone else, individuals may permissibly be partial to

The State as an Agent of Trade Justice  127 their own well-being, interests and projects. In this sense, the separateness of persons legitimizes some partiality. Notwithstanding differences between persons and institutions, for example, we can generalize this idea of legitimate partiality to entities other than persons. Since entities like institutions have their own point and purpose, and since gains to one do not straightforwardly offset losses to another, the idea of legitimate partiality carries over. Crucially, if entities can prioritize their projects at all, surely the same is true in the domain of the most stringent moral demands. In that domain partiality, not with regards to partial interests but with regards to specific normative concerns, should be less problematic. For we now consider partiality only within the domain of those most stringent demands that, from the standpoint of the universe, are on a par. Typically the problem about granting priority to projects is that such priority interferes with what agents morally should do or pay heed to.11 Another argument is instrumental: any agent knows his/her/its own concerns of justice best, thus chances are higher this aspect of justice is realized if one does it oneself (if one can). Moreover, if attending to one’s own concerns of justice provides practice in caring about and implementing justice, it is likely to make one better at doing justice elsewhere. In any event, this is so if these concerns are pursued with the awareness that their importance stems from their being concerns of justice rather than from being concerns of one’s own. One might say this argument establishes the appropriateness of a moral division of labor among agents, rather than partiality. But from a standpoint of constrained agency, there is no difference. To be sure, there is a danger that, say, within a state a focus on domestic justice not only fails to promote a concern with other matters of justice but, on the contrary, undermines devotion or siphons off resources that could apply to concerns of justice that are not domestic in nature. This could happen specifically in democracies because government and parliamentarians are accountable to a multitude of voters. Appropriate efforts are needed to communicate to all relevant actors that what matters is promotion of justice rather than pursuit of one’s own concerns. This is a tall order but hopefully not impossible. A final point in support of the position that any entity can give some priority to its own concerns is that from the standpoint of the universe nothing is lost thereby. This is so partly because all principles of justice are on a par from that standpoint, and partly because all principles are assumed to be jointly satisfiable. There is no standpoint from which one could complain if an agent prioritizes his/ her/its own concerns, as long as those are concerns of justice and prioritization is appropriately limited. Section 7.5 discusses what it means for such concerns to be so limited. In conclusion, giving some priority to one’s own concerns of justice is ­acceptable. For individuals, this is merely a complicated way of saying they have to do their duties of justice (as citizens or human beings). But for institutions, especially the state, it is not trivial. It means a state can give some priority to

128  On Trade Justice domestic over non-domestic matters. Our arguments suggest such priority is required. But once it is granted that prioritizing is acceptable in some ways, namely to grant some partiality to an institution’s own concerns of justice, we can also see that even though all principles of justice are on a par, they apply to agents differentially, with details determined also by the nature of the agent.

7.4  Assigning Obligations of Justice With the permissibility of giving some partiality to an institution’s own concerns in place, let us ask for which principles do agents have obligations to do what they can, within limits, to bring about justice? Let us say ground G is embedded into H if agents in the scope of G are also in the scope of H. Using this notion we respond as follows to the question we just raised: First, we find ground G most closely linked with the institution in question.12 Taking the institution of the state as an example, that ground would be state membership, since the operations of a state (or its government) are primarily directed at members of that state. We ask next what principles are “associated” with that ground. A principle is “associated” with a ground if it either arises from the ground as sketched (e.g., as the Rawlsian ­principles arise from state membership) or from another ground into which the first is “embedded.” Then we apply this rule: an institution has duties corresponding to all principles “associated” with the grounds linked to the institution. This approach to deciding which principles an institution has duties to bring about is more restrictive than the view that entities with obligations of justice are responsible for all principles. Using this approach, states have no obligations relating to Rawlsian principles elsewhere, for example, or to principles applying to people on another planet (to whom they are not linked). A list of principles associated with ground G is (by definition) incomplete until we know into which grounds it is embedded, and what principles are associated with any such H.  A full statement of principles in G also determines priorities among principles associated with H vis-à-vis those associated only with G. Inquiries about principles associated only with G but no other ground into which G is embedded are preliminary: we must revisit them once we know the principles associated with H. Shared membership in a state is embedded (given that there is a world society and a trade regime) into common humanity, ­collective ownership of the earth, membership in the world society, as well as shared subjection to the trade regime unless the respective country does not participate. So once we have identified the principles that apply purely domestically—say, the Rawlsian principles—we must also identify all principles associated with grounds into which shared membership in a state is embedded. Next we produce a revised list of principles of distributive justice that apply to the state and that takes these

The State as an Agent of Trade Justice  129 additional grounds into account. Section  7.7 presents the full list of principles applicable to the state.

7.5  Prioritizing Obligations of Justice: Adjudication Principles We have established that it is permissible for agents to give some priority to their own concerns of justice, and defined rules for determining which principles apply to an agent. Next we explore what to say about the ranking of remaining ­principles in order of priority for any given agent, that is, principles that fail to capture the agent’s own concerns and on that basis would not be on top of the priority ranking, but still apply to that agent. We must also explain in more detail what it means that institutions can give some (rather than absolute) priority to their own concerns and thus that any priority within a ranking (including the top-ranked priority) has a defeasible default status. Questions about rank-ordering arise because agents may need guidance when principles of justice conflict. In particular, there might be conflicts between top-ranked and other principles. Since justice is realized in degrees, the former cannot always prevail. Otherwise, minor advances in the realization of prioritized principles would outweigh enormous advances with regard to others even if the fulfilment of the former is much further along. The arguments for letting institutions give some partiality to their own concerns cannot bear such weight. What to do if adjudication among principles is needed? Several answers are available: (a) Offer no ranking among such remaining principles, and no guidance for conflicts. There is nothing to say (other than that some priority for one’s own concerns of justice is acceptable) since all remaining principles are on a par. (b) Offer no ranking, but offer guidance on how to think about prioritizing in any given case. Explore the kind of priority one’s own concerns of justice could have, and add some general considerations that in particular cases help adjudicate conflicts. (c) Offer a full priority ranking, and do not permit exceptions from that ranking. Adjudication becomes superfluous. (d) Offer a full priority ranking and permit exceptions. Guidance for adjudication is needed. (e) Offer a partial ranking, and do not permit exceptions in cases where a ranking is specified. Adjudication again becomes superfluous. (f) Offer a partial ranking, but permit exceptions in cases where a ranking is specified.

130  On Trade Justice Among these, (a) is ruled out since there are plausible things to say about prioritizing (as we explain below). As far as (c) and (e) are concerned, considerations we offer below render it implausible that there could be no exception to such rankings. As far as (f) is concerned, once we rank principles and allow for exceptions, it seems inappropriate to rank only some principles. This leaves (b) and (d). Both permit adjudication between principles, but for different reasons. In (b) there is ad hoc adjudication. In (d) adjudication explains deviations from a principled ranking. In both approaches the same considerations matter, which we formulate next. Suppose principle P1 is associated with ground G1, and P2 with G2. Suppose G1 is embedded into G2. Suppose the agent with whose obligations of justice we are concerned is government GC of a given country (linked to G1). For ease of formulation we identify a ground with the individuals in it. The following adjudication principles help resolve conflicts among principles of justice that apply to GC.13 1)  The larger the difference in average wealth or well-being between persons in G1 and persons in G2 outside of G1, the less plausible it is for GC to prioritize P1 over P2. That is: The wealthier people in G1 are on average, the less G1 has reason to neglect matters of justice outside of G1.

2)  If persons in G1 are on average above a basic threshold of a decent life, then the more persons in G2 outside of G1 are below that threshold, the less plausible it is for GC to prioritize P1 over P2. That is: If people in G1 are at a distinctly higher wealth level, then they have reason to help people outside of G1, and the more so the poorer those people are.14

3)  The better positioned GC is to bring justice to those in G2 outside of G1, the less plausible it is for GC to prioritize P1 over P2. That is: Suppose people in G1 have skills that are easy to teach, and people outside of G1 would benefit from learning them. If those skills could be easily taught without setbacks to G1 but with important benefits for realizing justice outside of G1, GC should take on the task.

4)  The less well-positioned agents other than GC are to bring justice to persons in G2 outside of G1, the less plausible it is for GC to prioritize P1 over P2. That is: GC has a particular obligation to help out persons in G2 if nobody else has the capacity to do so.

5)  The more GC approaches full realization of P1, the less plausible it is for GC to prioritize P1 over P2.

The State as an Agent of Trade Justice  131 That is: If people in G1 are an almost fully just society they have little reason to deploy resources on improving internal justice if they can use them to support justice elsewhere.

6)  The less justice is realized outside the scope of G1, the less plausible it is for GC to prioritize G1 over G2. That is: People who are surrounded by societies in which justice does not prevail at all have reason to do what they can to help with the realization of justice.

7)  All of these principles apply with the more force, the less responsibility the affected agents themselves have for the relevant circumstances. That is: The less it is the fault of people in G2 outside of G1 that justice has not been realized there, the more such realization should become a priority for GC.

These principles articulate concerns drawing on differences in wealth or wellbeing (and the absolute level thereof), ability to make a difference, and the extent to which justice is already realized. The overall picture is that on the one hand, realizing justice is a globally shared obligation. On the other hand, some partiality is acceptable. For agents not all principles are on a par, even though they are from the standpoint of the universe. In general, institutions’ own concerns of justice get top priority, though merely by default rather than with more serious stringency. We must consider then how remaining principles apply to the agent. Adjudication principles, as articulated above, help to do so. They apply regardless of whether we compare P1 and P2 for one particular situation or determine exceptions to rankings. Both times adjudication principles apply dialectically.15 They create pressure one way or another, but there is no precise algorithm.

7.6  Obligations: Refrain from Violating; Respect; Support Different agents have different kinds of obligations regarding justice. We have so far mostly talked about the state, but there are of course other entities. Section 7.3 has established that each can to some extent prioritize their own concerns. Sections 7.4 and 7.5 have provided a general orientation for how to place dutyholders within a pluralist theory. Chapter  6 has already introduced vocabulary responsive to the differentiated natures of variegated duty-bearers. We now adjust this vocabulary to the challenge of spelling out duties from trade.16 To begin with, all agents, from individuals and companies to institutions, are expected to “refrain” from committing injustices. A possible exception is if in­justice is necessary for increased justice overall, as well as the extraordinary

132  On Trade Justice case where a combined amount of other values justifies a breach of justice. All agents are also asked to “respect” demands of justice, even those to which they are not subject (with similar exceptions). Nobody should support violations in other countries (to whose laws one is not subject). Even countries not involved with the trade regime should not undermine trade justice. “Respecting” justice also precludes states from enabling firms or corporations to commit injustices, for ­example through insufficient regulation. Finally, all agents ought to “support” principles to which they are subject and thus see to it that they are realized.17 This duty varies substantially across kinds of agents. Individuals are asked to “support” principles of justice associated with any ground of which they are part. This includes domestic principles, principles associated with common humanity, membership in world society, humanity’s ­collective ownership of the earth, and, as appropriate, principles associated with trade. Practically, in the domestic context, individuals would comply with the rules of a just system. In a system that is by and large just, individuals should muster enough courage to help maintain it. In exceptional cases this may involve civil disobedience or other protest to improve on deficiencies. If there is no such system, individuals should see to the realization of justice by helping create one.18 Let us explore what it means for states, and specifically governments, to “support” justice. Ours is a world of states. Their shortcomings notwithstanding, states remain the only institutions that can manage large-scale social and economic change. State policies affect production and allocation of goods and services, distribution of income and assets, and aggregate level of employment. Since states can limit the power of sectional interests and are set up to administer law, they are in principle the most competent entities to realize justice. Therefore, for states to “support justice” is for them to have primary responsibility for realizing all ­principles associated with them. For principles associated with different states this must involve a burden-sharing arrangement. The grounds-of-justice approach dilutes contrasts between domestic and foreign policy. Acceptance of global responsibilities is a condition on state sovereignty. International organizations must be harnessed to realize justice, in ways that circumvent negative incentive effects from the domestic accountability mechanisms, democratic elections.19 States should also assist other states that cannot realize justice themselves. This may happen through direct aid or suitable international organizations, as appropriate. Since duties of assistance and interference are held alongside other states, they may well be exercised through international organizations. States should interfere if other states are unwilling to maintain an acceptable record. Interference might mean anything from supporting opposition movements or economic incentives, to sanctions and in the last resort military intervention. In our world of states, the general duty of obligation to assist in realizing justice elsewhere amounts to one in building state institutions.20 States must also record the performance of other states, especially those with which they interact

The State as an Agent of Trade Justice  133 regularly (e.g., through trade). Such recording is necessary to guide assistance and interference. International organizations too have obligations to support justice. They must assist states in discharging their duties, and interfere as appropriate if states are unwilling to maintain an acceptable record. They therefore also ought to supervise the justice-related record of states, at least in the domain of their activities (e.g., the WTO in the domain of trade). New institutions might be needed to attend to these responsibilities. What is crucial about international organizations is that they are founded by states. They have no independent existence, though some states encounter them as an independent power confronting them with demands. There may be several reasons states would or should found such organizations: to coordinate legal projects, or make sure subsequent governments keep commitments, but also because certain duties are naturally shared among states and thus best realized by such organizations. Obligations of justice pertinent to international organizations are constrained by considerations related to the purposes for which the organizations were, or should have been, founded. They must prioritize justice-obligations connected to their purposes—obligations inherited from states that founded them—in ways that do not conflict with other obligations of states. Such organizations are constrained by whatever constrains states that found them. It is a complex exercise to think about the conditions under which they should be founded, and for what domains, and what kind of obligations should remain in immediate care of states in domains for which such organizations have been founded. Businesses too are duty-bearers, especially multinational enterprises with great impact. As part of a UN effort to bring corporations under the purview of the human rights regime, a 2011 UN report plausibly distinguishes between a duty of  states to “protect” human rights and that of businesses to “respect” them.21 According to this effort, states must set appropriate incentives, and companies should be legally obligated to adopt due-diligence standards to ensure human rights are respected. The UN “business and human rights” initiative insists on far-reaching human rights-related obligations companies have all the way down their supply chains. Parallel demands can plausibly be made to business for the more general domain of distributive justice. As we argue later, corporations have duties to refrain from violating, to respect, and to support trade justice as non-exploitation. Duties of distributive justice are stringent, but not absolute. Ferdinand I, midsixteenth century Holy Roman Emperor, adopted the motto Fiat iustitia, et pereat mundus, “let there be justice even if the world perishes over it.” That is, if the price of the survival of the world were injustice, it would be too high. This carries the stringency of justice too far. Duties of justice can be suspended to avoid greater injustice, and in extraordinary cases can also be suspended under different circumstances. Rawls insisted “an injustice is tolerable only when it is necessary to avoid an even greater injustice” (our italics).22 This may still be too

134  On Trade Justice strong, but situations where non-justice-based considerations outweigh justice will be exceptional.

7.7  Prioritizing Trade Appropriately Membership in states as a ground of justice is embedded into subjection to the trade regime as such a ground (if we talk about states that participate in the trade regime). Trade injustice consists in exploitation among actors subject to the ­international trade regime. What does this mean for states? To begin with, by way of “supporting” justice states have primary responsibility for seeing to it that all principles associated with them are realized. States should also assist other states if those are incapable of realizing justice themselves. They must interfere if other states are unwilling to maintain an acceptable record in this regard. Finally, states must record the performance of other states, especially those with which they interact regularly. All these obligations apply especially with regard to trade. Trade is maintained through market reliance practices and upheld through the overall ensemble of trading states. Trade-related duties are therefore shared among states: their realization must involve burden-sharing. For this reason (among others), an international organization should be harnessed to realize trade justice. So the principle of trade justice applied to states points to the need to found such an organization to realize this type of justice. A suitable organization exists: the WTO. If there were no such organization yet, we should found one forthwith. But since there is one, that organization must be rethought from a standpoint of justice. For now we say trade justice “points us” towards such an organization. Chapter 8 offers more extensive argumentation as to why there is a duty to found one.23 But assuming there is a duty of justice for states to found an organization concerned with trade justice, what obligations should remain in immediate care of governments? Generally, for any agent of justice the rank-ordering of principles is determined as follows: the agent’s own concerns appear first (for agents that have such concerns), and all other principles remain on a par, as they are from the standpoint of the universe. The rank-ordering is qualified through the various adjudication principles discussed in section 7.5. Therefore this is a default ordering rather than one expressing any stringency. It is possible that matters captured by other ­principles that generally are subordinate from a given agent’s standpoint are under particular circumstances either urgent or especially significant. Similarly, if two principles are ranked at the same level, adjudication principles help settle conflicts. A complication is that an agent’s own concerns of justice might have to be stated in multiple principles. Rawls formulates two principles. It is not obvious that once we add principles associated with grounds beyond the state, the proper ranking would simply list non-domestic principles after those two. This is so

The State as an Agent of Trade Justice  135 especially since Rawls ranks his principles. As we extend Rawls’s list to a global one, adjudication principles help to integrate the principles that transcend domestic concerns. Adjudication principles enter twice: first by bearing on how to rank principles to begin with, and then to decide whether there can be exceptions to the ranking, or which of two principles ranked on a par should be prioritized under certain circumstances. Both times these principles enter dialectically, pushing one way or another. The following list spells out claims to which state duties must conform in order of priority. This list extends Rawls’s principles since membership in the state is embedded into other grounds: 24 1.  Within the state, each person has the same indefeasible claim to an adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all. 2.  (a) The distribution in the global population of the things to which human rights (understood as membership rights in the world society) generate entitlements is just only if everyone has enough of them for these rights to be realized. (b) The distribution of original resources and spaces of the earth among the global population is just only if everyone has the opportunity to use them to ­satisfy their basic needs, or otherwise lives under a property arrangement that provides the opportunity to satisfy basic needs. (c) The distribution of gains from global trade is just only if these gains have been obtained without exploitation. [These principles have the same priority.]

3.  Within the state, each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all. 4.  Social and economic inequalities are to be arranged so that they are both (a) attached to offices and positions open to all under conditions of fair equality of opportunity, and (b) to the greatest benefit of the least advantaged. [4(a) has priority over 4(b)]

Rawls’s first principle appears in two versions. Principle 1 omits “fully.” States need not support non-citizens if they cannot realize an adequate scheme of liberties at home. But this scheme need not be fully adequate before duties to others apply. If citizens enjoy an adequate scheme, duties generated by Principle 2 have greater importance than a fully adequate scheme. Adjudication drawing on wealth differentials motivates this way of prioritizing global over certain domestic concerns. Principle 3 restates Rawls’s first principle, including the word “fully,” to capture his own prioritizing of this principle over his second principle (here Principle 4).25 An international organization is the preferred vehicle to realize trade justice as non-exploitation. Nonetheless, trade justice appears as principle 2(c), to

136  On Trade Justice emphasize that the relevant obligations ultimately belong to states Should the ­international organization fail in fulfilling its duties, states must assume them. Listing trade justice also implies that pertinent obligations continue to apply in interactions outside the scope set for the trade organization, or with regard to states remaining outside of it. Foreign policy must internalize that it is morally un­acceptable to wield power to undermine reciprocal trade relationships. As long as there is a well-functioning international organization aiming for trade justice, human rights (as in 2(a)) largely eclipse trade justice as far as global obligations that remain in immediate care of states are concerned. At the same time, that obligations of trade justice beyond human rights are thus eclipsed is consistent with human-rights-related obligations in the context of trade. Trade often is an excellent vehicle to realize human rights. To the extent that trade creates domestic obligations, Principle 4 subsumes them. Social justice broadly conceived overshadows trade justice. We should aim for a society that provides fair equality of opportunity and regulates remaining inequalities in a manner benefitting all. Beyond that trade calls for no special attention. Let us conclude. This chapter has theorized the state as a major actor within our theory of trade justice. We have developed a differentiated vocabulary to outline obligations of different agents, some of which are designed to fit the role and importance of states for global justice, but some are also designed for other actors. In the process we have reconnected to the constrained-agency approach from Chapter 6. Chapter 8 now considers the international organization states should charge with realizing trade justice.

Notes 1. Here we do as much of such foundational work as is necessary for present purposes on the grounds-of-justice approach. For a more extensive development, see Risse, On Justice: Philosophy, History, Foundations. 2. For a contrast to constrained agency we could also talk about an impartial observer or the standpoint of humanity as such. We neglect possible differences among these articulations of impartiality. 3. These are Rawls’s two principles of justice, originally developed in Rawls, A Theory of Justice. For a statement see e.g., Rawls, Justice as Fairness, 42. These principles apply in an order of priority (the first outranking the second, and the first part of the second principle outranking its second part). They replace a more general conception of j­ustice only once circumstances allow for effective realization of the liberties in the first principle; see e.g., Rawls, A Theory of Justice, section 26. 4. See Chang, “Introduction”; Chang, “The Possibility of Parity.” See also Hsieh, “Incommensurable Values.” 5. It is not true that individuals have no duties vis-à-vis domestic justice in foreign jurisdictions; they must still be respectful, as we argue in section 7.6. But this minimal duty does not detract from the point here.

The State as an Agent of Trade Justice  137 6. North, Institutions, Institutional Change and Economic Performance, 3. 7. This terminology expands on Risse, On Global Justice, 327. For the justice relationship see Julius, “Nagel’s Atlas,” 176. 8. One may ask why there should be institutions with their own concerns of justice. Regarding states the argument draws on limitations of utopian reasoning, see again Chapter 4; see also Risse, On Global Justice, chapter 16. 9. McCarthy, The Road. 10. Nozick, Anarchy, State, and Utopia, 33. 11. In other words: If projects of one’s own can get a certain priority when there are ­obstacles to such priority (obstacles arising because the projects conflicts with moral considerations), then projects of one’s own can also get priority where those projects are themselves concerns of justice and thus of highest stringency. 12. Most commonly there will only be one such ground linked with the institution. If there should be more than one contender, we must assess how the institution affects people in the scope associated with each of those grounds. 13. For ease of formulation we identify a ground with the individuals in it. In other words, we talk about grounds as sets of individuals. 14. Averages might hide vast differences within countries. In countries where some live in abysmal poverty such principles might not exert much pressure to help realize justice in the larger domain. If wealth is unevenly distributed, there would also be pressure to remedy that situation. But this would not undermine the use we make of adjudication principles. 15. For example: “Yes, people in A may prioritize realization of political and civil rights; but neighboring B and C are doing so poorly/A is in a good position to help/A is doing so well in this pursuit/etc., that A can be expected to aid B and C in pursuit of principles that apply to all of them, such as realization of human rights.” 16. For a proposal of such vocabulary for human rights, see Risse, On Global Justice, chapter  11. That case is particular because human rights apply to all entities in the world society. But in general, agents of justice may have obligation vis-à-vis principles that do not apply where they are located. The vocabulary On Global Justice proposes for human rights is what this vocabulary for obligations turns into in the case of human rights. 17. For principles to which agents are subject, there is no difference between respecting and supporting. 18. This latter point about individuals doing their share in creating institutions that do not exist yet also holds for other principles that apply to individuals. For international principles this would not amount to much because individuals as such have little impact on international systems. But individuals qua voters could express support for human rights causes or fair treatment of developing countries in negotiations. Politicians will not pay attention unless they receive clear messages that voters care. Individuals qua tourists could support good causes by practicing non-odious tourism. They should also respect the law of a just system when travelling there. Individuals should act as citizens of the world, cosmopolitans, in such (limited) ways. 19. On how sovereignty depends on acceptance of international obligation, see Risse, “Taking up Space on Earth: Theorizing Territorial Rights, the Justification of States and Immigration from a Global Standpoint.”

138  On Trade Justice 20. See Risse, On Global Justice, chapter 4. 21. See Ruggie, “The UN Guiding Principles on Business and Human Rights.” For ­elaboration, see Ruggie, Just Business. 22. Rawls, A Theory of Justice, 4. 23. Chapter 4 incorporates the WTO into our characterization of trade as a ground. Since throughout we assume the existence of that ground we also presuppose the WTO’s existence. Partly in the present chapter but then largely in Chapter 8 we offer an argument as to why it is a duty for states to found an organization concerned with trade justice. We make that argument under the assumption that the WTO already exists. It would be an extra step to argue the already existing WTO should be transformed into the organization which states have a duty of justice to found. Alternatively, we could argue for the founding of an international and even global trade organization without presupposing the existence of trade as a ground in a way that includes the WTO. But since no circularity or other logical problem occurs for our strategy there is no need to proceed that way. 24. For the original list, see Risse, On Global Justice, 331. That list does not include 2(c). The considerations below as to how trade justice is eclipsed by human rights-related obligations motivated that earlier list. But for reasons explained below, we now think trade justice should be on this list nonetheless. 25. Adjudication principles also help with a challenge raised by Wollner, “The Third Wave of Theorizing Global Justice: A Review Essay.” Suppose Stalinist Russia was ­indispensable to the Allied success in World War II, to secure human rights of ­millions. Also suppose the only way of doing so was through a regime that failed to realize adequate liberties. Under such circumstances we can appeal to adjudication principles to show that by failing to secure adequate basic liberties at home to protect human rights abroad Russia would not act wrongly. Extending Rawls’s principles to the global context is consistent with the stringent ranking for the domestic context.

8

A Much-Needed Organization Rethinking the WTO

8.1 Introduction States ought to found an organization to pursue trade justice. In our world, an organization concerned with trade already exists. The WTO plays an essential role coordinating and harmonizing trade. As the WTO sees it, “globalization is unlikely to thrive in the absence of international political cooperation.”1 With digitalization and changes in logistics revolutionizing trade, harmonization gains even greater importance. The WTO also reflects the distribution of power in a world of states of vastly different wealth and involvement in trade. Unsurprisingly, this power structure generates failures of reciprocity. While multilateralism is a requirement of justice, the WTO is exploitative.2 Some moral language appears in WTO treaties, and the statues flanking the entrance to its Geneva headquarters represent peace and justice.3 But in the WTO’s view, “the trade system’s overriding purpose is to help trade flow as freely as possible [. . .] because this is important for economic development and wellbeing.”4 The WTO must be reoriented such that it makes justice its primary goal.5 Our argument that states ought to found an organization to pursue trade justice translates into one for WTO reform. We propose some broad mandates to that end.6 Section 8.2 expands on our previous description of the WTO. Sections 8.3 and 8.4 offer a justice-based rationale for a global organization. Section 8.5 explores how principles of justice apply to that organization. Section 8.6 explores the connection between our argument and Rodrik’s globalization trilemma.7 Section 8.7 explains why the WTO is exploitative. Sections 8.8 and 8.9 suggest how the WTO could approximate an organization devoted to trade justice, and thus how the world could approach a New Global Deal.8

8.2  The WTO In 1995 the WTO replaced the GATT, at which point we left our exploration of postwar trade arrangements in Chapter  2. It is often said that developed and developing countries struck a grand bargain. Developing countries would accept On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

140  On Trade Justice a “single undertaking”—all members must accept the treaty as a whole—that included a wide range of rules and commitments restricting policy space to deploy developmental measures. Some such rules and commitments covered new areas, such as services and intellectual property. Both domains of regulation allowed developed-country industries to penetrate developing-country markets. In return, developed countries would be accommodating in areas of interest to developing countries such as agriculture and textiles.9 In some ways the WTO regime has held up well. Countries have mostly refrained from raising trade barriers during financial crises. Moreover, the dispute settlement system is highly regarded; it is much stronger than the GATT’s and permits sanctions against violators. But compared to more forceful postwar proposals to integrate developing countries—think of the NIEO—the spirit of the WTO is to let developing countries have some share of globalization in return for playing by rules that mostly maintain access for developed countries. The WTO has not benefitted the poor as much as it could have. Power has not been deployed to build a regime where genuine reciprocity reigns. Regarding the trade of manufactured goods the most sizable gain for developing countries was the dismantling of the Multi-Fiber Agreement that had ­regulated textiles. Developing countries also benefited from tariff reductions in rich countries. But UNCTAD soon recorded that low-technology countries were losing $700 billion annually due to developed-country protectionism.10 In agriculture, developed countries largely failed to improve access for developing countries with a comparative advantage. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that was part of the WTO treaty introduced conditions to govern intellectual property that were absent from the GATT. Developing countries tend to be importers of intellectual property. US pharmaceutical, entertainment, and information industries got TRIPS on the agenda. Lack of patent protection had allowed firms to reverse-engineer products such as medicines by producing them with different methods to keep them affordable. Under TRIPS products themselves became protected. The US initially made aggressive use of TRIPS. They subsequently acquiesced to public health exceptions, realizing public health problems around the world threatened security. In 2005 the WTO approved changes to make it easier to import cheap medicine. However, this did not substantially change the nature of the regime. Whereas technology transfer was one demand of the NIEO, high barriers to such transfers became the default, prompting UNCTAD to comment that “liberalization without technical learning will result, in the end, in increasing marginalization.”11 Over decades, change in the WTO regime has come through draining rounds of negotiations where closed meetings were the preferred mode of interaction. These negotiations favored skilled negotiators, and thus countries that could dispatch teams of them. Poor countries would often not be competitive or even able

A Much-Needed Organization: Rethinking the WTO  141 to calculate consequences of potential agreements. One commentator laments that TRIPS and the disadvantaged position of developing countries in trade ­discussions generally arose because we have “installed competitive negotiating among unequals as the machinery of trade governance.”12 Despite shortcomings on the developed countries’ side of the bargain, ­negotiations recommenced in 2001, in Doha.13 Doha has commonly been called a development round. However, conflicts between proponents of free trade of goods and services and some developed countries’ insistence on retaining agricultural subsidies have remained major obstacles. As of 2019, no major breakthrough has been achieved. That Doha has so far failed to offer developing countries a meaningful place within the trade regime is symptomatic of asymmetrical capacities to take advantage of the trade regime. But the delays also revealed that developing countries are unwilling to accept just any arrangements offered.

8.3  The Justice-Based Rationale for a Global Trade Organization: First Argument According to standard economic theories, liberalizing trade is unilaterally beneficial. So the WTO’s existence, and especially talk of access-granting “concessions,” may seem puzzling. But it is easier for governments to sustain commitments ­necessary to benefit from trade arrangements (i.e., overcome special interests) if they bind themselves internationally.14 Indeed, while trade harbors enormous benefits, trade measures can fuel conflicts, and what trade policy is adopted is a matter of domestic contestation. There is also a justice-based rationale for an organization with global ambitions. If there were no such organization, states should found one forthwith. Since there is one, we should reform it so it can pursue its justicebased mission. Two arguments establish that rationale. The first—anticipated in Chapter 7—draws on the nature of trade to recast in moral terms the argument based on the beneficial consequences of binding commitments. The second, in section 8.4, draws on accountability. Recall that states have the primary responsibility for realizing principles ­associated with them. They should also assist states incapable of realizing justice. They must interfere if other states are unwilling to perform adequately. Finally, states must record the performance of other states, especially those with which they interact regularly. All of these obligations apply to trade. But one needs partners to trade, and only an international regime makes trade safe and reliable. That regime is one crucial aspect of what we mean when we call trade a ground of ­justice. States have trade-related obligations because they are actors within that ground, sharing them with other states involved with trade. Accordingly, there is a moral reason for founding a global organization pursuing trade justice, a forum for states to make commitments reflecting their moral obligations in that domain.

142  On Trade Justice Since in our world there is such an organization, that organization—the WTO—should be reformed to be an agent of justice. Since such an organization would be (and the actual one was) founded by states, it inherits their trade-related obligations, as well as other justice-related duties. What states are obligated to do constrains how such an organization can execute its tasks. Since in the case of trade we talk about globally interlocking activities, the presumption is that most trade-related obligations are within the international organization’s purview. Its treaties would regulate the basic p ­ arameters of trade in a non-exploitative manner. But the obligations ultimately belong to states.

8.4  The Justice-Based Rationale for a Global Trade Organization: Second Argument The second argument draws on considerations of accountability. We develop it in three steps. The first is to recall that there are different grounds of justice. So some principles of justice hold transnationally and have more people in their scope than belong to any given state. The second step is that agents of justice also have duties to account for how they discharge obligations. The last step is to note that a government that is democratically accountable to its citizens for realizing ­principles that hold in virtue of shared membership in a state has incentives to neglect other duties.15 Entity A is accountable to B for activities in some domain if and only if A owes B an actual (rather than hypothetical) justification for A’s activities in that domain. A and B stand in an accountability relationship. An accountability relationship is effective if B: (1) has the knowledge and competence to judge A’s actions in that domain; (2) has access to sanctions to penalize A if A falls short of B’s e­ xpectations, or to reward A if A meets B’s expectations; and (3) is constituted in such a way that (1) and (2) can become relevant (i.e., knowledge and competence to judge A can be brought to bear, and sanctions could be exercised). Such “knowledge and competence” presuppose performance standards applicable to the relevant domain. If (1), (2), or (3) fail, accountability is ineffective. Accountability relationships can be more or less effective (and separately so in terms of knowledge, impact of sanctions, and how its (that is, the accountability relationship’s) ­organizational set-up bears on those other two aspects), since B can have more or less knowledge to judge A’s actions in the relevant domain, B’s sanctions may have a stronger or weaker impact on A, and B may be more or less well-organized for any of this to matter. Ways for accountability to be ineffective include its being exercised rarely, or merely as an all-things-considered judgment, as in democratic elections. Whether there can be effective accountability depends on both accountgiver and account-recipient.

A Much-Needed Organization: Rethinking the WTO  143 Accountability between A and B is intermediate if A is accountable to B and B acts on behalf of C, such that B is accountable to C for B’s activities in some domain. A may or may not be accountable to C, and standards by which B should judge A may be shaped by B’s being accountable to C. The relationship is ultimate if it is not intermediate. Often agents are intermediately, and more or less ­effectively, accountable to relatively few overseers who are ultimately, but less effectively, accountable to a larger group. Examples include hierarchical structures in companies, where employees are intermediately and often effectively accountable to supervisors, with managers ultimately accountable to shareholders. Yet shareholders may only have periodic, unfocused influence. Democratic governance is another case. Within bureaucracies, employees are intermediately and effectively accountable to supervisors. Ultimately the government is accountable to voters. But voters often know little, vote rarely, and then only in an allthings-considered way. Are agents with duties to advance justice actually (not merely hypothetically) accountable to those in the scope of relevant principles? We give two arguments for why they are. First, there is an argument from respect. If people in the scope of principles were mere recipients of distribuenda covered by the principle, the fact that they are moral agents would not be taken seriously enough. One might object that such an argument can be made for any type of duty, implausibly precluding duties for which one owes merely hypothetical justification. But duties of justice are especially stringent. Moreover, duty-bearers may err in executing duties (e.g. due to flawed information, cognitive errors, motivational failures). Due to their seriousness, prospects of errors in executing especially stringent duties require that duty-bearers offer reasons for what they do and subject themselves to scrutiny (of sorts). Reasons should be given to those in the scope of relevant ­principles (or agents acting on their behalf). For duty-bearers to give reasons to people other than those in the scope of such principles (or those acting on their behalf) is patronizing to the latter.16 The second argument is instrumental. Accountability ensures the manner in which duty-holders act is under scrutiny on behalf of (or even by) those whose stringent claims are at stake. If those with duties towards realizing justice must give reasons to those whose claims are at stake, chances increase that such justice is done. While this claim is defeasible in particular cases, it is very plausible. Hume called justice “the cautious, jealous virtue.”17 Justice is jealous “since it decrees each person’s due, and we are jealous of our due, resent being denied it, and are apt to compare it with what others are getting.”18 Those who stand to gain benefits have reason to ensure they receive them. Those who stand to lose have reason to ensure they are burdened no more than required. Therefore skepticism about the usefulness of reason-giving to those in the scope of relevant principles likely is skepticism about forms in which such reason-giving is organized, not about reason-giving per se.

144  On Trade Justice Accountability should be as effective as reasonably possible. If accountability is ultimately owed to an unorganized group, there is pressure to create an entity to which others are intermediately and effectively accountable. That entity acts on behalf of the unorganized group and gives account in whichever ways remain possible, if only by publishing widely accessible accounts of its activities and by being open to public debate. The final step to establish our justice-based rationale is to note that a government that is democratically accountable to its citizens for realizing principles that hold in virtue of shared membership is incentivized to neglect other duties. Electoral politics interfere with other duties. Voters are preoccupied with their concerns, and representatives risk being penalized if they fail to cater to those. This normally implies a high degree of prioritization of domestic over other concerns by political leaders. Yet governments are also accountable to non-citizens. Therefore we need accountability mechanisms that ensure governments fulfill such duties. Since domestic realities prevent governments from taking seriously transnational duties of justice, there should be a transnational entity where governments coordinate, and account for, efforts to satisfy such duties. Due to the global nature of trade such account-giving should occur in an organization that at least aspires to be global. Much ingenuity in institutional design is needed to make such accountability as effective as possible.

8.5  How Does Justice Apply to the Organization? Since the global trade organization would be (a) founded (or re-structured) to pursue trade justice, (b) created by entities to which that principle applies already, and (c) concerned with regulating trade as a ground, the associated principle of trade justice applies to this organization: the distribution of gains from trade is just only if these gains have been obtained without exploitation. The trade organization should ensure there is no unfairness through power as far as the basic rules of the international trade regime are concerned. The logic of embeddedness from Chapter  7 also applies. The grounds into which the trade regime is embedded include collective ownership of the earth, membership in the world society, and common humanity. Principles associated with those grounds apply to the trade organization as well. Another consideration that leads to that conclusion is that that organization has been founded by states. Therefore, other obligations pertaining to states are bequeathed to it (adjusted to the fact that this organization deals with trade). Recall that embeddedness is a device to capture arguments about how global justice is structured. For ground G to be embedded into H means that whatever ties together the larger group such that considerations of justice bear on them also ties together the smaller group. Those who trade are also humans, members of the world society and inhabitants

A Much-Needed Organization: Rethinking the WTO  145 of this planet. On all of these grounds considerations of justice apply that do not expire when people trade. In light of the weightiness of justice a trade ­organization must see trade in a broader context of global justice. Most importantly, it has a human rights mandate. Since the view of human rights that is part of the grounds-of-justice view implies a duty of assistance in building institutions, the ­organization also has a development mandate.19 Chapter 7 has generated a ranking of principles for states by establishing that institutions can to some extent prioritize their own concerns of justice. We argued that principles not exclusively concerned with domestic matters may, accordingly, get lower priority but remain on a par with each other. Further, we introduced arbitration principles that help ascertain what kind of priority states can give to domestic matters. Finally, we made a proposal for how to supplement Rawls’s principles with principles of global reach by bringing to bear all these considerations. Similarly, since the trade organization ought to be founded by states to regulate trade, its own concerns consist in the realization of trade justice. Via embeddedness the following principles also apply: (1) Common humanity: The distribution in the global population of the things to which human rights (understood as rights needed to protect the ­distinctively human life) generate entitlements is just only if everyone has enough of them to lead a distinctively human life (and thus if those rights are satisfied). (2) Collective ownership: The distribution of original resources and spaces of the earth among the global population is just only if everyone has the opportunity to use them to satisfy their basic needs, or otherwise lives under a property arrangement that provides the opportunity to satisfy basic needs. (3) Membership in world society: The distribution in the global population of the things to which human rights (membership rights) generate entitlements is just only if everyone has enough of them for these rights to be realized. These principles help define the organization’s mandate. Let us spell this out for human rights. Both common humanity and membership in the world society generate a human rights principle. A plausible way of understanding that the organization can prioritize trade justice but is also subject to human rights principles is to say human rights constrain and guide the organization. They constrain the organization because it is not supposed to pursue trade justice at the expense of human rights violations. They guide the organization if trade arrangements are used suitably to pursue human rights causes. For example, Christian Barry and Sanjay Reddy explore how the WTO could link trade and labor standards. Governments would have incentives to improve labor standards if trade were conditional upon their promotion.20

146  On Trade Justice Generally our argument supports proposals to make trade conditional upon promotion of human rights and eschewal of tainted gains—unless there is evidence that doing so would backfire and make these goals less likely to be realized. Constrain-and-guide language also applies to the development mandate. That language is our interpretation of the ranking of principles as they apply to the trade organization, of what it means to give limited priority to trade justice. Justice is realized under conditions of constrained agency. Human rights issues should never be outweighed by trade concerns, but trade justice can nonetheless be the distinctive priority of one agent of justice. After all, the WTO’s justicebased rationale is the pursuit of trade justice.21 A corollary is that the trade organization has obligations to non-members. Negotiations about joining the WTO are often arduous and asymmetrical. Each member can impose conditions on aspiring members (beyond the treaties). Since many countries see themselves unable to stay away from the trade organization, one way of substantiating obligations to non-members is that existing members should not use accession to their advantage. Doing so is a paradigmatic case of using power—here, power stemming from membership—to make sure others do not get a voice in trade discussions.22

8.6  Weakening Domestic Democracy? Part of our justice-based rationale for a trade organization is that democracies fail to allow for genuine accountability for principles other than purely domestic ones. But does our rationale, then, not implausibly favor weakening domestic democracy by way of internationalizing decision-making? Indeed, some decisionmaking would be transferred to international organizations since account-giving implies much discretion in determining what trade justice requires. Any such shift means certain decisions are closed to domestic contestation. But the clash between globalization—economic or political—and domestic social arrangements is a defining characteristic of the world society. Dani Rodrik captures the ensuing difficulties in terms of a trilemma: we cannot have hyper-globalization (increasing shifting of decision-making to the transnational level), democracy, and national self-determination all at once. We can have at most two of these three (Fig. 8.1).23 Suppose a fully globalized economy has eliminated all international transaction costs. We have “deep economic integration.” If this world still respects nation states, domestic regulations and tax policies ipso facto harmonize with international standards (especially in all domains affecting trade): we are on the triangle’s “golden-straightjacket” side of the triangle. Governments provide services within the confines of international harmonization. In principle there could be all sorts of services as long as corporate taxes do not drive companies to relocate. If states coordinate on a corporate tax rate, any level is sustainable. But in reality social

A Much-Needed Organization: Rethinking the WTO  147 The Political Trilemma of the World Economy Deep economic integration

‘Golden Straitjacket’ Washington Consensus

Powerful nation state

Global Federalism World Government

‘Embedded liberalism’ Bretton Woods compromise

Democratic Politics

Fig. 8.1  Dani Rodrik’s globalization trilemma

services would likely be limited. In any event, domestic possibilities to affect ­policies would be restricted. We would have hyper-globalization and national sovereignty at the expense of democratic politics. Under the assumption of a fully globalized economy we could alternatively abandon powerful states. Global institutions would obtain robust regulatory and standard-setting powers as well as adequate accountability. Democratic politics would shift to the global level, and we would then be on the “global federalism/ world government” side of the triangle. There would be hyper-globalization and global democratic governance, at the expense of national self-determination. The third alternative is to eschew hyper-globalization, as the Bretton Woods system did (see chapter 2). During that period, countries could restrict capital flows as they saw fit. Trade agreements were limited to removing certain border restrictions on trade and requiring signatories to treat all trading partners equally. John Ruggie coined the term “embedded liberalism” for the global economic system and political orientation that existed from World War II to the 1970s.24 With that view we are at the triangle’s lower side. Sacrificing hyper-globalization leaves national sovereignty and (in this case domestic) democracy. So there are three ways of managing tensions between domestic democracy and transnational decision-making: to limit domestic democracy to minimize international transaction costs (holding sovereign states fixed); to limit economic globalization in the hope of building democratic legitimacy at home (again holding states fixed); and to globalize democracy, to the detriment of national sovereignty (maintaining that democratic decision-making of sorts ought to occur somewhere). Of course, sovereignty, globalization, and democracy are realized in degrees. So it is to the extent that we pursue any two goals that the third suffers. So Rodrik tells us that if we want more economic globalization while continuing to endorse powerful nation states, domestic contestation will be weakened, and

148  On Trade Justice the justice-based rationale above gives us a pro tanto reason for reducing domestic democratic contestation.25 Moreover, globalization has tremendous economic benefits, and we have reasons not to abandon national sovereignty (and if we were to do so, some loss in domestic democratic contestation is inevitable). A natural response to this situation then is to reflect on governance in ­international organizations and its potential for advancing global justice.26

8.7  Assessing the WTO The existing WTO does not see itself as an agent of justice. Still, the WTO is officially concerned with more than just efficiency. The preamble of the Marrakesh Agreement (the 1994 agreement establishing the foundation of the WTO) talks about “reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade.”27 Yet these goals should be pursued “with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand,” as well as with the goal of ensuring that “developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development.” Limited as it is, moral language appears in the WTO’s mandate. As far as the trade organization, whose founding is morally mandated, is concerned, the moral language must be expanded to include justice. The same is true for a reformed WTO. To the extent that many continue to think of the WTO as mostly or exclusively concerned with trade liberalization, we must rethink the trade organization’s obligations. The basic point is that the organization be charged with trade justice and thus avoidance of exploitation within the trade regime. Chapter 5 distinguished a generic conception from the particular one in the domain of trade. The generic conception understands exploitation as unfairness through power. The failure to proportionately satisfy all relevant claims creates unfairness. There is exploitation if that failure is due to one party’s power over others. The generic conception illuminates what role a reformed organization ought to play not only by way of regulating gains from trading, but also by way of considering obligations that arise in the context of trade. The constrain-and-guide language above applies to both its human rights and its development mandate. According to the WTO’s self-understanding and history, it fails to take these mandates sufficiently seriously. It is also clear from the history of postwar efforts at organizing trade that a human rights and development mandate never mattered much, as they might well have if Myrdal’s economic vision had come true, the ITO had been created, the UNCTAD had been more successful, the NIEO had not ­foundered, or the Brandt Report had not been engulfed by neoliberalism. Claims of justice drawing on various grounds have not been appropriately considered by

A Much-Needed Organization: Rethinking the WTO  149 the WTO because wealthy countries have deployed power to that end. That by itself makes the WTO exploitative: within the organization and through the ­treaties, the WTO deploys power to enable and maintain unfairness. Since the manner in which the WTO is exploitative can be spelled out with reference to various grounds of justice, this exploitation is an injustice. Apart from explorations of exploitation in the context of trade, a more specific notion of exploitation—power-induced failure of reciprocity—can be brought to bear on trading itself. Fairness in the trading itself requires all cooperation-relevant claims be satisfied proportionately. Provision of benefit generates claims, and questions of fairness thus arise as questions of reciprocity. There could be failures of reciprocity because actors bear a disproportionately large share of the costs of cooperation or others receive such a share of the cooperative benefits. As a matter of reciprocity, actors shouldering greater costs should receive a greater share of the benefit, where costs and benefits include material gains as well as effects on agency. What that means must be appropriately adjusted to the interaction at hand, and thus specifically to the economic prowess of the countries involved. This specific conception applies to a range of settings where parties are involved in trading. The trade regime as such ought to be arranged such that power is not used to undermine reciprocity. Above we found the WTO exploitative because the trade regime is not arranged the right way vis-à-vis other grounds. The specific conception allows us to assess the regime’s internal workings. The WTO is also exploitative in the specific sense because the implementation of its treaty imposes an unfair arrangement on developing countries. We noted the basic point above: at the WTO’s inception developing countries were asked to make commitments benefitting developed countries, but have not received reciprocal treatment in return. Again this exploitation amounts to an injustice because we are discussing the design of the trade regime, subjection to which is a ground of justice. The two ways in which the WTO is exploitative—in terms of how trade is positioned vis-à-vis other grounds, as well as in terms of how the regime itself is arranged—point to similar remedies. Participation of developing countries must be improved so they can see to it themselves that power is not wielded to perpetuate a lack of reciprocity. Moreover, the WTO should take seriously its development mandate. Doing so not only means to make sure gains from trade are distributed internally the right way; other considerations of justice in the context of trade should also factor in properly. With such reforms a New Global Deal for developing countries would be well on its way.

8.8  Reforming the WTO: Participation Under-representation of developing countries, asymmetrical capacities to take advantage of the system, and informal exercise of power are widely acknowledged

150  On Trade Justice problems of the WTO. Actors incur differential opportunity costs from p ­ articipation. Powerful players can impose terms on weaker ones with no realistic alternative to joining. For many states, joining the WTO as it was, or not joining at all, was a choice between the Scylla of subjection to unwanted and perhaps unreasonable norms, and the Charybdis of isolation.28 For much of its existence the WTO had a record of decision-making by informal caucuses of powerful nations that met frequently (in a way that exceeded the resources of smaller members) and enjoyed assistance of sophisticated staff, practices accompanied by lack of transparency and predictability for the excluded. Officially, the WTO is a onemember-one-vote organization, its decisions being consensus-based. But procedures favor the powerful.29 Intermittently, news has also been encouraging. As one observer reports, the WTO did a better job than the IMF or the World Bank to adjust decision-making to the increasing economic importance of countries like Brazil, China, or India.30 As a result, over the years the WTO differed substantially from the GATT’s “rich countries club.” But the WTO still faces the challenge of integrating members outside of the traditional club while enabling efficient decision-making. The difficulties to conclude Doha indicate both a failure at integrating developing countries in meaningful ways and a lack of willingness on their part to accept just any deal offered. As one commentator sums up, “[t]he days when a few First World countries could dominate trade discussions are over, and the WTO finds itself having to change radically, or be dismissed as a serious global governance institution.”31 An ongoing problem is that poor countries face difficulties maneuvering the dispute settlement system. The system is generally highly regarded, but it depends on compliance. If countries fail to comply, others may retaliate through sanctions. But countries without impact on world market prices cannot influence others through trade measures. Monetary compensation might be preferable for smaller countries. Moreover, since participation requires staff and expertise, countries are not equally able to benefit. As far as accountability is concerned, the trade ­organization is the natural place for states to account for their pursuit of trade justice. Governments should participate partly as account-givers, partly as recipients qua representatives of their people. Within WTO structures, governments should explain how they seek to realize justice, subjecting themselves to scrutiny by other governments, WTO staff, and plausibly also NGOs or independent experts. States would be intermediately accountable to (or better, within) the WTO but ultimately to the global population. Effective accountability requires that recipients be in a position to pass informed judgment and impose sanctions. Such empowerment is essential to make sure that the WTO takes seriously its duties in the pursuit of justice and that effective accountability occurs. Poor countries must have standing. This requires financial and logistical support, which richer members should provide. It is a duty of

A Much-Needed Organization: Rethinking the WTO  151 justice to make accountability as effective as reasonably possible. Accountability mechanisms must be strong enough for poor countries to have access to effective sanctions even against powerful countries. That is a tall order. As an agent of justice, the WTO itself has obligations to give account to relevant populations (trading states and the global population of individuals). The WTOs accountability should be to governments, to the extent that those represent their populations. The WTO’s chief administrators should explain to government representatives (including representatives of non-members) how the organization advances trade justice.32

8.9  Reforming the WTO: a Development Mandate More empowerment for developing countries without jeopardizing efficiency in decision-making is key to making the WTO less exploitative in both the generic and the trade-specific sense. Ultimately, changes must come about through ­negotiations among countries. Strengthening developing countries would help ensure that. In Richard Miller’s words: the basic tendency of reasonable trade deliberations will be a trade regime whose allocation of openness to goods, exemptions from constraints, and mitigation of burdens of disruptions due to trade must favor the countries where there is most need for growth through trade.33

Our second recommendation for reforming the WTO addresses the substance of the required changes. That proposal is to put the development mandate front and center. This move addresses both the problem identified in terms of our general conception of exploitation and the one identified in terms of the specific one. This is obvious for the former since the deficiency diagnosed thereby was that the WTO neglected development. Regarding the specific sense, a focus on development means developed countries receive reciprocal gains from the WTO agreement. To be sure, the place of trade in development is disputed. Rodrik, for one, warns that help for the poor should involve debate about policy space rather than trade liberalization. He proposes national oversight over financial markets, as well as work permits to allow guest workers to come to the developed world. Such permits generate a financial flow and let workers acquire skills they can put to use back home. With such assistance, developing countries would have policy space needed for social programs. Trade is just one part of such efforts.34 Knowledge transfer is essential. UNCTAD is right that “liberalization without technical learning will result, in the end, in increasing marginalization.”35 But as the WTO argues, success depends on absorption capacities (that is, on how countries can put knowledge to use), which in turn depend on education. China, Korea, or Singapore have done well here. African countries have not, and would

152  On Trade Justice benefit little from knowledge transfer.36 Consequently, even UNCTAD concurs that trade can only be part of development: “in many countries, underlying structural weaknesses still continue to limit diversification, restrain productivity growth, restrict gains from trade, and hamper efforts to alleviate poverty.”37 They remind us that calls to “free trade” can lock countries into an established pattern of production that—even if it makes efficient use of a country’s resource endowments—may not generate the more dynamic productivity gains that drive catch-up growth. These depend on a variety of macroeconomic, structural and technological factors that need to be in place for a strong investment-export nexus to emerge, including in the context of global value chains, and to support a more diversified economic structure.

Still, trade and the factors affecting trade performance are components of development. In an era of deep harmonization these background factors also naturally come onto the agenda of a global trade organization. As UNCTAD states: In order to maximize the potential gains from trade and to direct them towards inclusive development, developing countries require not just a rules-based global trading system, but also the support and the space to use policy instruments to promote capital formation and economic diversification and to manage the adjustment costs that such changes imply. There must be an effort to ensure that existing agreements maximize policy space, and where appropriate, expand it in sectoral areas of interest to developing countries through the formalizing and strengthening of special and differential treatment. At the same time, developing countries are aware that the absence of rules and effective surveillance in areas of particular interest to them continue to hamper efforts to build a more balanced international division of labor.38

In this light, some measures proposed by Rorden Wilkinson seem promising, such as a more enabling environment for least developed countries (market access, but also sustainable programs for economic improvement); help with capacity building; up-scaling technical capacities of the secretariat to be of greater assistance; thorough review of the WTO to reorient its focus; and making sure all countries can complete accession so at least most states are members. Such proposals flesh out the development mandate.39

8.10 Conclusion We need a global organization to make non-exploitative trade a reality. States are obligated to found such an organization, or reform an existing organization accordingly. As far as WTO reform is concerned, there needs to be improved

A Much-Needed Organization: Rethinking the WTO  153 participation (also in light of the importance of accountability), as well as a development mandate that is front and center in its operations. Our proposals move in intellectual proximity to some postwar proposals to create a more hospitable space for developing countries in the global economy. The problem has always been that richer countries are reluctant to offer more inclusive trade arrangements. But sharing power and wealth for the sake of trade justice is what we call for. To be sure, this mandate should be sensitive to the restricted but genuine role trade, as well as the factors that enable trade, can play in development. Our arguments support the founding or reform of a genuinely global organization, rather than one or more with a regional focus. It is only within such an organization that a New Global Deal could be offered.

Notes 1. World Trade Organization (WTO), World Trade Report 2013, Executive Summary. 2. In the WTO context reciprocity is understood in a quid-pro-quo sense as granting of mutual concessions in tariff rates or other commercial restrictions. Traditionally, such reciprocity was not expected of developing countries, who received special and preferential treatment instead. When we talk about reciprocity we mean the richer notion from Chapter 5. 3. See World Trade Organization, The WTO: the WTO building—Works of Art, at: http:// www.wto.org/english/thewto_e/cwr_e/cwr_art_e.htm; last accessed December 11, 2018. 4. https://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm; last accessed December 11, 2018. 5. For a related point in terms of social goods rather than justice, see Wilkinson, What’s Wrong with the WTO. For the view that the global trading system is merely an arrangement to further commercial relations, see Brown and Stern, “Concepts of Fairness in the Global Trading System.” 6. For detailed prescriptions, see e.g., Stiglitz and Charlton, Fair Trade for All; Wilkinson, What’s Wrong with the WTO. Many of their proposals align with what we argue. WTO reform is normatively overdetermined: a range of stances on global justice or trade in particular demand substantial reform. 7. Rodrik, The Globalization Paradox. 8. For discussion of the WTO under the heading of justice, see Brandi, “The World Trade Organization as Subject of Socioeconomic Justice.” For another global justice approach with an eye on international law, see Garcia, Trade, Inequality, and Justice. 9. See Van Grasstek, The History and Future of the World Trade Organization; Wilkinson, What’s Wrong with the WTO, chapter  1; Narlikar, Daunton, and Stern, The Oxford Handbook on the World Trade Organization; Hoekman and Kostecki, The Political Economy of the World Trading System, chapter 2; Winham, “Explanations of Developing Country Behaviour in the GATT Uruguay Round Negotiation.” For the history of the trade system under political aspects, see Barton et al., The Evolution of the Trade Regime. See also Trebilcock, Howse, and Eliason, The Regulation of International Trade; Howse,

154  On Trade Justice The WTO System; Hoekman, “The WTO: Functions and Basic Principles.” For a short introduction, see Narlikar, The World Trade Organization. For reflections on the future of the WTO that are somewhat dated, see Meléndez-Ortiz, Bellmann, and Mendoza, The Future of the WTO; Steger, Redesigning the World Trade Organization for the Twenty-First Century; Cottier and Elsig, Governing the World Trade Organization. For general issues about when international cooperation is desirable and the distinction between shallow and deep integration, see Lawrence, Bressand, and Ito, A Vision for the World Economy. See also Hoekman, “The WTO: Functions and Basic Principles.” 10. United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 1999, ix. 11. United Nations Conference on Trade and Development (UNCTAD), Least Developed Countries Report 2007, i. For implementation of TRIPS, see Deere, The Implementation Game; Drezner, All Politics Is Global. For the argument that enforcement of intellectual property helps developing countries by spurring medical advances, see Sykes, “TRIPS, Pharmaceuticals, Developing Countries, and the Doha ‘Solution.’” On access to medicine, see Prashad, The Poorer Nations, 180–3. 12. Wilkinson, What’s Wrong with the WTO, 13. Note what others say about these ­negotiations: “The success of US intellectual property industries in getting TRIPS onto the Uruguay agenda and gaining a favorable agreement is a testament to their skill in negotiating. NGOs and developing-country delegations demonstrated similar skill in  wining public-health related concessions on TRIPS at the Doha ministerial in late 2001”; Devereaux, Case Studies in US Trade Negotiation, 111. “Both battles occurred in the context of a much longer war,” Devereaux, 118. Negotiation skills help on all sides, but the war is not symmetrical. For advice for developing country negotiators, see Jones, Negotiating Against the Odds. For an account of WTO negotiations around the Doha Ministerial in 2003, see Jawara and Kwa, Behind the Scenes at the WTO. 13. On Doha, see Ancharaz, “Can the Doha Round Be Saved?”; Lee and Wilkinson, The WTO after Hong Kong; Hoekman and Kostecki, The Political Economy of the World Trading System, 140–6. For the WTO’s take see “The Doha Agenda.” See also Dupont and Elsig, “Persistent Deadlock in Multilateral Trade Negotiations: The Case Of Doha”; Jones, The Doha Blues. For some minor breakthroughs in Bali in 2013, see Wilkinson, Hannah, and Scott, “The WTO in Bali: What MC9 Means for the Doha Development Agenda and Why It Matters.” Regarding Doha’s early years, see also Stiglitz and Charlton, Fair Trade for All, chapters 3–4. 14. See Baldwin, “The Case For a Multilateral Trade Organization.” 15. This section draws on Risse, On Global Justice, chapter 17. 16. One might say professors owe students fair grades, but this does not mean students should be empowered to sanction them if they fail their expectations. In this case, particular forms of accountability (such as students voting on a professor’s employment) are ineffective to ensure fairness. Nevertheless, there should be oversight over grading on behalf of students, and there is if students can complain about misconduct and submit evaluations. 17. Hume, Enquiries Concerning Human Understanding and Concerning the Principles of Morals, 184. 18. Baier, The Cautious Jealous Virtue, vii–viii.

A Much-Needed Organization: Rethinking the WTO  155 19. For that duty and its connection to common humanity as a ground, see Risse, On Global Justice, chapter 4. 20. See Barry and Reddy, International Trade and Labor Standards. For links between labor rights, human rights and justice, see also Dahan, Lerner, and Milman-Sivan, Global Justice and International Labour Rights. 21. Things are more complex as far as embeddedness into other grounds is concerned. On Global Justice distinguished demands of justice from those of reasonable acceptability. The latter are less demanding than those of justice and become applicable only with increasing wealth levels. Associated with collective ownership of the earth, one of them is intergenerational equality: each generation can be reasonably expected to leave behind a non-declining stock of natural capital. In this way the trade ­organization incurs global environmental responsibilities. On intergenerational equality, see Risse, On Global Justice, chapters 9, 17. On trade and the environment, see Hufbauer and Fickling, “Trade and the Environment.” 22. For ascension to the WTO, see Stiglitz and Charlton, Fair Trade for All, chapter 11. 23. Rodrik, One Economics, 199–205; Rodrik, The Globalization Paradox, 200–6. The chart is adapted from Rodrik, One Economics, 200. 24. Ruggie, “International Regimes, Transactions, and Change.” 25. Rodrik, The Globalization Paradox. 26. For the view that well-crafted international governance enhances quality and ­legitimacy of democratic practices, see Keohane, Macedo, and Moravcsik, “DemocracyEnhancing Multilateralism.” There need not be a conflict: some governance functions shift to international bodies, but their design strengthens the democratic credentials of what decision-making remains domestic. 27. http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm, last accessed December 11, 2018. 28. See Barton et al., The Evolution of the Trade Regime, chapter 3. See also Gruber, Ruling the World. Narlikar characterizes the WTO in terms of an unsustainable discrepancy between “extreme legalization, particularly in the enforcement of its rules through the dispute settlement mechanism, on the one hand, and an inordinate reliance on de facto improvisation in the making of those rules, on the other,” Narlikar, The World Trade Organization, 42. See also Narlikar, “Law and Legitimacy: The World Trade Organization.” 29. See Stiglitz and Charlton, Fair Trade for All, chapters 3–4; George, The Truth about Trade; Watkins and Fowler, Rigged Rules and Double Standards. 30. Narlikar, “New Powers in the Club: The Challenges of Global Trade Governance.” 31. Peet, Unholy Trinity, 242f. 32. For WTO reform, see Cottier and Elsig, Governing the World Trade Organization; Hoekman, “Proposals for WTO Reform: A Synthesis and Assessment.” But much of this work takes more guidance from reality than we do. See also Deere-Birkbeck, Making Global Trade Governance Work for Development. For changes in the ­organization, see Narlikar and Vickers, Leadership and Change in the Multilateral Trading System; Van Grasstek, The History and Future of the World Trade Organization, chapter 15. 33. Miller, Globalizing Justice, 74. There are many similarities between Miller’s and the grounds-of-justice approach, especially in terms of their conclusions. For the role of

156  On Trade Justice unequal bargaining power in exploitation, see Miller, “Unequal Bargaining Power and Economic Justice: How Workers Are Exploited and Why It Matters.” 34. Rodrik, The Globalization Paradox, chapter  12. Stiglitz and Charlton summarize as follows: “Theory and empirical evidence indicate that trade liberalization can be a force for development in poor countries but that these benefits depend on others, concomitant factors;” Stiglitz and Charlton, Fair Trade for All, 35. On how to pursue free trade or multilateral trade in connection with other aspects of international economics, see also Daunton, “The Inconsistent Quartet: Free Trade Versus Competing Goals.” 35. United Nations Conference on Trade and Development (UNCTAD), Least Developed Countries Report 2007, i. 36. World Trade Organization (WTO), World Trade Report 2013, 165. 37. United Nations Conference on Trade and Development (UNCTAD), Report of the Secretary-General of UNCTAD to UNCTAD XIII, 27. 38. United Nations Conference on Trade and Development (UNCTAD), 77. 39. (1) See Wilkinson, What’s Wrong with the WTO. Stiglitz and Charlton’s suggestions include that all countries should grant market access for countries poorer than they are themselves; exemptions from restrictive multilateral rules; elimination of all agricultural subsidies; also addressing non-tariff barriers to trade, migration, unskilled services, industrial tariff structure, to the extent that they are needed to make countries more competitive in what then is traded, see Stiglitz and Charlton, Fair Trade for All. (2) For the argument that there should be something close to full trade liberalization, see Teson and Klick, “Global Justice and Trade.” They neglect that liberalization must happen in particular contexts where trade would and should only be one part of an overall development strategy.

9

Domestic Trade Policies in an Interconnected World 9.1  Problems about Trade in an Interconnected World Chapter 8 discussed Rodrik’s globalization trilemma that captures the clash between globalization and domestic social arrangements as a defining feature of our world. The grounds-of-justice approach conceptualizes justice in our complex world where states remain the only institutions to manage large-scale social and economic change, where at the same time political and economic interconnectedness shapes what any given state can do, and where democratic governance is an ideal. Trade-As-One-Ground develops this approach for trade. This chapter discusses three problems of trade policy in an interconnected world. We illustrate how our apparatus bears on such problems. The grounds-of-justice approach dilutes contrasts between domestic and foreign policy. Governments must attend to matters of domestic justice, as well as make appropriate contributions to the global advancement of human rights and to trade justice. There are additional duties of justice and other moral duties that apply to states in domains such as immigration, climate change, or protection of future generations. The state has obligations to protect its labor force and look after its vulnerable citizens. But it also has duties towards people elsewhere. The challenge is to reap gains of cooperation in trade, culture, education, environmental protection, among others, while respecting the world’s many local peculiarities and making sure those gains do not accrue only to a few. The grounds-of-justice approach offers guidance for how to pursue these tasks. Given the colossal wealth in our world, there are enough assets for economic progress to benefit everybody. But it requires political and administrative sophistication, smart as well as wise governance, to navigate this terrain, especially with an eye on what justice requires. This chapter makes proposals for what such governance might amount to in certain contexts. But prospects might be bleak. There is evidence that in peaceful times capitalism benefits those who own productive assets much more than it benefits those who do not. Unless consistently contained, over generations this tendency ossifies societies, with facts about one’s birth determining one’s life chances.1 Vast fortunes are bequeathed to heirs who have not earned their privileges while others are left behind from the start. The historical record suggests that significant measures to reduce inequality only ever On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

158  On Trade Justice prevail in calamitous times, such as war, pandemics, or social collapse. They do not succeed through reform but require a shock to the system.2 Inheritance taxation would be an obvious way to channel benefits of human collaboration to everybody. But politically such measures are hard to pass. In line with the historical record, the wealthy do their utmost to prevent such measures. Typically, they play off one group of disadvantaged against another. For example, immigration to wealthy countries or transfer of economic activities to poorer ones are often blamed for the vulnerability of the working class in industrialized countries. But too often no substantial changes in education, infrastructure, or industrial policy are pondered to offer people genuine alternatives to what they have been doing. Blame is assigned to immigration and outsourcing only because much else is taken as fixed, especially the distribution of wealth. Challenges to generate new forms of work are enormous in an era on the cusp of technological revolutions that will eliminate many blue- and white-collar jobs. Economic nationalism rears its ugly head, and in 2016 led to Donald Trump’s election as US president. All this is the canvas before which our discussion unfolds. As loosely interrelated as they are, the problems of this chapter all arise in the context of trade policy in an interconnected world. The first is how politicians should think about responsibility in a particular trade niche that also generates larger questions. The second problem is what to do about export subsidies, especially the controversial agricultural subsidies in wealthy countries. Such governmental payments for exporting products appear prominently in debates about trade justice. The third is whether to trade with authoritarian regimes. Wealthy ­democracies must often shoulder more responsibility for violations committed by trading partners than they are comfortable acknowledging. But that may not mean such trade should cease.

9.2  Responsibility Practically Speaking: A Case Study One of the longest-serving US senators ever, Patrick Leahy, was elected in 1975 and as of 2019 still represents Vermont. In 1990, he introduced legislation to alter the policy governing pesticide exports. Existing regulation permitted relatively free flow of pesticides to foreign countries, generating the “circle of poison.” Pesticides banned in industrialized countries continued to be exported to developing countries, threatened people’s welfare there, endangered the environment, and were used on export crops to re-enter the US as harmful residues on food. Leahy’s bill would impose restrictions on overseas sales of agricultural chemicals. It would largely ban export of pesticides not approved domestically, and closely control exports that were approved but classified as hazardous. Importing governments had to consent for such materials to be shipped.3

Domestic Trade Policies in an Interconnected World  159 This scenario raises questions about how lawmakers or officials should see responsibility in decision situations with international dimensions, such as trade policies. Such cases provide the practical reality where officials must put into practice the manner in which states ought to refrain from injustice and respect and support the pursuit of justice as discussed in Chapter 7. Such scenarios also trigger reflection on how that framework ought to enter deliberations of elected politicians. Though the pesticide users live abroad, lawmakers should not ignore their plight. If we failed to offer protection to them we would apply double standards. The difference in treatment would not be justifiable in terms of ­citizenship. After all, as far as basic goods such as health and environmental protection are concerned, claims to protection are based on common humanity. With the general public unengaged, Leahy met with the unremitting hostility of the chemical industry, which had ties to many members of Congress or their constituents. The government held that reforming export practices for pesticides would cause economic harm at home and impose standards on countries ill prepared to meet them. Politicians in developing countries, countries deemed to benefit from reform, often resist such measures as ethical imperialism or paternalism, parallel to rich-country pressure to reduce pollution. They tend to insist all countries should assess risks without being beholden to standards elsewhere. Or they deny product control is a governmental responsibility to begin with.4 Membership in a state as a ground of justice is embedded into several others, which generates an extended list of principles that apply to the state beyond the Rawlsian principles.5 Such a view of global justice has implications for policymakers. Domestically there is a clear accountability relationship, with democratically-elected politicians accountable to voters. Leahy’s accountability is to the voters of Vermont. But we must ask if this relationship delineates his full responsibilities within a pluralist theory of global justice. Does Leahy, and do representatives or public officials generally, have obligations to people beyond the constituents to whom they are accountable? We can distinguish among electoral, constitutional, and moral constituents. Leahy’s electoral constituents are in Vermont. Different views are available on the nature of representation, but in a concrete sense Leahy speaks in the name of his voters. In addition, there are his constitutional constituents, Americans outside of Vermont. Leahy works within a framework for whose functioning he is accountable to those subject to it, the American people. But obligations within the grounds-of-justice view are not exhausted by these categories. Obligations arise on grounds such as trade and common humanity. Double standards are not always unacceptable among countries in vastly different economic circumstances. But here the concern is with elementary goods like health and environmental protection. As a matter of justice, consideration of such goods should enter deliberations of politicians even where they are not goods appertaining to their voters. Thinking of those who handle pesticides abroad as moral constituents

160  On Trade Justice supports Leahy’s stance (even if politicians in receiving countries complain about ethical imperialism). So far, we have considered the implications of the grounds-of-justice approach for responsibilities of politicians. But it is still unclear how philosophical inquiry can or ought to move elected officials. Such officials are accountable to voters, not to a philosophers’ court. But as Edmund Burke famously said to the electors of Bristol in 1774, “your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”6 Philosophical arguments aim to persuade policymakers, as apparently some persuaded Leahy. Only too narrow a view of representatives as receiving instructions from electorates blocks philosophical argument from informing relevant reasoning. Unfortunately, as of 2019, there is increasingly much of this narrow view in today’s politics with its ever-increasing role for polling and social media analyses. Policymakers must be guided by feasibility lest they fail to get anything done. Even the morally upright must worry about re-election lest they be replaced by someone less concerned with justice. But within such constraints moral argument finds room, if only as offering ideals worth aspiring to and pursued as ­opportunities arise. Politicians also play educational roles that should be informed by philosophical arguments. Responsibility to moral constituents should loom large in such arguments, also in the context of trade. In the age of Trump this sounds like wishful thinking; but that only adds to its relevance.

9.3  Export Subsidies: Basic Terms Recall that “fairness in trade” has three meanings: first, the proportionate satisfaction of claims arising in some context-specific sense somehow involving trade; secondly, the proportionate satisfaction of claims of justice arising in the context of trade, based on different grounds; and thirdly, the proportionate satisfaction of claims arising from trading within subjection to the trade regime as a ground. In this third sense “fairness in trade” is the same as “trade justice.” These distinctions help us analyze the normative dimensions of subsidies. Some context-dependent claims of citizens in wealthy countries are overruled by claims of justice drawing on common humanity.7 Export subsidies are governmental payments to producers for exporting products. Alongside anti-dumping measures, export subsidies are common forms of protectionism. “Dumping” occurs if goods are sold at less than “normal” (WTO language) or “fair” value (US language). Anti-dumping duties make imports more expensive, favoring domestic industries. These measures are the primary fairness topics covered by WTO regulations (which constrain both). Also criticized as inefficient, agricultural export subsidies in the US, EU, and Japan specifically have long been seen as serving the rich at the expense of the poor by excluding from

Domestic Trade Policies in an Interconnected World  161 the world market poor-country producers who would otherwise have a comparative advantage in this domain. Export subsidies benefit domestic producers but harm consumers because there are fewer goods on that market, which causes prices to rise.8 While redistributing wealth, subsidies cause “deadweight-losses,” distortions arising because restrictions motivate producers to produce more and consumers to consume less. And subsidies harm producers abroad by lowering world market prices (if ­subsidies are large enough). Ipso facto, subsidies benefit consumers abroad. Agricultural subsidies therefore benefit net-food-importing countries. Yet by harming producers abroad, subsidies might also harm consumers there by undermining prospects to work for such producers. Subsidies create winners and losers, as does their removal. The expiration of the Multi-Fiber-Agreement benefitted China, whose comparative advantage in textiles had lain dormant only because of that Agreement. Similarly, removing subsidies might give some countries advantages in agriculture or cause others to alter production. But since it is hard to predict which countries will shift—only retrospectively do we see that the Multi-Fiber-Agreement aided textile producers competing against China—­ liberalization might not help those on whose behalf it is demanded. Consequentialist considerations support trade liberalization, although their strength remains debated. Estimates depend on predictive models, specifically on assumptions about what happens in production when subsidies expire. To see how astounding the degree of variation is, consider two papers, both published by the World Bank in the same year. Anderson and Martin agued in 2006 that “[f]reeing all merchandise trade and eliminating agricultural subsidies are estimated to boost global welfare by nearly $300 billion a year by 2015. Additional gains would come from whatever productivity effects that reform would generate.”9 They added that 45 percent of gains would go to developing countries, more than their share of global GDP. Hertel and Keeney provided significantly lower estimates of the benefits from liberalization. They estimated that eliminating agricultural subsidies and liberalizing trade in goods and services would lead to gains of $151 billion, $34 billion for developing countries.10 Observers like Rodrik have long argued that the importance of removing ­subsidies has been exaggerated and that other programs would produce higher gains, especially work permits to generate remittances.11 Although UNCTAD does not care for subsidies, they too think trade can only be part of an overall development strategy. As they say in a 2011 report, “in many countries, underlying structural weaknesses still continue to limit diversification, restrain productivity growth, restrict gains from trade, and hamper efforts to alleviate poverty.” The productivity gains that drive catch-up growth, they add, depend on a variety of macroeconomic, structural and technological factors that need to be in place for a strong investment-export nexus to emerge, including in the context of global value chains, and to support a more diversified economic structure.12

162  On Trade Justice Considerations that put in perspective the importance of trade for development also decrease the urgency of removing subsidies. But how to argue for subsidies to begin with? There are three strategies. First, some may have claims as citizens against the government to continue in a line of work that has become ­unprofitable.13 Secondly, the community may have a prerogative to indulge in certain products, and, say, pay subsidies to keep farmers in business. Thirdly, the community may have moral commitments that require protection of members who unilaterally suffer because of these commitments. Producers could make an argument following that third strategy if their competitiveness declines because they must comply with higher labor standards than used abroad, and if these standards are implied by the community’s moral commitments.14 Sections 9.4–9.6 assess these strategies from a standpoint of fairness or justice. Subsidies in general and in agriculture in particular have been contested for decades, partly because of their effects on developing countries but also, and largely, because of inefficiencies. In various ways, rich-country governments have committed themselves to discontinuing export subsidies, especially in agriculture. But subsidies continue to exist. Moreover, the political temptation to protect interests through export subsidies might well return. A moral assessment of subsidies is therefore central to any discussion of trade justice.

9.4  Claims to Subsidies? Governmental support for producers whose occupational choices are frustrated has many forms, such as unemployment benefits or assistance in changing work. For claims to export subsidies to succeed, the government must be liable for occupational choices to such an extent that individuals are entitled to protection from foreign competition if otherwise they could not continue in that line of work. One might think everybody is on the labor market at her own risk (except that a social system provides basic safeguards) and for her own sake (except that she must pay taxes). People acquire skills, and keep most gains. If demand dries up or the price those skills command declines, the state only owes protection against hardship. This view is implicit in the political economy of liberal market economies, as in the US. However, there are other versions of capitalism, including coordinated market economies, in which states plausibly owe more than such protection. Versions of capitalism are characterized by institutional complementarities: one set of institutions operates effectively only (or more effectively) if a­ ccompanied by other institutions. This applies especially to ownership arrangements and labor markets. Coordinated economies have rigid labor markets that encourage employees to acquire specialized skills to reward them with job security. Other factors that shape the political economy complement such markets. Participants in coordinated economies have a different relationship to the state than that in

Domestic Trade Policies in an Interconnected World  163 liberal economies. Note this assessment of labor markets in Germany and Japan, two paradigmatic examples of coordinated economies, as they were around 2000: Social constraints and opportunities [. . .] typically enforced by social institutions, define the legitimate place and the possible range of market transactions and markets in the economy-cum-society in which they take place. By circumscribing and thereby limiting the role of markets, they typically “distort” them, for example by shielding desirable social conditions from market fluctuations.15

By promoting specialization the government participates in professional decisions. The risk that accompanies specialization, if occurring in response to how labor markets are framed, is justifiable only if the state offers citizens guarantees beyond protection against hardship, which leads to demands for export subsidies if competition grows too strong.16 One might say individuals must always make choices in light of legislation. There is nothing special about legislation that determines the basic set-up of labor markets. But we must differentiate. Suppose a Swede makes life choices based on Swedish liquor laws. As far as legislation is concerned, she retains many options, all those not challenging liquor laws. Suppose a Japanese must decide whether to invest in certain skills and finds labor markets make it irrational not to specialize somehow. Short of emigrating or accepting failure, she cannot evade this choice. Laws like those that shape labor markets have special relevance. In liberal economies individuals can specialize or not, accepting risks with each decision. Since the system is prepared to deal with workers who lack specialization and may need additional training, even those who specialize and fail could more easily switch sectors than in coordinated economies. Liberal systems too subsidize individuals: they provide infrastructure (from education to roads) to enable individuals to live and pursue goals. But support for unprofitable work is nothing people can claim within such systems. To the extent that fairness claims arise, they draw on the fact that past policies create expectations it would now be unfair to thwart. Compared to other citizens, workers in now-unprofitable sectors would be asked to assume a disproportionate share of burdens from certain policy choices. There should be suitable warning that policy will change, and there should be efforts to allow workers to switch tracks. But within liberal market economies no weightier fairness claims are forthcoming.17 Even in coordinated economies one may doubt if individuals have claims against the state to enable them to continue in an occupation. Of course, especially for well-trained people who spent all of their life in one niche, the costs of change might be staggering, including psychological difficulties in adjusting to new work. In coordinated economies, these considerations support fairness claims to governmental assistance. But employees only generically have a claim to a high level of support if their life choices end in frustration, a fairness claim based on risks they are encouraged to take in coordinated economies. In ­coordinated

164  On Trade Justice economies, gains from trade need not be distributed in such ways that people can continue in a chosen line of work. The state may also help people to leave the export sector altogether. Alternatively, the state may assist through unemployment insurance, retirement packages, or more training.18

9.5  Subsidies as Expression of a Collective Preference Consider the French as a (rather stylized) example to examine the second type of strategy used to argue for subsidies. The French may consider redistribution and deadweight-losses acceptable to continue production of baguettes from French grain, camembert from French cows, or foie gras from local ducks. Far from honoring a duty, they might have a collective preference for home-grown products and happily pay for them. To be sure, such preferences can be satisfied without trade distortions. Farm products can be re-marketed as gourmet products. Higher prices for “French” products keep farmers in business if consumers pay for quality. Subsidies indicate the government thinks this preference should be maintained through authority rather than consumer choice. Alternatively, the government might think the price for this preference should not be too high, so that even the poor can partake of the French savoir-vivre.19 This way of upholding a collective preference would have to outweigh claims of farmers in developing countries. That could happen only if trade had little to do with development, much less than what is empirically plausible. A stronger argument for state action on behalf of home-grown products stems from more weighty values than food preferences. Food may be part of the preservation of French culture or countryside. Or perhaps it is part of a strategy of ensuring France can survive emergencies. Supporters might claim that without government support these goals succumb to collective action problems. Still, even such claims must compete with the relevance of trade for development. Since as a matter of justice poverty alleviation bears more weight than cultural preservation, attempts at preservation ought not to distort trade. Concerns about security are different. However, these concerns could plausibly be met if countries kept a limited number of farmers with required know-how and preserved a share of lands for ­possible farm use. Little support for broadly-based export subsidies remains.

9.6  Subsidies as a Matter of Moral Consistency Let us explore one final argument for the view that people should be supported to continue in an occupation although markets would not allow it. Suppose legislation for social standards is adopted not merely because it expresses what our practices happen to be, but for moral reasons that capture views about how to treat

Domestic Trade Policies in an Interconnected World  165 persons. If labor standards abroad differ from those we collectively endorse and domestic producers suffer as a result, the harm should be shared across the community. Redistribution may involve subsidies. In addition, import of goods produced under conditions of which our community disapproves could be restricted. Both measures help domestic industries. A consideration favoring such measures also is that we thereby avoid setting incentives for future treatment of the relevant sort. If lower labor standards abroad are negatively sanctioned in this way, they might change. This argument falls short of demanding that one prevent others from treating people badly in ways other than by protecting those in the country who act properly and by refusing to set incentives that instigate such behavior at home or abroad. Consider the fight against corruption. For a long time, many countries treated domestic corruption differently from corruption abroad. Playing along with corruption abroad was not punishable. Suppose corruption was prohibited in country A because of moral concerns about conditions under which people should get ahead. A should protect citizens who abide by its norms (also by making sure those who do not, fail to profit thereby), and should refrain from setting incentives for corrupt behavior in B by tolerating that its, A’s, citizens become complicit with corruption in B. But A need not take additional measures against B. Or consider a case involving animals. Foie gras is duck or goose liver fattened by force-feeding. Some countries have laws against such practices, but not against importing foie gras. Suppose A has prohibited force-feeding because of concern for animals. A should refrain from setting incentives for production of foie gras by prohibiting imports. But A need not otherwise act to prevent B from producing foie gras. If legislation of social standards rests on moral reasons, then domestic industries deserve protection. But often standards are adopted for selfishly nationalist reasons, or arise from power struggles. Domestic industries then cannot insist on shifting harm to everybody if competitors abroad benefit from different practices. Only if the intent behind standards is moral is there an argument to that effect. Consider an excerpt from the 1930 US Tariff Act: All goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/ and indentured labor under penal sanctions shall not be entitled to entry at any of the ports of the United States, and the importation thereof is hereby prohibited. [. . .] [B]ut in no case shall such provisions be applicable to goods, wares, articles, or merchandise so mined, produced, or manufactured which are not mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States.20

The protectionist intent is obvious: import is prohibited only if the US can satisfy its demand. But often it will be hard to tell whether, say, labor legislation has been

166  On Trade Justice adopted based on moral reasons. Generally, identifying collective commitments involves both conceptual and practical problems. But in any event, what we are getting in this way are pro tanto considerations: if we are committed to certain moral views, then those who suffer harm thereby have a case that those who share the commitment also share burdens. However, this kind of argument cannot validate subsidies if such payments violate any duties of justice, such as the duty of assistance in building institutions arising from common humanity or the duty not to exploit in the context of the basic rules of the trading system. So this third argument succeeds only within the constraints set by principles of justice.21 What to conclude? In a broad range of circumstances, trade theory recommends liberalizing trade since that benefits participating countries. Many economists think liberalization is necessary, though insufficient, for fast growth—insufficient because absent credible policies, enforceable contracts, and other hallmarks of stability, openness cannot trigger sustainable growth. To the extent that trade does matter for development, the principle of justice that human rights be realized and the entailed duty of assistance in building institutions, as well as considerations of trade justice, imply that states should adopt trade ­policies that foster development, including suspension of subsidies.22 This follows in particular from our argument in support of a development mandate for the trade organization (Chapter 8). This result is not limited to agricultural subsidies, but applies to all domains where subsidies are trade-distorting and distortions hamper development. None of the arguments for subsidies we have reviewed and that can readily be classified as fairness-based (in the context-dependent sense, drawing on claims of citizens to appropriate burden-sharing) trump this justice-based argument.23 One might object as follows. Investments in infrastructure, education, health, environmental standards, interest rates, and so on affect producers not only at home but elsewhere too. Does this mean that the US or EU should create inferior infrastructure to make Africa more competitive? Or suppose a government can aid an industry by investing either into research and development or into export subsidies. Except for efficiency, why would they not be indifferent between these measures? But what is peculiar about subsidies is that states generally adopt them after they have already provided favorable conditions for economic advancement. Subsidies are paid to make sure products sell on the world market although they are not competitive otherwise. There is a striking unfairness involved in a setback in competitiveness inflicted upon others simply through a transfer of money to competitors that is not even linked to attempts to improve performance. One can find fault with such measures without finding fault with measures that enhance competitiveness. While the subsidies of developing countries can harm other developing countries, our argument applies only between groups of countries where one has duties of aid to the other. It does not apply among developed countries, or among

Domestic Trade Policies in an Interconnected World  167 least developed ones. There will be a gray zone where it is unclear what duties countries have towards each other, consisting of economies that are neither among the developed nor among the least developed countries. The most pressing case, however, is what developed countries should do vis-à-vis least developed countries.

9.7  Authoritarian Regimes Should we stop trading with regimes that exploit people, violate human rights, or rule autocratically?24 Leif Wenar, for one, has argued that we should buy no oil from autocratic regimes.25 The question arises frequently, with regard to both regimes selling off their people’s resources and oppressive regimes such as apartheid South Africa. To some extent Chapter 6 already explored these matters when discussing the moral force of exploitation. We now apply some of them to this concrete issue.26 We first offer some considerations to the effect that trading with authoritarian regimes poses no particular moral problem. Suppose A is an authoritarian regime, B a country trading with A. B might not benefit from the violations perpetrated by A. A would otherwise sell for the same price. As things stand, some people in A pocket extra gains. So the problem lies with the distribution of benefits and does not affect terms of trade. Secondly, even if B discontinued trade, the argument might go, violations would continue because there are other buyers. Suppose France threatened to suspend oil purchases from Nigeria unless Nigeria agreed to certain reforms. Presumably, Nigeria could sell elsewhere. Suspending trade would make no difference. Since termination would not help the oppressed, we might (and possibly should) go on trading. Thirdly, trade is not normally the only reason for the occurrence of violations by authoritarian governments: they would occur anyway. One facet of South African apartheid was that non-whites lost out in trade. However, what motivated whites to mistreat people of color was not eagerness to improve gains from trade; that was merely a “fortunate” side effect for them. Arguably, trading partners would then not be sufficiently implicated in oppression to bear responsibility and discontinue trade. But as far as the first two points are concerned, trading partners are responsible not because they benefit from trade more when human rights are violated or ­people exploited than if none of that were the case, as both arguments seem to presuppose. Trading partners are responsible because they are tied in certain ways to those whose rights are violated. That demand from elsewhere would uphold violations does not exonerate those creating current demand, any more than one could shoot an innocent person because the person will get shot anyway.27 Regarding the third point, if trade played a role in the emergence of human rights violations, this fact offers additional support for assigning responsibilities to

168  On Trade Justice trading partners. What remains problematic is to receive ill-gotten gains at the expense of those whose rights are violated or who are exploited even if prospects of gains have not caused violations. Apartheid shows that a diagnosis of injustice does not require that trading partners set incentives such that, without trade, the victims would be better off. There is a problem already if they do not benefit ­adequately from their contributions and are exploited that way. So common ways of shirking responsibility in dealing with authoritarian regimes fail. Now, Wenar urges us not to deal with autocratic regimes selling oil. He argues as follows. To begin with, property law is generally national law, often rather local in nature. No international property regime regulates details of ownership in various locations, or determines under what conditions property arrangements that hold in one location remain valid when objects are transferred to another location. Property arrangements in country A become legal in B only if B opts to recognize A’s arrangements. Property disputes with an international element ending up in B’s courts are decided in accordance with B’s laws.28 The second point is that national ownership of resources—that a country’s resources belong to the people—is broadly recognized in international law. In light of this fact B should not be obligated to recognize A’s property arrangements if A is ruled by an autocratic regime that fails to validate the people’s ownership. If, say, the US buys oil from Saudi Arabia, it recognizes the Saudi property regime and launders the money the Saudi regime makes from seizing its country’s oil. Once the US grants citizens the right to buy from the Saudi regime, American law sanctions that regime’s appropriation of oil from the Saudi people. And there were worse regimes than that of Saudi Arabia. “The crime of slavery is worse than a theft of a nation’s resources,” Wenar writes, “but the wrongness of American enforcement of these injustices on its own soil is at most a matter of degree.”29 The exploitation as unfairness-through-power perspective developed in Chapters 5 and 6 delivers a similar verdict. Authoritarian states use power to get citizens to produce particular products at low cost. But for the state to benefit from its citizens’ productivity, the products must be sold on international markets. By buying the products, we become complicit in exploitation. Without buyers on international markets, authoritarian regimes would not succeed in taking unfair advantage of their citizens. To trade with authoritarian regimes would thus be a failure to respect and support trade justice as non-exploitation. So not only do standard ways of renouncing responsibility fail, but we launder ill-gotten gains by trading with such regimes and become complicit in ­exploitation. Does that mean there should be no such trade? Not automatically. To make that point recall the discussion in Chapter  6 about the moral force of exploitation. Like exploitation, trade with authoritarian regimes may be morally acceptable as a stepping stone towards a world without such trade, or a price worth paying since trade benefits the victims. But a case must be made that such trade is both necessary and permissible, to make sure relevant considerations are not deployed self-servingly.30

Domestic Trade Policies in an Interconnected World  169

9.8 Conclusion To begin with, we have argued that democratically-elected politicians and functionaries have responsibilities towards people who cannot vote for them or who do not jointly live under a constitution with them. In addition to electoral and constitutional constituents there are moral constituents. In the practical realities of democratic life their interests may rarely get priority. But it is up to politicians and public officials to find imaginative ways to be responsive to their moral constituents. Discussing these matters led us to explain what the grounds-of-justice machinery implies for political responsibility. We have also discussed the vexing problem of export subsidies. Several ­fairness-based considerations are available in their support. But all things considered, as a matter of justice, such subsidies should be phased out or designed in ways that do not distort trade. Discussing these matters gave us occasion to explore how considerations of fairness and justice coalesced around one particular topic. Finally, we have discussed how to deal with authoritarian regimes in the context of trade. We dismissed several ways of denying that trading partners have any responsibility. Wenar’s property-based argument shows that there is more responsibility for activities of such authoritarian regimes than many will be comfortable with. Whether this means such trade should be discontinued depends on whether it is a stepping stone towards a just world or otherwise a price worth paying. We end with another appeal to the importance of smart and wise governance that pays attention to matters of justice in a complex world. Our explorations are meant to suggest what such governance would amount to in the various contexts discussed here. There are enough resources for us to build a just world, and thus to offer a New Global Deal to developing countries. If only we could find the political will do to do so.

Notes 1. Piketty, Capital in the Twenty First Century. 2. Scheidel, The Great Leveler. 3. We follow a Harvard Kennedy School teaching case on these matters; see Winston and Scott, “Breaking the ‘Circle of Poison:’ Senator Patrick Leahy and Pesticide Export Controls.” 4. On paternalism see Thompson, Political Ethics and Public Office, chapter 6. 5. Recall that this was discussed in detail in Chapter 7. 6. Burke, Edmund Burke, 224. 7. Here we draw on Kurjanska and Risse, “Fairness in Trade II”; Risse, On Global Justice, chapter 14. 8. On subsidies in the WTO, see Hoekman, “Proposals for WTO Reform: A Synthesis and Assessment,” 280–4. On the economics of subsidies, see Krugman, International Economics, 196–205. On the history of subsidies and other incentive-distorting

170  On Trade Justice measure in agriculture, see Anderson, Distortions to Agricultural Incentives. See also Meléndez-Ortiz, Bellmann, and Hepburn, Agricultural Subsidies in the WTO Green Box; Anderson, The Political Economy of Agricultural Price Distortions. 9. Martin and Anderson, “Agriculture, Trade Reform, and the Doha Agenda,” 11. 10. Hertel and Keeney, “What Is at Stake: The Relative Importance of Import Barriers, Export Subsidies, and Domestic Support.” See also Teson and Klick, “Global Justice and Trade.” Teson and Klick do not only argue for liberalization because of its aggregative welfare effects but also argue that liberalization benefits the global poor. 11. Rodrik, The Globalization Paradox. In their contribution to a volume on global crises, Winters and Anderson address trade liberalization and immigration barriers ­simultaneously, see Winters and Anderson, “The Challenge of Reducing International Trade and Migration Barriers.” 12. United Nations Conference on Trade and Development (UNCTAD), Report of the Secretary-General of UNCTAD to UNCTAD XIII, 27. 13. Chapter  13 discusses the complaints of those laid off as a consequence of firms’ ­relocation. We argue that these are most plausibly directed at states. But just as protectionism would be short-sighted and inadequate as a response to the adverse consequences of outsourcing, export subsidies would be the wrong response to unemployment caused by foreign competition. States ought to engage in adequate social policy measures to mitigate the consequences of trade-induced unemployment. 14. “Higher” standards are not ipso facto morally preferable. We use these terms descriptively, with reference to typical concerns: safety; job security; benefits; right to unionize, etc. Loosely, these issues order standards in terms of “weaker” and “stronger.” 15. Streeck and Yamamura, The Origins of Nonliberal Capitalism, 2. 16. For the Varieties-of-Capitalism approach to comparative political economy, see Hall and Soskice, Varieties of Capitalism; Clark, The Evolution of Economic Systems; Hancké, Debating Varieties of Capitalism. 17. (1) Recall that domestic principles of justice eclipse claims of this sort, which articulate what proportionate consideration of interest amounts to. What we say here applies in non-ideal theory, deploying the pragmatic sense of fairness. (2) For the origins of American agricultural subsidies, see Egan, The Worst Hard Time. 18. The same conclusion applies to the state’s obligation in cases of relocation. As Chapter 13 argues, non-exploitative trade requires institutions capable of redistribution, through effective welfare-state provisions or educational opportunities. 19. Without subsidies French products become less expensive at home, but more expensive abroad. Other producers will enter and beat prices of French producers. So those go out of business unless they create a market for gourmet products. 20. Title 19, US Code, Ch. 4; Tariff Act of 1930; Subtitle II—Special Provisions, Part I; Miscellaneous, Sec. 1307. 21. So again the relevant fairness claim that factors into this strategy is of the pragmatic sort. 22. On links between human rights and a duty of assistance, see Risse, On Global Justice, chapter 4. 23. This recommendation is in line with Stiglitz and Charlton, Fair Trade for All; Teson and Klick, “Global Justice and Trade.” The OECD also demands elimination of market price support since it does not reach the intended beneficiaries and imposes significant costs on food industry and consumers, with particularly damaging implications

Domestic Trade Policies in an Interconnected World  171 in low-income countries; see OECD, “Agricultural Policy Monitoring and Evaluation 2016,” 26. They point out that gradual, though uneven, progress has been made in reducing overall support levels and shifting more of it towards less distortive policies. Yet much remains to be done. 24. Chapter 14 addresses the same question from the point of view of the corporation. It is one of the advantages of our approach that it offers a unified set of considerations as relevant for different types of actors and various perspectives of “constrained agency.” 25. Wenar, Blood Oil. 26. This section draws on Risse, “Fairness in Trade I.” What is new is the link to Wenar, Blood Oil. 27. For discussion, see Thompson, Political Ethics and Public Office, 49–52; Glover and Scott-Taggart, “It Makes No Difference Whether or Not I Do It.” For a similar argument to the effect that firms cannot deny responsibility for wrongs committed by suppliers because they do not make a difference to its occurrence, see our discussion in Chapter 14. 28. International law does constrain domestic property law in some domains, such as intellectual property, foreign investments, deep sea minerals, cultural objects and satellite orbits. Globalization adds to these constraints. But while these are important developments, they do not undermine Wenar’s point. For international components of property, see Sprankling, The International Law of Property. 29. Wenar, Blood Oil, chapter 7. For the quote see Wenar, 120. 30. For a fuller picture of how the notions of necessity and permissibility apply to ­cooperation with authoritarian regimes, see Chapter 14.

10

A Step in the Wrong Direction Mega-Regionalism

10.1 Mega-Regionalism WTO multilateralism has been under siege from many directions. In addition to those who support multilateralism in the domain of trade but argue it must come in a different guise—we count ourselves among them—there are those who think there should be cooperation but want to limit it to a smaller number of, say, ­technologically advanced countries. There are also economic nationalists who barely believe in trade cooperation. At his 2017 presidential inauguration, Donald Trump encouraged Americans to “buy American and hire American.” His predecessor had favored agreements with blocs of countries falling short of the full range of WTO members. The transition from Obama to Trump changed the US stance from support for mega-regionalism to economic nationalism.1 Partly owing to the slowdown in WTO multilateralism, there have been many bilateral and regional agreements since the beginning of the twenty-first century. Over the years, the US and the EU, the largest markets, have concluded bilateral agreements (or economic partnership agreements, in the case of the EU) with mostly Asian and Latin American countries. The most prominent ones among the bilateral and regional treaties under consideration—those giving rise to the term mega-regionalism—are the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Involving twelve Pacific Rim countries, TTP was signed in February 2016, after seven years of n ­ egotiations. TPP lowers barriers such as tariffs, and establishes an investor-state dispute settlement mechanism (procedures for resolving conflicts between governments and companies that invested in a given country and are affected by policy changes therein). Following Trump’s accession, the US withdrew from TPP. As of 2019, its future is uncertain.2 An agreement between the US and EU, TTIP (as it had been developed in the final stages of the Obama administration) featured further-reaching innovations than TPP. In addition to removing direct trade barriers and further lowering tariffs, TTIP would likely have included mutual recognition of product standards in areas where these are high in both regions (e.g., cars or pharmaceuticals). Moreover, TTIP sought to intensify regulatory cooperation. The case for TTIP was both economic and strategic. The economic case was that both the US and EU On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

A Step in the Wrong Direction  173 wanted to boost their economies after the financial crisis. The strategic argument was that trade harmonization could establish economic leadership and belie the narrative of Western decline. TTIP triggered a substantial backlash from civil society in the EU.3 As of 2019, the future of TTIP too is uncertain. Mega-regionalism may well resurface in the future. Moreover, the relationship between a potentially global multilateralism and the alternative prospect of megaregionalism generates principled questions. For these reasons, we explore mega-regionalism from a standpoint of global justice. For concreteness, and since possibly discussions will eventually resume where they were left, we focus on the state of negotiations for TTIP as they were towards the end of the Obama administration. The emergence of mega-regionalism marks a crisis in global multilateralism. That crisis has arisen partly from an increasing unwillingness of weaker states to embrace whatever the powerful offer, and partly from the increasing digital divide that undermines the extent to which trading partners share regulatory interests. We worry that mega-regionalism diminishes the prospects of any trade arrangement to advance justice. As opposed to multilateralism’s (at least potential) farsightedness, mega-regionalism stands for short-sightedness in the domain of trade. Our assessment of TTIP from the standpoint of global justice is negative. There had better be no such treaty, certainly not outside of WTO multilateralism. The remainder of this section elaborates on mega-regionalism and TTIP in particular. Section 10.2 explores how TTIP would result in a loss of democratic contestation. Sections 10.3 and 10.4 argue that, in all likelihood, mega-regionalism undermines global justice. Our negative assessment draws on a mixture of conceptual and empirical reasons. In principle, WTO multilateralism and megaregionalism diverge; what is morally required is WTO-style multilateralism. It takes a certain factual constellation to reconcile multilateralism and megaregionalism, and this constellation seems not to be forthcoming. Bilateral and regional treaties normally contain commitments on trade-related issues beyond WTO regulations. These agreements arise in response not merely to failures in WTO negotiations but also to new complexities in trade resulting from revolutions in information and communication technologies. These technologies make it possible for production stages previously performed in close proximity to be dispersed with little loss in efficiency. The WTO has neglected these changes since it was “otherwise occupied” with Doha.4 Owing to this technological revolution, trade in goods, international investment in facilities, training, and technology, as well as use of infrastructure services for coordination have become intertwined. As a result, differences in regulatory regimes and rules relating to competition, investment, intellectual property, and services across countries have become more prominent obstacles to trade than tariffs. By regulating that nexus between trade in goods, investment, and use of infrastructure services, regional treaties seek to close governance gaps. As an

174  On Trade Justice agreement between the two largest economies that addresses that nexus, TTIP, if ever reinvigorated, could dramatically alter opportunities around the world. TTIP sought to increase access to products and services, including by opening up government procurement practices (e.g., by precluding provisions in the 1933 Buy American Act directing procurement towards American products). Moreover, it aimed to streamline standards and regulation across industries such as car manufacturing, pharmaceuticals or financial services (e.g., by terminating the necessity for producers to conduct different safety tests). Furthermore, it incorporated elements relevant to twenty-first-century commerce such as intellectual property, labor regulation, environmental rules, and foreign direct investment. In light of the fierce resistance some of its provisions faced from civil society organizations especially in Europe, it is unclear whether such a treaty could ­ultimately have been ratified, or whether anything like it may be revitalized in the future even if governments resume negotiations. The debate about TTIP was more vigorous in Europe than in the US during the final year of the Obama administration. The American public, to the extent that it cared about trade ­negotiations, was preoccupied with TPP. It is notoriously hard to predict any such treaty’s impact (which is partly what motivated resistance). Economic models quantify impact, making predictions about how many jobs would be created or lost, how much an average family would gain or lose, or what goods and services would fare better or worse. But such models manage “fictional expectations.”5 Any change in trade rules not only affects how parties currently do business, but also alters incentives for parties currently unconnected to trade to modify their business models. In response, yet other parties will alter their behavior, setting in motion a dynamic process of adjustments. Any model must incorporate assumptions about such dynamics. Since we are talking about reactions to reactions to reactions, such assumptions are fictional expectations. Such complications render discussions of mega-regionalism somewhat tentative.

10.2  TTIP and the Value of Democracy In Chapter 8 we saw that some loss to democracy is inevitable in a globalizing world of states. We also saw that from the standpoint of justice certain losses in domestic contestation are acceptable, even called for. But that leaves much to be discussed about the domains where such losses would be incurred, and what kind of rule-making should be in place when rules are not made by domestic democracy. From the standpoint of some trade negotiators everything hampering trade looks like a regulatory obstacle, much as some economists even think of citizenship as an obstacle to functioning labor markets. Proposals for deep integration remove certain domains from their previous regulatory oversight to increase

A Step in the Wrong Direction  175 trade flow, expecting revenues that hopefully accrue to more than a select few. Trade has made the world. But it behooves us to be careful that the world is not left entirely to trade representatives. Despite convergence in lifestyles between Europe and North America, there are significant differences: public services play a larger role in Europe; labor markets work differently, with American markets lacking the rigidity of European ones; there are different risk cultures, with Europeans more focused on ex ante assessment and precautionary thinking. These matters reflect deeper differences in societal values. At the same time, special interest groups might conveniently appeal to such values, and much regulation is a matter of administrative convention that might as well be settled differently. So a careful look and political decisions are necessary to distinguish matters of genuinely deep societal concern from those that could be modified without serious threats to broadly cherished values. To mention one domain where modifications would be unproblematic from the standpoint of underlying values, the EU and US do not currently recognize many of each other’s safety regulations even if they fulfil the same purpose. For instance, they require different dummies for crash tests, even though those dummies accomplish the same goal. Manufacturers must do the tests twice, which increases prices noticeably. A similar story is true for tests on chemicals.6 But matters are different for food and environmental standards. One issue is whether the EU would admit genetically modified products. EU countries that value agriculture loathe policy changes, especially if the EU’s high production standards are threatened. The US makes it easy for companies to use untested ingredients unless scientific results are concerning. The EU’s precautionary approach pushes policy into different directions. In Europe widespread concerns about genetically modified food capture deeply held attitudes.7 In the famous Beef Hormone Case regarding use of certain hormones for cattle-raising, the WTO found against the EU, which banned hormone-treated beef. However, instead of complying, the EU persisted in banning hormone-treated beef and received retaliatory measures.8 Problematic changes in domains where broadly shared values are at stake might also come over time. To the extent that TTIP would move decision-making away from domestic democracy into channels where corporations set the tone, it might have a chilling effect on regulation and protection. Depoliticization of regulatory decision-making might well make it easier to deregulate in the long run, and more difficult to adopt ambitious policies to improve environment, health, or working conditions.9 In addition to the question about the domains where domestic democracy should decide, there is the question of what new forms of decision-making would become operative under trade agreements. One worry concerns investor-state dispute settlement (ISDS). An instrument of public international law, ISDS grants investors access to dispute settlement proceedings against foreign governments. Suppose financiers from one country invest in another, both of which accept

176  On Trade Justice ISDS. If that other country violates rights granted to investors, they may bring the issue before an arbitration tribunal. The motivation for ISDS is to protect i­ nvestors from capricious policy changes, including expropriation. To that effect, tribunals deciding such matters are staffed with decision-makers who are unaccountable to the government in question. However, concerns arise about the accountability under which such tribunals operate and possibilities for corporations to influence the selection of decision-makers. Many investment- and trade-related treaties contain provisions for ISDS. States may agree to them to attract investment that otherwise would not occur. Such commitments would not prevent states from changing policies, but they would have to pay compensation as agreed at the time of investment. The problem is that investor protection can inhibit governments from passing legislation if investors can extract prohibitive compensation. This would be most challenging for developing countries that have not yet implemented health or environmental protections, labor rights, or human rights. Such countries might be in the awkward situation of compensating investors for losses if they take such measures. Powerful companies could take advantage of vulnerable countries. All this would be unproblematic for the EU and US, where even worst-case scenarios would do little damage to regulative and legislative options. But overall ISDS is a legal instrument that should be abandoned. Concerns about lack of accountability of arbitration panels might be resolvable. But for one thing it is unwise for governments to give foreign companies possibilities domestic companies do not have (to demand compensation for policy changes). This would create different business environments within the same country. More importantly, ISDS creates the potential for exploitative situations between corporations from developed countries and the developing countries in which they operate. The more ISDS becomes entrenched, the more developing countries are pressured to endorse it again in the next treaty. Multinationals likely would take advantage of their vulnerabilities. Perhaps there are ways of protecting investors that are not open to exploitative behavior by multinationals. But since investor protection aims at maintaining the status quo under which investments are made, this might be tantamount to squaring the circle. Chapter 8 emphasized the importance of letting developing countries design policy space. In light of today’s power differentials, the need of developing countries to have protected policy spaces outweighs the need of corporations to safeguard against capricious change. We can only agree with UNCTAD: If the reason for establishing ISDS is to respond to failures in national judicial systems that do not provide independent justice or enforce the protection of private property, the appropriate response should be to fix those shortcomings, rather than allowing foreign investors to seek justice elsewhere.10

A Step in the Wrong Direction  177 If concerns about domestic democracy were the only pertinent issues, solutions might be available. There are good reasons to restrict domestic democratic contestation anyway, as discussed in Chapter 8. A helpful thought is to regard TTIP and related treaties as “living agreements” to which sectorial annexes might be added under parliamentary oversight.11 Even those areas where concerns about the value of domestic democracy are most plausible should be reconsidered if TTIP advanced global justice. Alas, the opposite is true. From the standpoint of global justice, TTIP and mega-regionalism go the wrong way. It becomes questionable whether in the future even alternative versions of TTIP, such as those only focusing on low-hanging fruits like safety tests, should be concluded. If the price for such advantages is strengthening mega-regionalism, it is too high.

10.3  Mega-Regionalism in Light of a Possible Failure of Doha Most of the discussion of TTIP, and of other bilateral and regional agreements, has occurred from the standpoint of potential participants. The guiding question tended to be how any agreement affects them. How much growth would it generate for the US, Spain, Slovenia, or the EU as a whole? How would it affect particular niches? Or how would it affect certain countries outside the EU and US? Separate from that line of questioning, one major concern from the standpoint of global justice is how mega-regionalism could affect the future of multilateralism. Earlier we presented a justice-based rationale for a trade organization with global reach. The current WTO is far from having all the credentials which are desirable from a standpoint of justice. But it is an organization with global ­aspirations, and both the increase in membership over the years and the manner in which the WTO has integrated countries beyond the GATT speak to its potential as an organization that takes justice seriously. There is a long way to go. As we argued in Chapter 8, the current WTO is exploitative. But instead of reforming the WTO to be an agent of justice, mega-regionalism dismantles a crucial ingredient of justice, multilateralism. Mega-regionalism has been largely a response to Doha’s looming failure. Such failure would cast shadows over the WTO’s ability to be a global organization advancing justice. A breakdown would derail its efforts to test its capacities as a development-oriented organization. It would be a failure in its efforts to provide benefits to developing countries in response to burdens they accepted under the WTO beyond what was expected under the GATT (especially TRIPS). As of 2019, the issues continue to include the reform of agricultural subsidies; assurances that additional liberalization in the global economy respects the need for sustainable growth in developing countries; and improved access for exports. That these issues remained unresolved also reflects the WTO’s more inclusive

178  On Trade Justice nature, making it impossible for traditional powers to settle matters to their liking without further ado (especially regarding agriculture). But overall the organization still fails to advance less advantaged economies. A breakdown of Doha accompanied by strengthened mega-regionalism might render global multilateralism increasingly irrelevant. WTO members comply with agreements partly because they hope for new ones that benefit them. But such expectations presuppose the WTO remains capable of generating agreements to begin with. Moreover, so far no far-reaching arrangements have been made among the largest trading blocs: the US, EU, China, Brazil, and India. To the extent that that has not happened yet, the WTO, the principal convening point for these countries, has not met its purposes. If they cannot arrive at further-reaching agreements under WTO auspices these countries might ultimately make arrangements outside of it, further weakening the WTO’s potential. One might say regional arrangements themselves could advance global justice, in two ways. First of all, they could be sensitive to the obligations which accrue to a global organization, as Chapter 8 argued. Regional blocs could accept developmentand human-rights-oriented mandates. But that is unlikely. The most p ­ owerful regional arrangements on 2019’s agenda or likely future agendas—especially that between the US and the EU—fail to include poor countries. If it is infeasible to reach agreements around ideas of non-exploitation and a development mandate within an institutional setting that includes poor countries, prospects are dim for that to happen within settings that do not. That is especially so if new settings emerged because of failures to respect poor countries’ needs. More likely, regional blocs become inward-looking and disregard non-members. If multilateralism fails to work for the poor, mega-regionalism is not going to do so.12 A second possibility is that, as proponents argue, TTIP in particular might inaugurate new global standards. If the WTO itself disintegrates as a forum for negotiating such standards, perhaps the largest economies should be torch-bearers of progress. Eventually others will adopt their standards. But first of all, the largest economies would then have first-mover advantages in establishing rules and standards others would have little prospect of renegotiating later. These followers would have to comply, as well as presumably shoulder all costs of adjustment, without having any say in the design of regulation. However, and this is the second response, prospects that TTIP would even aspire at ushering in global standards seem remote. Suspending concerns about that very role, TTIP could be such a torch-bearer only if it were concerned with harmonization rather than mutual recognition. Harmonization involves deliberation about which of two sets of rules to adopt (including, perhaps, the decision to discard both in favor of a third). This would involve reflecting on lessons from past standard-setting and regulation. To be sure, this would be a labor-intensive process and would put the costs of adjustment in the particular domain fully on the bloc asked to make changes. As

A Step in the Wrong Direction  179 opposed to that, mutual recognition means that multiple existing standards and regulations—such as those valid in the US and the EU—could be adopted. Businesses on both sides could choose either. Unlike harmonization, mutual recognition involves no serious deliberative exercise, but delegates decision-making to companies and renders it a purely economic choice. One might think concerns about harmonization imposing unilateral burdens are alleviated if one trade area adjusts to one set of standards and the other to a different set; and then there would be a third domain where both adjust because they realize there are improvements over current regulation in either system. But that version of harmonization too would be labor-intensive, and involve all the political intricacies of seeing through such efforts. Before their suspension, mutual recognition is where TTIP negotiations were headed, though a type of mutual recognition that would also involve at least a certain degree of c­ oordination when it comes to new standards. The European Commission was hoping to “help EU and US regulators work more closely when setting new regulations” and “recognize each other’s regulations where they provide equivalent protection.”13 Mutual recognition might be limited to businesses in the US and EU, or be extended to everybody. On the latter model, third countries could follow either the US or EU approach. In the former case companies, in such countries would suffer competitive disadvantages because they would have to produce for both markets whereas competitors in the TTIP domain could choose standards. Third countries would have little reason to adjust to either standard and might not prevail on the new transatlantic mega-market. TTIP would have no chance of setting new global standards.14 But even if third countries got to reap some benefits of mutual recognition, we would be no closer to global standards. To that effect we need harmonization. Even if we did have harmonization, it would give first-mover advantage to leading trade nations, leaving to others only the option of joining or not joining.15

10.4  Concerns for the Future So far we have assumed mega-regionalism poses a problem only if Doha fails. But it threatens the role of the WTO even in the unlikely event that Doha generates agreements acceptable to developing countries. The looming breakdown is only one reason we see an increasing number of regional treaties. The other is that twenty-first century trade, ever changing as a reflection of technological revolutions, creates an urgent need for new trade regulations (more urgent than that for cutting tariffs).16 One way the WTO might become obsolete is if groups of countries (e.g., the EU and the US, in the case of TTIP) find it favorable to reach agreements without making efforts under the aegis of the global trade organization. Success at Doha would be Pyrrhic, a consolation prize for developing countries

180  On Trade Justice upon the award of which developed countries set the agenda exclusively in each other’s company. For this long-term structural reason mega-regionalism is likely to return to the agenda, its hiatus under Trump notwithstanding. Insisting mega-regionalism has come to stay, Robert Lawrence thinks one way of domesticating it is to fold plurilateral treaties into the WTO framework (i.e., treaties that do not involve all members).17 Plurilateral agreements under WTO auspices have benefits in comparison to deals outside the multilateral system, including transparency and options for all member states to join negotiations. Differential needs would be recognized within the system to avoid collapse. Supplementing core WTO obligations with plurilateral agreements could promote deeper integration (first regionally, then perhaps globally) while alleviating institutional tensions. This could be a compromise to make diversity coexist with more extensive commitments among the willing. But ultimately this too would amount to a resignation as far as multilateral ambitions and global obligations of the trade organization are concerned. It requires much optimism to think problems about regionalism outside of the WTO are resolvable by transforming mega-regionalism into plurilateralism within the WTO. If mega-regionalism is here to stay, this will in all likelihood undermine prospects for global justice. Chapter 8 argued for a reconsideration of the WTO as an agent of justice organized around the idea of non-exploitation in ways that involve human rights- and development-oriented mandates. Let us finish this discussion with that same thought, quoting Rorden Wilkinson: A new declaration of aims and objectives ought to place the realization of trade-led development-for-all in an environmentally sustainable fashion at the forefront of the purposes of the multi-lateral trading system with particular emphasis on helping the least able.18

10.5 Conclusion From the standpoint of global justice, one can only hope mega-regionalism will never replace WTO multilateralism. There is a possible scenario under which mega-regionalism advances global justice: if negotiations for mega-regional agreements selected sensible standards and regulation the rest of the world has reason to accept. But if things go that way, this would be as splendid an appearance of the cunning of reason as one can imagine, a cunning that aids global j­ustice even though the negotiation process and the putative aims of the relevant parties do not. The workings of mega-regionalism would have to support the multilateralism required by global justice even though mega-regionalism is a retreat from a genuinely global orientation. Conceptually there is a deep tension only a particular alignment of facts could resolve, which empirical research does not tell us is

A Step in the Wrong Direction  181 forthcoming. In light of the damaging prospects of mega-regionalism one should even reject a version of TTIP that merely reaches for low-hanging fruit. Such an agreement would likely have chilling effects on future possibilities of multilateralism. It would be a step in the wrong direction. Plurilateralism within the WTO, under the circumstances, would be a ­distinctively second-best outcome. Plurilateralism would most likely indicate the trade organization fails to move in the direction we argue is required from the standpoint of global justice. But this path might eventually be the only one to keep alive negotiations within the WTO. So at least plurilateralism within the WTO would allow us to maintain hope that in the future multilateralism could get reinvigorated in ways that take trade justice seriously. In any event, there will be more reason for such hope if plurilateral agreements are enacted than if the WTO disintegrates as a result of increasing economic nationalism. Any efforts of starting a new organization that puts trade justice at the core of its mission would be quixotic in times when even multilateralism of the sort embodied by the WTO is heavily under siege. For now, even a largely unreformed WTO is better than mega-regionalism from a standpoint of global justice. But this could only be a temporary assessment because the technological change that drives mega-regionalism and plurilateralism in the first place is probably here to stay. As Chapter  2 explored, there have been multiple failed attempts to create a postwar trade regime that would allow newly independent former colonies to find their place in a world created by imperial powers. The WTO is what has remained of these efforts. It emerged when the guiding idea no longer was integration of developing countries for their own sake but protection and expansion of economic activity in the Global North. Unfortunately, and tragically, it would be in line with postwar history that the WTO would fall apart or be reduced in importance because its wealthy members are unwilling to accept the developmentoriented mandate that as a matter of justice a trade organization must have and that the current organization explores at Doha. That same outcome could also result from a strengthening of economic nationalism, rather than being triggered by multi-regionalism. Either way, the failure of WTO m ­ ultilateralism would amount to the opposite of a promising New Global Deal. Prospects for trade justice are grim.

Notes 1. This chapter draws on Risse, “Multilateralism and Megaregionalism from the Groundsof-Justice Standpoint.” 2. On regionalism, see Hoekman and Kostecki, The Political Economy of the World Trading System, 492–510. For the WTO’s take on regionalism, see http://www.wto.org/english/ thewto_e/whatis_e/tif_e/bey1_e.htm.; last accessed December 11, 2018. On TPP, see

182  On Trade Justice Hufbauer and Muir, “The Trans-Pacific Partnership.” On TTIP, see Ville and SilesBrügge, TTIP. 3. Opposition focused on the issue of investor–state dispute settlement (ISDS) clauses, which would allow corporations to sue governments if new legislation harms their interests. In addition, there was public anger concerning data protection, health and environmental standards, the secrecy of negotiations, as well as possible impact on services such as the UK’s National Health Service. 4. Baldwin, “21st Century Regionalism: Filling the Gap between 21st Century Trade and 20th Century Trade Rules,” 3. 5. Beckert, “Imagined Futures.” See also Rodrik, Economics Rules. 6. See for instance http://www.bbc.com/news/uk-politics-30493297, last accessed December 11, 2018. 7. There is also a fair amount of convergence between the EU and the US against the background of which exceptional areas stand out; on different risk regimes, see Hood, Rothstein, and Baldwin, The Government of Risk “Understanding Risk Regulation Regimes.” 8. Hoekman and Kostecki, The Political Economy of the World Trading System, 150–7. 9. See Ville and Siles-Brügge, TTIP, chapter 3. TTIP would also put the different v­ arieties of capitalism operative in the US and the EU into competition. Jobs in Europe might well decline because the less rigid nature of the American job market entices companies to move jobs across the ocean. Trading products back to Europe would be easy. 10. United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 2014, 146. 11. “If well-handled, the innovative mechanisms of international cooperation envisioned in TTIP carry the potential to establish a transatlantic regulatory laboratory. [. . .] [I]ts success will largely be determined by its ability to connect this mechanism to the existing regulatory cooperation and ensure parliamentary input into its operation so as to guarantee TTIP’s legitimacy and accountability”; Alemanno, European Parliament, and Directorate-General for External Policies of the Union, The Transatlantic Trade and Investment Partnership and the Parliamentary Dimension of Regulatory Cooperation, 6. See also Dullien et al., A Fresh Start for TTIP. 12. For the point that despite its shortcomings, multilateralism is the best available option for economically weaker countries, see also Moellendorf, “The World Trade Organization and Egalitarian Justice.” UNCTAD has argued that “developing countries require greater policy space to enable them to continue their rapid growth trajectory of the past 15 years and make such growth more equitable and sustainable. Strengthened global economic governance that refocuses trade negotiations on multilateral agreements which recognize the legitimate concerns of developing countries, abandons WTO-plus and WTO-extra provisions and fosters the developmental character of the Doha Round would be an important step in this direction. Leveraging the greater economic and political power that developing countries have achieved over the past two decades could strongly support this process”; United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 2014, 80. 13. See http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/questions-and-answers/ last accessed December 11, 2018. See also Ville and Siles-Brügge, TTIP, chapter 2.

A Step in the Wrong Direction  183 14. For the view that a bilateral limitation of mutual recognition was more likely than giving companies in third countries the same choice, see Ville and Siles-Brügge, chapter 2. 15. For the topics of the last few paragraphs, see Ville and Siles-Brügge, chapter  2. For mutual recognition in global governance, see Schmidt, “Mutual Recognition as a New Mode of Governance”; Nicolaidis and Shaffer, “Transnational Mutual Recognition Regimes”; Trachtman, “Embedding Mutual Recognition at the WTO.” 16. Baldwin, “21st Century Regionalism: Filling the Gap between 21st Century Trade and 20th Century Trade Rules.” 17. Lawrence, “Competing with Regionalism by Revitalizing the WTO.” 18. Wilkinson, What’s Wrong with the WTO, 143. See also George, The Truth about Trade, chapter 10.

11

Theorizing the Firm 11.1  Transitioning to Part III What characterizes the Trade-As-One-Ground approach is, first of all, that ­subjection to the trading system is a ground of justice to begin with. Secondly, Trade-As-One-Ground theorizes subjection to that system as one in several grounds. The principle of distributive justice associated with trade as a ground is this: the distribution of gains from global trade is just only if these gains have been obtained without exploitation. Our account of exploitation is ecumenical by being value- and actor-pluralist. Parts II and III apply this account to the conduct of actors, examining specifically what trade justice requires of actors included in this ground. In Part II we explored the obligations of states; Part III explores obligations of companies. States and companies are the most important actors in the domain of trade. However, companies have been neglected as a subject of political philosophy and of theories of trade in particular. While the state’s obligations concern trade policy and the establishment of an international regime, firms have trade-related obligations regarding their setup and operations—most importantly their treatment of employees—and their relationship with outsiders, including communities where they conduct business, contractors and suppliers with whom they cooperate, as well as governments under whose jurisdiction they operate. Such obligations can be captured in terms of the requirement not to exploit. Companies ought not to use power to induce failures of reciprocity, but ought to transact on terms that satisfy transaction-specific claims of other parties. Companies also ought to see to it that transactions occur on non-exploitative terms. This chapter defends the idea that firms are actors with moral responsibilities and subject to trade justice. We make a suggestion for how to think of the firm (section 11.2), elaborate on the link between firms, markets, and trade as a ground (section 11.3) and argue that firms are moral actors in the domain of trade (section 11.4). We respond to four objections to the idea that companies have trade-related obligations (section 11.5): the arguments that competitive pressure exempts firms from moral requirements; that trade’s adversarial nature permits behavior that is ordinarily impermissible; that the only moral principle binding for a firm is to serve shareholders; and that firms are off the hook because of a moral division of labor between political institutions and economic actors. We conclude by introducing the case of Nike, which informs our discussion in the remaining chapters (section 11.6). On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

188  On Trade Justice

11.2  What is a Firm? What is a Corporation? Our suggestion for how to think of the firm in the context of trade justice combines general theories of the firm and insights from recent theories of the ­corporation. The challenge for a theory of the firm is to explain the coexistence of firms and markets. Given the efficiency of markets as coordination devices, why do firms exist? Given the widespread reliance on firms as places of exchange, why are there markets? A theory of the firm drawing on insights formulated by Ronald Coase answers these questions, serving as our starting point for thinking about a company’s obligations of trade justice.1 Another key challenge is to offer an accurate picture of the predominant ­corporate form of contemporary firms. What is the nature and status of the ­corporation? Drawing on what has emerged as a “political theory of the firm,” which moves beyond an account of firms in terms of economic rationales and takes seriously that firms (and in particular corporations) are in several important ways political actors, we render more precise the picture of the corporate firm as an agent of trade justice.2

11.2.1  The Firm While market activity is coordinated through prices, within the firm activity is coordinated through managerial decisions and exercises of power or authority. According to Coase, firms exist where coordination through hierarchical ­organization is less costly than coordination through market transactions.3 Differences in coordination generate differences in the predominant form of interaction. While in markets that form is transaction-specific contracts, in firms it is governance relationships between employer and employee. To avoid transaction costs, employer and employee enter an incomplete contract, which does not define every task but delineates the employer’s authority. The employer’s authority to direct workers reflects the firm’s function to organize production by direction, replacing interaction through transaction-specific contracts with a governance relationship. That relationship is codified through property, labor, and corporate law.4 Abstractly, the firm is a set of relationships characterized by assignments of rights and obligations to direct economic coordination.5 Actors organized in firms turn inputs into outputs.6 Within market economies, the aim is to sell those outputs on markets. Descriptively speaking, firms (usually) exist to make profits. There are two ways of accommodating the profit motive within a theory of trade justice. Perhaps formulating principles of justice for actors who pursue profits (rather than principles prohibiting such pursuits) is a realistic concession to what firms do. Alternatively, profits may be permissible and desirable. Joseph

Theorizing the Firm  189 Heath, for one, argues that without firms seeking to maximize profits, the price mechanism of the market would cease to function.7 Since that mechanism is the best, and possibly only, way of efficiently coordinating an economy, pursuit of profits is a permissible means of realizing benefits such as employment and prosperity.8 We combine these perspectives. As long as alternative ways of running an economy are unavailable, profits are permissible and desirable, if indeed they translate into such benefits.9 The question becomes within what limits a firm’s pursuit of profits is permissible and desirable. Our conception of trade justice is part of the answer.

11.2.2  The Corporation The firms that arguably are the most important players in trade are c­ orporations.10 Corporations have been created as the most efficient vehicle for making profits on markets, and thus for engaging in trade.11 Two characteristics of the corporate firm matter at various stages in later chapters. Our first observation captures the legal form of and economic rationale behind corporations. Crucially, ­corporations possess a legal personality that establishes them as actors distinct from managers, workers, or investors.12 Relatedly, corporations enjoy legal privileges including limited liability, which protects private assets of investors or managers. As a consequence, shares are transferable, for example on stock markets, allowing ownership to change easily. Control and earnings are tied to capital. Ownership of shares is often geographically dispersed and diverse, ranging from private individuals to institutional investors like pension funds or state agencies. Those with direct financial interests, the shareholders, usually differ from those who run corporations and control their assets, the management. This structure permits effective decision-making in light of fragmented ownership while generating the principal–agent problems widely discussed in theories of corporate governance. Many institutional features and policies, including governance structures or financial compensation of management, seek to ensure firms are managed in the interest of investors. The second characteristic is that corporations depend on government and state provisions.13 Constitutively, the governance structure and legal form that enable the corporation’s pursuits is maintained by property, corporate, and labor law established and protected by states. Historically, charters given by states establish corporations. Corporate property and managerial authority are created and maintained by states. Additionally, many advantages enjoyed by corporations, including limited liability of investors or tax exemptions for transactions within firms, reflect state action. Once we recognize the dependence of the corporation on the state, several normative questions arise that purely economic theories may not notice: Since

190  On Trade Justice corporations are created by and dependent on public institutions, in whose interest should they be managed? Given that their hybrid character eschews a clear public/private distinction, what are normative requirements for internal governance? What are the moral limits on a corporation’s influence on politics?14 While we do not answer these questions in general, we address specific versions relevant to the corporation as a bearer of obligations of trade justice.

11.3  Trade: Seeing Like a Firm There is a twofold link between firms and trade because the regime and practice of international trade bear on firms and their activities, while firms also shape that regime and practice.15 Trade matters for issues internal to the firm, for how the firm operates on markets, and for what part of their economic activities occurs within rather than between firms. Firms shape trade practices because profit-oriented behavior has a profound impact on what gets produced and sold where, by whom, and at what price. Also, firms shape trade in multiple ways. Let us apply some of our earlier arguments about the moral significance of trade and the trade regime to firms and corporations. From the point of view of a firm, trade is associated with the movement of goods and services across borders structured and facilitated by rules and institutions of the trade regime. Consumption goods are produced in one country and sold in another, for example, when cars are exported or imported. Factor inputs may also move across borders, for example, when car parts are produced in one country and bought by a company in a different country for assembly (“vertical specialization”).16 International trade may even occur within companies, for example when some production stages occur in factories abroad, through “offshoring” and foreign direct investments.17 Trade has been growing because costs of moving goods and services across borders have declined. While technological innovation has enabled cheaper transport and new forms of communication, we should appreciate the role of politics in reducing transaction costs. The trade regime, most importantly the WTO, has magnified trade volumes. Formal and informal institutions drive and facilitate trade through reductions in tariffs, harmonization of regulation, or assurances to transacting parties. The impact of trade on economic activity can hardly be overestimated. First, trade matters for internal operations of the firm. As firms internationalize in response to reduced transaction costs, companies turn into multinationals by offshoring, building factories, and employing workers in other locations. Reduced cross-border transaction costs thus influence who does what within firms, and where it occurs. Secondly, trade matters for transactions among firms. Reduced transaction costs let firms engage in vertical specialization and buy intermediate products abroad. Exporting and selling abroad also become viable. Finally, trade

Theorizing the Firm  191 partially determines what part of economic activity and coordination occurs within firms, and what part on the market. Coordination that used to happen within firms may be taken over by markets, for example because purchasing and transporting from abroad becomes cheaper than producing in-house. But firms not only have their activities shaped by trade, they also shape both the practice and the regime of international trade. First, they do so through ­outsourcing, offshoring, and investment. Vertical specialization increases trade volumes, while foreign direct investments may create employment abroad and shape development. Secondly, cross-border transactions shape market outcomes. Exporting goods may reduce prices on the targeted market while increasing domestic prices for those goods, triggering further impacts on employment and relative prices of other goods. Thirdly, in the aggregate, decisions to purchase also bear on trade volumes, relative prices, and employment. Finally, given that a significant share of trade occurs within multinationals, their governance structures are part of the trade regime.18 In light of globalized value chains, corporate governance issues may turn into trade governance issues. Corporations must also be recognized as powerful actors shaping the trade regime. Corporations form institutions and associations that are part of the trade regime, including the cartels discussed in Chapter 4, and they influence trade policy and regulation.

11.4  Firms and Trade Justice Firms bear obligations associated with trade as one ground of justice. To see this, we apply to firms our argument about how actors become subject to duties of justice. We then outline what duties of trade justice firms have.

11.4.1  Getting Firms on the Moral Hook Recall some basic vocabulary of the grounds-of-justice approach. Every agent and institution has the duty to do what they can, within limits, to bring about justice, as described by the principles of justice associated with the grounds to which they are relevantly linked. There is a direct link if the institution is constitutive of the ground and establishes a justice relationship among those in the scope associated with it. The state is an actor that in this sense is constitutive of a ground. There is an indirect link if the operations of the institution are primarily directed at, or most directly affect, people in the scope associated with that ground. The state is also linked in this indirect sense to trade as a ground. Principles of justice are associated with a ground if its salient features (e.g., direct coercion and pervasive impact in the case of the state) trigger a concern for the principle in question or establish the relevant justice relationship among those

192  On Trade Justice in its scope. Principles thus associated with a ground may become an actor’s or institution’s concern in one of two ways. Actors or institutions may be directly responsible, and thus incur duties derived from principles because their existence and activity are constitutive of the ground. Actors may be indirectly responsible, and thus incur duties deriving from principles because their existence and activity is directed at or affects those in the scope of the ground of justice. Firms are linked to trade as a ground in both direct and indirect ways. Firms are directly linked because they are constitutive of trade practices. Even though states play an important role for both the existence of firms, especially corporations, and for the occurrence of trade, firms maintain and shape that practice. If firms did not pursue profits there would be no trade. Many ideas and phenomena familiar from trade policy at the national level, such as “gains from trade” or “balance of trade,” supervene on activities of firms. Firms are also constitutive of parts of the trade regime, both as parts of its architecture through cartels or in virtue of internal governance structures spanning different locations, and as actors shaping or influencing policy and regulation. Firms are indirectly linked to trade as a ground because their activity is directed at, and has a profound impact on, individuals within the scope of trade. Their activity is directed at individuals as consumers because without consumer demand there would be no profits. Firms affect the well-being of consumers by determining which goods are available at what prices. Their activity is directed at individuals as employees because without employees there would be no profits either. Firms activities also bear on employees’ well-being by setting terms on which they can (or cannot, as the case may be) make a living. Similar observations about direction and impact of a firm’s activities apply to individuals as dependents on the natural environment, members of local communities, or citizens of states. Later chapters return to these matters.

11.4.2  The Content of Obligations So what are firms’ responsibilities with regard to the exploitation-based principle of justice associated with trade? Recall from Chapters 6 and 7 that actors relevantly linked to a ground have three sets of responsibilities. They ought to “refrain from violating” principles of justice, which rules out perpetrating injustices. They ought to “respect” demands of justice, which rules out supporting violations of justice committed by others. And they ought to “support” the realization of ­principles to which they are subject, which requires seeing to it that principles of j­ustice are met. The contents of these duties, especially of the last one, vary across different kinds of firms. Still, in principle all of them apply to firms. Our argument that firms ought to refrain from violating and ought to respect and support trade ­justice builds on but differs from a prominent precedent. As part of a UN effort to

Theorizing the Firm  193 bring corporations under the purview of human rights—the “Guiding Principles on Business and Human Rights” have been endorsed by the UN Human Rights Council—John Ruggie argues that businesses bear the duty to “respect” human rights.19 Parallel arguments apply to businesses for the general domain of trade justice, with duties beyond “respecting” the relevant demands. Let us elaborate. According to our first and presumably least controversial claim, firms ought to refrain from violating trade justice. The requirement not to take unfair advantage constrains firms in the three dimensions discussed above. Firms are required not take unfair advantage through internal transactions, shortchanging workers. They are required not to take unfair advantage through market transactions, shortchanging contractors or suppliers. And firms are required not to take unfair advantage through re-drawing the line between firm and market, that is, through vertical specialization. According to our second claim, firms ought to respect trade justice. This requirement precludes certain ways of relating to injustices committed by others, including other firms or states. For example, firms must not facilitate or support injustices committed by states where they do business or by suppliers with which they cooperate. Respecting trade justice means not becoming complicit in violations of principles of trade justice. Finally, and presumably most controversially, firms ought to support principles of trade justice by seeing to it that they are realized. Such support may assume different forms. Firms may be required to assist other actors, such as states, realize demands to which they are subject. Firms may be required to get other actors to live up to requirements of justice if those are unwilling to do so. And they may be required to pick up slack where others are unable to respect and refrain from violating trade justice. The scope and nature of these obligations depend on multiple factors, including the size and power of firms. Later chapters substantiate our claims.

11.5  Off the Moral Hook? Skeptics will object that trade justice does not apply to firms. To make their case, they may point to competitive pressures, invoke the adversarial nature of trade, appeal to obligations managers have towards shareholders and owners, or insist on a division of labor between firms and political institutions.20 However, none of these arguments succeed.

11.5.1  Market Pressure The idea that competitive market pressures explain why trade justice does not apply to firms can be motivated in different ways. First, advocates may rely on

194  On Trade Justice the principle “ought implies can” and argue that many firms cannot but act exploitatively.21 Since other firms exploit to avoid disadvantages that come with non-exploitative transactions, firms that endeavor not to exploit are outcompeted and eventually go bankrupt. Honoring trade justice is impossible. But, to begin with, there is reason to doubt the empirical premise of this argument. Have all alternatives for remaining competitive by reducing costs and prices been exhausted? In industries where production costs account for a fraction of the price, the market-pressure argument appears unconvincing. More importantly, does exploitation really maximize profits? There is evidence that non-exploitative workplaces are more profitable than exploitative ones.22 Moreover, there is a possibility for firms to avoid transacting on exploitative terms, to wit, by not transacting at all. There may be reasons to prefer exploitative transactions to no transactions, all things considered. But it is possible for firms not to exploit. Alternatively, advocates of the market-pressure argument may insist firms cannot reasonably be expected to bear costs associated with non-exploitive trade. But first, costs of non-exploitation may not be that high after all. Wage increases, for example, may be offset through cuts and savings in firms’ expenditures where nothing of comparable moral significance is at stake, or lead to higher productivity. Secondly, costs imposed through compliance with norms of non-exploitation are costs one must bear to act permissibly. Norms of non-exploitation pose constraints on permissible pursuits through interaction with others. A final variant of the argument from competitive pressure draws on notions of fairness and assurance. Without assurance that others pursue trade justice, compliance confers unfair disadvantages. However, in light of assurance problems, obligations not to exploit may play out as obligations to organize assurance by initiating or joining schemes that guarantee norms of non-exploitation are observed. Even without assurances the obligation not to exploit remains. Unfairness suffered by unilateral compliers will normally be minor compared to injustice suffered by victims of exploitation. Consider an analogous case where health and safety are at stake. Firms may argue that under competitive pressures they cannot afford safe workplaces. It is false that they cannot but employ workers under hazardous conditions because they could just not employ anybody at all. The argument that safe workplaces are too costly should be met by pointing out that alternative ways of cutting costs could free up funds, while employment under unsafe conditions may be impermissible. While there are initiatives to provide assurance of universal compliance with health and safety standards (e.g., the aspects of the “global reporting initiative” dealing with occupational health and safety),23 unfairness suffered through unilaterally offering safe conditions is minor compared to wrongs suffered by those prone to injury or death at work. If employment under safe conditions drives firms out of business, this may be for the better.

Theorizing the Firm  195

11.5.2  Adversarial Practices? Those who build their case on the adversarial nature of markets and of ­international trade in particular argue that in these contexts, certain actions become permissible that are impermissible otherwise. Like violent games or the American legal system, trade might count as an “adversarial practice.”24 Within such practices, certain types of ordinarily impermissible behavior are permitted. But why should trade be viewed as such a practice? A first answer draws on consent.25 Those who participate in relevant practices consent to being treated in particular ways. Just like those who enter a rugby pitch agree to tackling, those who participate in trade agree to exploitation. But for one thing, in the context of trade consent by transacting parties does not possess the right normative credentials. In the case of workers in developing countries, or suppliers down the value chain, actors may have no alternatives to trading on exploitative terms. Their participation in trade practices as well as their engagement in particular transactions may lack relevant voluntariness.26 Also, consent is insufficient for moral innocence. Some wrongs occur even if all parties consent. As Chapter 5 argued, exploitation is such a wrong. A second answer offers an invisible-hand argument.27 Within adversarial practices, self-interest, as if by an invisible hand, improves everyone’s situation. Adversarial practices thus benefit all participants in ways that would be ­unavailable without the behavior allegedly permissible in this context. But to begin with, it is unclear that trade without exploitation would be less beneficial than trade with exploitation. Secondly, even within the class of benefit-promoting acts occurring as part of adversarial practices, not all interactions are permissible. There are constraints on how benefits may be generated. Trade justice is one such constraint.

11.5.3  Obligations to Shareholders A third attempt to get firms off the moral hook is to point to obligations managers have towards owners.28 Since managers have fiduciary duties to advance owners’ interests, and since honoring norms of non-exploitation may well not do so, managers need not refrain from exploiting. However, the requirement not to exploit is a constraint not just on management but also on what owners may have others do. Such constraints cannot be bypassed via principal–agent relationships.29 If it is impermissible for managers to exploit, it is impermissible for them to exploit on anyone’s behalf. Moreover, there are, at least for corporations, reasons to be skeptical about the idea that pursuit of owners’ interests provides a firm’s sole purpose. Corporations are enabled by and depend on state provision, for example, through corporate

196  On Trade Justice and labor law. Corporations advance investor interests in virtue of enjoying ­privileges, including limited liability.30 But since such privileges are granted by public institutions, it is doubtful that narrow pursuit of investor interest is permissible. Public interests matter for the aims a firm may pursue and constrain these pursuits.31 More fundamentally, one ought to question the idea that there are individual shareholders who actually own the corporation in the sense of enjoying the full set of rights standardly associated with ownership. As Ciepley puts it, “owning a share [. . .] is entirely different from owning corporate assets.”32 In virtue of its legal personality, the corporation is a distinct agent, and that agent owns ­corporate property and assets. Individual shareholders do not own the corporation in the full sense of standard ownership; they merely hold some limited control rights. The claim that corporations and their assets have to be managed in the best interest of shareholders because shareholders are the owners is thus mistaken.33

11.5.4  Division of Labor The fourth argument draws on a division of labor between business and politics and argues that trade justice is the sole responsibility of political institutions or a society’s basic structure. However, the grounds-of-justice account offers a rationale for why trade justice applies to firms. It applies directly because the activity and existence of firms is constitutive of trade as a ground. It applies indirectly because the firms’ existence and activity is directed at, or affects, those in the ground’s scope. Duties of trade justice apply not just as imperfect duties that are indeterminate as to who fulfills them; instead they impose constraints that ­corporate actors have to meet for their actions to be permissible. But even if trade justice was the state’s or a basic structure’s sole responsibility, firms would still have duties. To begin with, firms may have duties towards ­political institutions or the basic structure. Nien-he Hsieh argues firms are obligated to promote just and effective institutions wherever they do business because certain actions (e.g., productive activity imposing risks on third parties) are permissible only if there are mechanisms to compensate losers if risks materialize.34 Since political institutions provide these mechanisms, productive activity is permissible only against the background of effective institutions. Where no such institutions exist, firms ought to contribute to their establishment. Otherwise firms should help maintain them. Similarly, firms engaged in trade ought to contribute to the establishment and maintenance of institutions capable of and charged with delivering trade justice. If states cannot discharge their duties, doing business under the relevant state’s jurisdiction may entail the duty to enable or get the state to discharge its duties, or otherwise compensate for its failures. Onora O’Neill argues that even though

Theorizing the Firm  197 states are the primary agents of justice, firms may become secondary agents.35 Because of their “capabilities to contribute both to greater justice and to greater injustice,” firms are responsible for achieving justice where states are weak or unjust.36 Those who disagree with our claim that firms and corporations are agents of trade justice to begin with may still accept O’Neill’s diagnosis and agree they sometimes inherit such duties.

11.7  Setting the Stage for Subsequent Chapters: The Case of Nike The building blocks for the substantive arguments of Part III are in place. We have explained why trade is a ground of justice, defended an exploitation-based ­principle of trade justice, developed an understanding of firms and their relationship to markets and trade, and argued they are subject to trade justice. From the standpoint of firms, questions of trade justice arise internally, for instance when it comes to outsourcing or compensation, and as questions regarding actors outside the firm, for instance regarding vertical specialization or cooperation with ­suppliers. To render the issues tangible and construct a framework for subsequent chapters, we introduce the case of one firm that has featured prominently in public debates: Nike.37 Based in Oregon, Nike had been a corporate success for decades when it became subject to boycotts and negative commentary because of labor offenses such as underage workers in Indonesia, forced overtime work in China, and dangerous working conditions in Vietnam. What differentiated Nike from its competitors—by 1997 it had gained a 40 percent share of the $14.7 billion athletic footwear market—was its corporate strategy. Devised by the legendary CEO Phil Knight while he was still in business school in the 1960s, Nike’s concept was to produce abroad and invest funds thereby saved into advertising, especially highprofile endorsements by celebrity athletes, like Michael Jordan and Tiger Woods in the 1990s and 2000s. A virtual company without production facilities of its own, Nike had become one of the world’s most recognized brands by the early 1990s, using the “swoosh” as its logo. Nike insisted it neither produced nor sold shoes. It sold an image of athleticism and “urban cool.” Customers bought Nike’s products for more than their usefulness as footwear would warrant. But the shoes themselves had to come from somewhere. That manufacturing process rested on a frequently uneasy relationship with a far-flung empire of workers in low-cost countries. This is where questions of trade justice emerge. Many of the workers producing shoes for Nike in Indonesia could not meet their basic needs. These conditions increasingly attracted attention by activists and journalists from inside and outside of Indonesia. Before long, neither the Indonesian government nor Nike

198  On Trade Justice could ignore the increasingly vocal critics. In 1992, the government raised the minimum wage. But even that new wage was insufficient to cover basic needs and often diluted in various ways. Nike continued its strategy of investing substantially into advertising. According to one soon-to-be-famous comparison, it would take an Indonesian worker 44,492 years to earn as much as Michael Jordan pocketed for endorsements of Nike. Many observers thought this imbalance indicated that workers did not receive just wages. This leads to a first question regarding firms and trade justice, QUESTION 1: is a just wage a matter of productivity, should it reflect needs, or does it amount to an appropriate share in profits? Chapter 12 argues that exploitation as power-induced failure of reciprocity offers the most plausible perspective on wage justice in the context of trade. Nike’s success depends on outsourcing and vertical specialization. The company signed its first contracts with Japanese manufacturers, but later shifted its supply base to South Korea and Taiwan. By 1990, as those countries grew richer, costs rose and Nike urged suppliers to move to China and Indonesia. Echoing contemporary concerns about trade causing domestic job losses, QUESTION 2 is: under what conditions, if any, are decisions to relocate production to facilities abroad, either through outsourcing or vertical specialization, morally problematic? A related issue is under what conditions, if any, is a subsequent shift of ­facilities from one foreign country to another morally problematic? Chapter  13 argues that complaints against outsourcing are best captured in the language of exploitation. In public debate, complaints about labor conditions were largely couched in human-rights language. Wages figured prominently, especially since they paled in comparison to income celebrities generated through endorsements. Safety and health standards that were often lacking in countries like Indonesia and Vietnam were also at issue, as well as overbearing working hours. Nike’s defense drew on the significance of outsourcing and vertical specialization. Without manufacturing facilities of its own, Nike insisted, it could not be accountable for failures of its contractors. QUESTION 3 then is: is Nike responsible for actions of its subcontractors? Is it perhaps guilty of indirect exploitation if subcontractors pay unjust wages? The first part of Chapter 14 addresses these issues. From Nike’s viewpoint, Indonesia initially seemed an ideal location for ­subcontractors. To attract investments the Suharto government facilitated a climate where wages were low, the workforce docile, and unions oppressed. Due to the resulting wage differential, in the early 1990s shoes from China and Indonesia cost 50 percent less than shoes from Taiwan and South Korea. In spite of the initial advantages in relocating to Indonesia, waves of labor unrest soon swept through the country. Foreign companies were subjected to increasingly critical scrutiny, workers made unprecedented demands, and before long, Nike had emerged as key target. The company was accused of encouraging contractors to mistreat workers in pursuit of unrealistic production goals. Widespread corruption made worker protection legislation unenforceable.

Theorizing the Firm  199 While this situation was not of Nike’s making, many observers surmised it took advantage of this climate of impunity. Like other companies, Nike would regard this climate as part of the background conditions of its operations and think its operations would suffer relative to competitors if Nike unilaterally acted against the prevailing conditions. A final question of trade justice is QUESTION 4: how should one think about Nike’s and its subcontractors’ dealings with an authoritarian regime and the resulting oppression of the labor pool? Are the company’s actions exploitative? Are they acceptable all things considered? The second part of Chapter 14 explains how the exploitation-based approach sheds light on these issues. Eventually Nike ceased to insist it did not produce shoes. However, its m ­ easures to improve conditions and monitor progress fell short of what critics demanded and what competitors were doing. Nike raised the minimum age for workers; adopted new clean-air standards for factories; expanded its monitoring program and even offered microloans. Nike also got involved with reform efforts organized around the Clinton-initiated Apparel Industry Partnership. That group eventually cobbled together an agreement among major players in the sneaker and apparel business, complete with an oversight organization known as Fair Labor Association (FLA).38 But wages remained contentious, with Nike standing accused of still refusing to pay acceptable minimum wages. To be clear, the Nike case is just one in many, and the issues it points to and which we will discuss in the next chapters are as urgent as ever.

Notes 1. We are hardly the only political theorists taking Coase as a starting point. Joseph Heath develops his “market failure” approach to business ethics building on the observation that firms exist to overcome certain market failures, see Heath, Morality, Competition, and the Firm. Elizabeth Anderson draws on Coase to argue questions of government and legitimate authority arise within the firm, see Anderson, Private Government. For Coase’s insights, see Coase, “The Nature of the Firm.” 2. For recent examples of the political theory of the firm, see McMahon, Public Capitalism; Ciepley, “Beyond Public and Private”; Ferreras, Firms as Political Entities. Differences between an “economic theory” and a “political theory of the firm” should not be exaggerated. Insights from both can be combined. 3. Coase, “The Nature of the Firm,” 388. 4. Anderson, “Equality and Freedom in the Workplace,” 61 ff. 5. As Coase puts it: “The system of relationships that come into existence when the direction of resources is dependent on an entrepreneur,” Coase, “The Nature of the Firm,” 393. This characterization of the firm operates on a descriptive level. It is an open question whether governance is legitimate and whether those coordinating economic activity in fact possess authority.

200  On Trade Justice 6. Dow, Governing the Firm, 92. 7. Heath, Morality, Competition, and the Firm, 30. Skeptics of this logic may object that a function price mechanism does not presuppose firms. To be sure, price formation on markets would work with individuals trying to maximize profits. But given the independent reasons for individuals collaborating in firms (in addition to the ones discussed above, economies of scale and risk sharing), price formation must rely on firms seeking to maximize profits. 8. Heath, 31. 9. As pointed out by G.  A.  Cohen, while economic institutions harnessing altruistic rather than self-interested motives seem morally preferable, it is unclear what such institutions would look like; Cohen, Why Not Socialism?, 58 ff. 10. For the significance of multinational corporations, see Cohen, Multinational Corporations and Foreign Direct Investment. For a discussion of how corporations fail to genuinely figure in political philosophy, see Heath, Moriarty, and Norman, “Business Ethics and (or as) Political Philosophy.” To be clear, we consider corporations as a subset of firms and for ease of use intend the term “firm” to cover both firms that are corporations and firms that are not. We use the term “corporation” whenever our argument turns on the fact that a firm is a corporation. 11. Our presentation of the legal form of the corporation follows Kraakman et al., The Anatomy of Corporate Law. Our discussion of the corporation as dependent on government and state draws on Ciepley, “Beyond Public and Private.” Once one ­distinguishes between (a) firm and corporation, and (b) claims about the genesis of the corporation, ontological claims about its legal nature and normative claims about its legitimate functions and operation, the economic and political approaches are in many respects compatible. 12. This paragraph draws on Kraakman et al., The Anatomy of Corporate Law, 6ff. 13. This paragraph follows Ciepley, “Beyond Public and Private,” 140–50. 14. For the latter two questions, see Ferreras, Firms as Political Entities, 107 ff. 15. For how trade affects firms and vice versa, see Helpman, Understanding Global Trade, chapters 5–6. 16. Irwin, “Trade and Globalization,” 24. 17. Our terminology follows Helpman, Understanding Global Trade, 127. Company A engages in “outsourcing” when purchasing intermediate products formerly produced in-house from unaffiliated party B.  We speak of “offshoring” when production that formerly took place in A’s country is now performed abroad, either by A itself, or an affiliated or an unaffiliated party. In case the party is unaffiliated, “offshoring” is also “outsourcing,” and for the purposes of our argument, we refer to the phenomenon as “vertical specialization.” (The notion of “horizontal specialization” applies to cases where the goods traded have been completely produced in one country, see Hummels, Rapoport, and Yi, “Vertical Specialization and the Changing Nature of World Trade,” 80.) Foreign direct investments by A enable offshoring by bringing foreign assets or production facilities under A’s control. 18. Half of US imports in 2000 were due to intrafirm trade, see Helpman, Understanding Global Trade, 127. 19. Ruggie, Just Business. For the principles, see Ruggie, “The UN Guiding Principles on Business and Human Rights.”

Theorizing the Firm  201 20. We here only address the most radical critic who believes morally speaking firms enjoy a carte blanche. More local forms of criticism, according to which obligations of firms are weaker than what we propose, come up in subsequent chapters. 21. See Snyder, “Needs Exploitation”; Zwolinski, “Structural Exploitation.” 22. See Brown et al., “Are Sweatshops Profit Maximizing?” 23. See https://www.globalreporting.org, last accessed December 17, 2018. 24. Applbaum, Ethics for Adversaries. 25. Applbaum, 115 ff. 26. Landemore and Ferreras, “In Defense of Workplace Democracy: Towards a Justification of the Firm-State Analogy”, 66 f. 27. Applbaum, 187. 28. Friedman, Capitalism and Freedom; Friedman, “The Social Responsibility of Business Is to Increase Its Profits.” 29. Our discussion of “loopholes” and obligation-avoiding behavior in Chapter 14 develops this argument. 30. Landemore and Ferreras, 57, who here build on Ciepley. 31. Landemore and Ferreras, 59. 32. Ciepley, “Beyond Public and Private,” 146. 33. Ciepley, 146 ff. For the argument that ‘no one is really in a position to own a firm’, see also Landemore and Ferreras, 61. 34. Hsieh, “Does Global Business Have a Responsibility to Promote Just Instititutions?” 35. O’Neill, “Agents of Justice.” 36. O’Neill, 193. 37. We follow a Harvard Business School teaching case here; see Spar and Burns, “Hitting the Wall: Nike and International Labor Practices.” For its founder’s take on Nike, see Knight, Shoe Dog. Our exposition in this final sections draws on Risse and Wollner, “From Theory to Practice I: Passing Judgments of Exploitation.” 38. http://www.fairlabor.org/, last accessed December 12, 2018.

12

Dealing with Workers The Question of Wages

12.1  Our Argument Chapter 11 identified different aspects of corporate activity that come up for evaluation in terms of trade justice, including how firms pay workers, whom they employ, where they produce, and with whom they cooperate. This chapter focuses on the first issue. We explain how questions of wages arise as topics of trade ­justice to begin with and offer an exploitation-based perspective. We also explore whether corporations like Nike pay wrongfully low wages. Applying ­considerations of exploitation to multinationals is vexingly difficult. Arguments with prima facie appeal advanced by either side of the debate on this issue often fail to withstand scrutiny. Section 12.2 explains how wages come up as a topic of trade justice. We examine prominent ways of thinking about wages. While none of them fully succeeds, they capture insights a convincing perspective should accommodate. Section 12.3 discusses some initially plausible ways of complaining about wages, and ­section 12.4 addresses attempts at justifying low wages as morally adequate. Incorporating insights from this discussion, section 12.5 develops an exploitationbased view on just wages and compensation. Section  12.6 explains how this account lets us criticize some wages as wrongfully low. Next we return to arguments about the moral force of exploitation from Chapter 6, and introduce a ­distinction between wage levels being exploitative and all-things-considered unjustified. Section  12.7 elaborates on the conditions that render low wages all-things-considered justified even though they are exploitative. Finally, section 12.8 explores whether low health and safety standards may be acceptable in exchange for wage increases.

12.2  Wages and Trade as a Ground of Justice First we explain how the issue of wages links up with trade as a ground of justice. Then we argue that trade justice bears on companies’ obligations to compensate workers. Finally, we sketch how questions of compensation in the context of trade differ from such questions in a domestic context. On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Dealing with Workers: The Question of Wages  203 From the standpoint of firms, trade is the movement of goods and services across borders, most commonly enabled through reducing costs of cross-border transactions. Firms shape international trade, for example, by producing at locations abroad where costs are lower. Trade also shapes firms. They respond to available opportunities, for example incentives provided by low costs of ­production abroad in combination with low cross-border transaction costs. Compensation figures under costs of production. Thus low wages abroad provide incentives for vertical specialization, offshoring, or outsourcing. As we have emphasized throughout, trade has made the world. As the most important form of structured cooperation across distances, trade deeply affects life prospects. One dimension of this is through wages, by altering who is employed by which company and for what wage. To be sure, firms do not on their own have this effect. Trade as a ground of justice is also shaped by treaties and state policy. But within such parameters firms constitute and have an effect on trade practices. This is how wages are features of trade as a ground of justice.1 Recall that there are two ways for actors to be linked to a ground. There is a direct link if actor and actions are constitutive of the ground. There is an indirect link if actions are directed at and have an impact on those in the ground’s scope. Firms are linked to wages as a feature of trade in both ways. Their employment behavior is constitutive of the practice. Without multinationals paying low wages abroad, important trade practices would not exist. Without the circumstances enabling and sustaining low wage levels, production would presumably continue at home, and there would be less movement of goods and services across borders. Employment behavior also bears on and is directed at those within the scope of trade practices. It is essential for economic success that firms get workers to accept employment at lower costs, which in turn has enormous implications for the livelihood of employees. The moral requirement of non-exploitation associated with trade thus applies to wages and compensation as one feature of that ground. Firms bear obligations associated with trade as one ground. In hiring workers abroad they ought to refrain from violating, as well as respect and support, trade justice. Interactions with workers, including provision of wages, may count as just only if there is no unfairness through power, more precisely no power-induced failure of reciprocity. There is an important difference between domestic justice and questions of justice in the context of trade. For example, domestically, transaction-specific requirements are more likely to be eclipsed by more comprehensive concerns of distributive justice.2 Wages and compensation are one ingredient in a package of burdens and benefits generated by comprehensive cooperative schemes. In trade, no similarly comprehensive scheme exists. We do not ask what an ideally just wage would be. Instead, we explore requirements that apply to particular actors under conditions of constrained agency. What are the wage- and compensationrelated obligations of firms operating across borders?

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12.3  Two Incomplete Ways of Criticizing Wages as Too Low Activists protest against companies like Nike, arguing that workers in production earn too little compared to the price of the goods they produce, compared to what companies pay “celebrity employees”, or compared to what others earn who contribute to sales, or simply too little to live on. An hourly wage of less than $1 seems too low while Nike pays millions to superstar athletes and its sneakers sell for more than $100. But are just wages a matter of productivity, should they reflect needs, or be understood in terms of an appropriate share in profits?3 Before arguing that the activists’ complaints are best conceived of as complaints about ­exploitation, let us consider some popular and influential ways of criticizing low wages that are promising yet ultimately incomplete and unconvincing. Consider first the comparison between wages and price. Complaints based on that comparison have intuitive force. But to begin with, it is unclear that $100 is best understood as the price of an object workers produce. There is some truth in CEO Phil Knight’s statement that Nike does not produce shoes. The product for which consumers pay $100 is a hybrid of image and signaling device, the result of marketing and campaigning more than of physical production. Of two pairs of sneakers produced by the same workers, one might hit the shelves with a swoosh and sell for $100 in a Nike store while the other departs unlabeled to fetch $10 at Wal-Mart. The shoes from the factory differ from the products on sale. Those complaining about low wages by invoking the price would thus have to explain in what sense price is a relevant point of reference. Our account below does so. It is a more general mistake to think of just wages as exclusively a function of prices. Imagine a modified version of the example where worker A produces sneakers sold by Nike, and B sneakers sold at Wal-Mart. Suppose A and B perform the same work under identical conditions for the same time. Should they be compensated differently in light of pricing differences? Anyone who believes that the reason why wage levels are too low depends fully on prices must answer affirmatively. But that seems wrong. A complete account of wage justice should explain why worker A performing the same task as B under identical conditions may complain about being paid less than B even if B’s product sells for more. Consider next comparisons between wages and payments to celebrities. It is unclear whether complaints about wages being too low compared to celebrity compensation are best understood as being about wages being too low. Plausibly, celebrity compensation is too high: Jordan and Woods are ludicrously overpaid. Liberal egalitarians would dismiss such incomes as unjustifiably high, for instance based on Rawls’s Difference Principle. It is doubtful that inequalities between superstars and the rest help the worst-off. Those who believe just prices are formed on competitive markets also have reasons to believe Jordan or Woods get too much.

Dealing with Workers: The Question of Wages  205 Their compensation does not arise on competitive markets, and would presumably be much lower if it did.4 Wages multinationals pay might be too low. But a convincing account should also explain why celebrity compensation may be too high.

12.4  Justifying Wages as Sufficient? Having raised doubts about two ways of arguing that wages are too low, let us consider some ways of supporting them as morally justified. One argument defends low wages based on relative scarcity: Indonesian workers receive low wages because they are in abundant supply and easily replaced.5 For each worker there are many eager to take her job. An initial worry is that whether a factor is scarce or abundant is morally arbitrary.6 Much recent political thought has been rightly skeptical of attempts to legitimize disadvantage in ways drawing on such factors. While relative abundance and scarcity explain why particular inputs into production are compensated at certain levels, it is doubtful whether scarcity or abundance justify these levels. But more importantly, while it might be easy to replace individual workers, or the entire workforce in one location, it is difficult to replace input of labor completely. Why justify low wages invoking individual replaceability, rather than high wages invoking collective irreplaceability? Due to coordination problems and power imbalance, compensation may practically reflect individual replaceability. But in light of collective irreplaceability, it is doubtful that this should be so. A second argument seeks to justify low wages based on small contributions to production.7 Drawing on neoclassical economics, the productivity or contribution argument builds on the observation that in competitive markets the price for a factor of production is equivalent to its marginal contribution. In competitive markets, what workers receive is their marginal product, the value of the contribution of the last worker hired. As the marginal contribution of workers in, say, Indonesian shoe factories is low, so is their wage level. But why should everyone’s contribution be rewarded as if it was that of the marginal worker? The first worker hired makes a greater difference than the thousandth. Wages based on marginal contribution cannot adequately reflect ­productivity because all workers are treated as if they were the marginal worker. Some of them are treated as less productive than they are.8 Advocates of this argument may move to average productivity. Even if each worker is compensated in accordance with average productivity, wage levels will be low if average productivity is. But how low really is it, and what level of compensation could be justified by invoking productivity differences across countries? According to the International Labor Organization (ILO), minimum wages in the clothing industries are twenty times higher in France than in Sri Lanka.9 Suppose this means the average French worker produces twenty times as many

206  On Trade Justice shoes as one in Sri Lanka. That is, wage differences are entirely due to p ­ roductivity differences (rather than other factors influencing wages). In large measure such productivity difference must mirror technological differences. But do technological differences justify wage differentials? Sometimes more productive workers may rightfully be rewarded for higher productivity, for instance where they possess skills that let them use technology productively. But if one skilled worker is more productive than another merely because of superior machinery, wage differentials are unwarranted. Since productivity in the garment industry seems to be a function of technology, that industry is a case in point. So the productivity (or contribution) argument is unpromising. However, there is another route towards justifying wage differentials based on productivity differences that does not turn on person-to-person comparisons across ­economies. According to this version, productivity differences reside at the macro-level rather than the individual level. Economy A as a whole—and thus the average worker there—is more productive than economy B because A is endowed with more advanced technology, infrastructure, educational systems, social systems, and so on. The point is not that workers in A deserve more than those in B because they are themselves more productive. Instead, workers can make demands to a fair share of benefits produced by the economic context where they operate, in virtue of their participation. Workers in A have claims to a share of what that economy produces, workers in B to a share of what that economy produces. This approach circumnavigates concerns at the individual level. Thereby a plausible argument justifying earning differences among workers across economies might be forthcoming after all. A convincing account should accommodate it.10

12.5  Power-Induced Failure of Reciprocity: the Exploitation Perspective We have encountered various promising yet incomplete ways of criticizing wages as too low, one problematic way of justifying low wages, and one promising way of doing so. We now propose an alternative way of criticizing wages like Nike’s we believe is more convincing than those above. Chapter 5 introduced exploitation as power-induced failure of reciprocity as the trade-specific version of our preferred view of exploitation. To see how and why this conception offers the right perspective, let us first revisit the notions of power and reciprocity in the context of firm–worker interactions before explaining how power-induced failure of reciprocity bears on wages and compensation. Our discussion of power as the ability of exploiters to get exploitees to do things by affecting their interests distinguished between features that generate the power relationship, the acts that exploitees do under exercise of power that they otherwise would not, and the way exploiters affect interests or incentive structures.

Dealing with Workers: The Question of Wages  207 Somebody may have power because of distributive injustices, past violations or a particular combination of an exploitee’s needs and an exploiter’s ability to satisfy them. Power may be exercised directly, through force and elimination of alternatives, or indirectly, through threats and by taking advantage of a superior bargaining position. It may be exercised formally, for example where official rules bestow power, or informally, for example where some actors exercise power independently of rules and institutions. These distinctions help us understand how multinationals exercise power. Sometimes they do so through force, for instance, by preventing workers from leaving factory premises. Sometimes companies leverage superior bargaining positions. Local firms may pay subsistence wages whereas multinationals pay slightly more. Workers are vulnerable because multinationals might well offer the only path out of poverty. Manifold features enable exercise of power. There may be a variety of reasons for the relative abundance of workers and their willingness to accept low wages, including morally innocent factors but also past wrongs like colonialism. In countries where companies like Nike produce, historical wrongs matter greatly. How should reciprocity be understood here? We have three building blocks in place. First, we have argued cooperators have claims of reciprocity both in virtue of providing benefits and in virtue of incurring costs for doing so. Secondly, we have offered an account of how to understand costs and benefits. Well-being and agency both matter. Applied to wages and compensation, the following picture emerges. Workers benefit from employment by having important well-being and agential interests advanced. Wages are higher than what they would be under their next best opportunity, and multinationals expand workers’ option set. Costs also play out in these dimensions. Employment entails opportunity costs associated with time at work and costs of maintaining one’s labor power. Employment also has adverse effects on agency interests, including the interests to live as one sees fit. In terms of agency interests, time spent at work is a cost because it is spent under somebody else’s direction. There will be failures of reciprocity in employment relationships if some bear disproportionately large costs of cooperation, or others receive disproportionately large benefits. To illustrate how this reasoning delivers ways of criticizing wages as wrongfully low, let us sketch the standard picture of how wages are determined on labor markets. As on other common models of markets, supply here is determined by the workers’ willingness to provide an amount of labor for a particular wage. The higher the wage, the greater the amount a worker willingly supplies. An Indonesian worker may be prepared to provide one unit of labor at a wage of $0.2 per hour, two at $0.4, three at $0.6, and so on. Demand is determined by the employer’s willingness to purchase labor at a certain level. The lower the wage, the greater the amount of work the employer wishes to purchase. A potential employer may be willing to hire the first unit for $3.8, the second for $3.6, and so

208  On Trade Justice on. The equilibrium is where the number of hours the worker willingly provide equals the number of hours the employer willingly purchases. On competitive markets, the equilibrium wage will be higher than the ­minimum level for which workers would work, and lower than the maximal level employers would pay, generating a producer surplus for workers and a consumer surplus for employers. On our simple hypothetical market, the equilibrium wage per unit can be calculated to be $2 with ten units being employed. This wage generates a surplus of $9 for Nike (which pays $20 of wages but would willingly have paid $29, for the first unit $3.8, for the second $3.6, for the third $3.4, etc., and finally for the last $2, for a total of $29), and a surplus of $9 for the workers (who receive $20 but would work for $11, the first for $0.2, the second for $0.4, the third for $0.6, etc., and the last for $2, for a total of $11). To inquire about just wages is to ask how to distribute the surplus. The wage level determines that distribution. We explain below how a particular wage level may constitute a failure of reciprocity. To apply the approach of exploitation as power-induced failure of reciprocity, in a first step, consider how power enters the picture. Power may induce failures of reciprocity in two ways. To begin with, it may figure exogenously. Employers may exercise non-market power in ways that still bears on labor market outcomes. They might influence workers’ willingness to accept low wages. Such willingness may reflect the power employers have, including power to obstruct unionization, prevent workers from leaving premises, or obliterate alternative opportunities. Power may also figure endogenously. Employers may have market power, in the sense that they set prices, for example because they have a monopoly. In this case, firms control the distribution of the cooperative surplus because they can determine the wage at which transactions occur. The two ways of inducing a failure of reciprocity may coincide or overlap. Firms may create market power by exercising non-market power. The two parts of our argument are now in place. There are certain judgments about wage levels a successful account should accommodate, and we can learn from alternative approaches which mistakes to avoid and which insights to preserve. We have also outlined how our trade-specific conception of exploitation applies to wages and compensation. Let us put these pieces together.

12.6  The Exploitation Perspective at Work A particular wage level and the distribution of the cooperative surplus that comes with it may constitute a failure of reciprocity. The exposition of our account of failures of reciprocity on labor markets and thus the completion of our argument comprises four elements: explaining a) how failures of reciprocity may be a matter of costs, b) how they may be a matter of contributions made, c) how the two

Dealing with Workers: The Question of Wages  209 considerations can come together, and how we determine the relevant frame of reference where costs and contributions matter, and d) how to accommodate insights from the promising yet incomplete perspectives above and how to answer objections.

12.6.1  Failures of Reciprocity and Costs To begin with, a failure of reciprocity may be a function of costs incurred. Cooperators have claims against others in virtue of incurring costs of c­ ooperation. Reciprocity requires that the distribution of the surplus reflect costs incurred. The wages companies like Nike pay might be considered exploitatively low because they do not adequately reflect costs incurred by workers. But as a matter of reciprocity, they should. Mark Reiff offers a promising way to capture the costs of (re-)producing labor power: wages should reflect costs not merely in the minimal sense that workers should earn enough to meet subsistence needs.11 Instead, wages should reflect what it takes to meet all contextual basic needs, i.e., costs of living with a decent amount of self-respect as valued community members. Otherwise workers and communities subsidize business endeavors. Such costs include expenses for food, clothes, and housing, but also health care, raising a family, enough leisure to recuperate from work, and expenses associated with professional development (getting educated, acquiring a reputation, building networks). In addition, they would include insurance costs to anticipate retirement or incapacitation.12 Where wages are insufficient to cover these costs owing to the employers’ power, there is a power-induced failure of reciprocity. Wages would then be exploitative. This perspective may be developed internal to the trade relationship. A concern for cost-based claims arises from trade as a scheme of cooperation for mutual benefit. Owing to their shared practices, cooperators have to help make sure others can maintain themselves as self-sustaining partners to the activity.13

12.6.2  Failures of Reciprocity and Contribution Reciprocity requires division of a surplus in line with contribution, which we understand as a suitably modified version of time spent producing. Defending a view of contribution as time spent producing requires answering at least three questions.14 Why is time spent producing morally significant? How can contribution so understood be measured? And are there good responses to objections often associated with this conception? In response to the first question, we draw on two ideas. Once we eliminate factors that are arbitrary from a moral standpoint within the context of cooperation,

210  On Trade Justice labor time expended is the factor most likely to survive. Unlike talent, ­productivity, or access to technology, time spent working generally is under individuals’ control and hence a factor for which, ordinarily, individuals are responsible. Within finite lives, time is arguably the most important resource. Other factors like food, housing, or shelter matter because they afford individuals time to live and work. For these reasons labor time should count as relevant contribution, generating claims of reciprocity.15 In response to the second question, we suggest that in addition to merely considering time spent simpliciter, the time spent on complex tasks which ­presuppose preparation and training should be multiplied. An hour worked may count as more than one hour if time had to be spent acquiring skills. Taking the threat of arbitrariness seriously, such multiples should not reflect talent or ­difference made to products but time people had to spend to become the kind of cooperator they are, suitable to exercise the given tasks. In response to the third question, we caution against misunderstanding. Some philosophers rely on observations about the significance of work as a premise to establish claims about what goes on in economic life, for example when arguing that labor is the source of surplus value or profit, or determines prices. We do not endorse the labor theory of value. We do not argue that time spent producing creates value or determines prices. Regardless of whether time is the source of value, time is what matters morally within cooperative enterprises and generates claims of reciprocity. Value created in cooperative activity should be divided in line with time spent producing.

12.6.3  Costs and Contributions Within the Right Frame of Reference How do considerations of cost incurred and contributions made mesh? For wages to be reciprocal they must cover costs incurred by cooperators and reflect contributions in terms of time spent producing. We do not provide an algorithm identifying a uniquely just wage. Instead we explain what could be wrong with a highly unequal distribution of the surplus from employment relationships. Wages are too low if they do not cover the costs of reproduction of labor power or fail to reflect contributions made. Both standards may be violated independently. Where cooperation does not generate a surplus, the contribution standard may be met, while wages are too low to cover costs of reproducing labor power. Even where low wages cover costs, they can fail to reflect contributions. Either way, there is the issue of how to determine the relevant frame of reference within which costs and contributions matter. What is the relevant cooperative surplus to which workers have claims?16 Answers differ along two dimensions. The first is institutional: do workers have claims to the surplus generated within

Dealing with Workers: The Question of Wages  211 their firm or the economy as a whole? The second is geographical: do workers have claims to the surplus generated locally, say within their national economy or local unit of production, or to that generated globally, say within the global economy or global firm? Taking seriously ideas of constrained agency, we focus on firms as the relevant institutional context. Even if theorizing from the standpoint of the universe suggested that everyone has contribution-based claims of reciprocity to the social product of the entire economy, we are interested in what firms ought to do given the options and factors under their control. Firms can influence only some of the parameters determining the distribution of the general surplus. Since their primarily relevant decision is how to compensate employees, for present purposes claims of reciprocity are best understood as referencing surplus within the firm. This surplus, and this is where we stand with regard to the second dimension, is the firm’s global surplus. Nike’s wages in China or Indonesia should reflect time spent working, with Nike’s global workforce as comparison class. Taking cues from the productivity argument identified as promising above, we reason as follows. Notwithstanding CEO Knight’s claim that Nike did not produce shoes, employees in different locations performing different tasks are part of one collaborative enterprise.17 The role performed by laborers, particularly when seen as a collective, is as necessary for success as the role of designers or managers. What each person within the firm contributes is a function of what others do. Without shoes the most ingenuous marketing generates no revenues.

12.6.4  Accommodating Other Theories and Addressing Difficulties We have argued that the price of the product and wages paid to celebrities are the wrong references for criticizing wage levels as too low. At the same time, complaints invoking these considerations have intuitive force. The power-inducedfailure-of-reciprocity perspective illuminates that force. High product prices and payments to superstars indicate failures of reciprocity. We have also argued that low wages may be justifiable from a standpoint of aggregate productivity. Thinking of wages in terms of claims of reciprocity on what is cooperatively produced within the firm, this perspective can again be incorporated. The complaint about lower wages of a worker producing for Wal-Mart who performs identical tasks as a worker at Nike but gets paid less can also be accommodated. While membership in the cooperative context of the firm supports differential wages, membership in that of the national economy speaks in favor of equal wages. But the state rather than the firm would be the target of that complaint. Let us also address a worry. According to what one may call the radicalism or  demandingness objection, our account has overly radical or demanding

212  On Trade Justice implications. All capitalist labor contracts will, for example, be exploitative because investors always receive part of the product without spending any time working. Additionally, our account would require that managers and workers who spend the same time working should receive equal pay. Are we prepared to accept that, to avoid power-induced failures of reciprocity in the context of wages and compensation, we must abolish the capitalist enterprise as we know it? Our answer has two parts. Emphasizing the critical force of our position, we acknowledge that capitalist employment relationships and distributive patterns they generate require fundamental reconsideration. There are reasons, among them the importance of avoiding power-induced failures of reciprocity, to think about how to organize production to re-distribute cooperative surpluses and constrain investor power.18 At the same time, our position’s critical force should not be exaggerated. Some wage differentials may, for example, be justified because for some employees, time spent working should be seen as a multiple of time spent working, accounting for training and education. And some wage differentials reflect differences in costs for maintaining and reproducing labor power across locations. In a similar spirit, some of the surplus may justifiably go to capital investors. Insofar as capital reflects investors’ past labor, investors have claims to the surplus on the basis of labor time spent. Additionally, several factors discussed below explain why it may be all-thingsconsidered justified to deviate from trade justice understood as absence of power-induced failures of reciprocity. Failures of reciprocity may be acceptable as stepping stones or as prices worth paying. This possibility is compatible with maintaining non-exploitation as a critical standard for comparative judgments about behavior of corporations, or when deciding which course of action to pursue. Some wage levels and labor contracts will be closer to what non-exploitation requires than others. With these mitigating factors in mind, our position is this: As a matter of trade justice, wages must not reflect power-induced failures of reciprocity, where reciprocity is a matter of both costs (comprehensive costs of reproducing labor power) and contribution (time spent working on the firm’s cooperative product, in the extended sense explained).

12.7  Stepping Stones and Prices Worth Paying? Chapter 6 argued that under certain circumstances exploitation may be all-thingsconsidered permissible. Wages might be exploitatively low but justified allthings-considered. Low wages may be a stepping stone towards less or non-exploitative wage levels, or acceptable as a price worth paying by creating benefits that otherwise would be unavailable. But acts of exploitation may be justified all-things-considered only if they satisfy conditions of necessity and permissibility.

Dealing with Workers: The Question of Wages  213 There are three paradigmatic ways for companies trying to justify low wages to violate necessity. To begin with, they may mistakenly infer that paying low wages is necessary for development or generating benefits from the observation that paying low wages suffices for that goal. Employment at exploitative wages may be one way of achieving development and conferring benefits, but there may be other ways of achieving the same end. Secondly, companies may make a scope mistake, erroneously inferring a claim about collective or universal inability to achieve some good in a morally innocent way from individual inability to do so. That a company by itself cannot change the terms of transaction does not mean companies jointly could not either. For instance, unilateral wage increases might bankrupt companies whereas industry-wide initiatives would not. Thirdly, companies may be guilty of the first-person mistake. Sweatshop owners cannot argue that exploitatively low wages are necessary by appealing to their own motivational setup and claiming “paying higher wages to workers, our profits will be too low.” Appeals to necessity are easily self-serving. There are also three paradigmatic ways in which companies may fail to satisfy permissibility. To begin with, there are moral wrongs that cannot be rendered all-things-considered permissible by development prospects or higher wages, including severe violations of health and safety standards. We return to this issue in section 12.8. For now consider two other potential failures. The permissibility condition could be violated because links between exploitation and development are spurious or shaky. If low wages are justified because employment and presence of multinationals allegedly offer development prospects, the role of ­exploitation in achieving development must be well understood. Is the idea that low wages foster development sufficiently well supported by evidence to accept exploitation as a stepping stone? Finally, the permissibility condition might be violated because the separatenessof-persons requirement fails on one of its two dimensions. Do benefits accrue fast enough? Too much of a lag between exploitation and the realization of development blocks direct solutions to the temporal dimension of the separateness-ofpersons problem. With development happening down the road, those benefitting will differ from those exploited. Is the objection mitigated if recipients of low wages have genuinely consented, or could not reasonably object to being so treated? Whether such solutions succeed depends on the case. Can exploitative wages be all-things-considered justified because they lead to economic development, higher wages and better working conditions in the future?19 The answer may be affirmative only if such wages pass the test of necessity and permissibility. Is there no other way of achieving the same end? Can companies not act collectively to increase wages? Is appeal to necessity a selfserving mistake? Are workers really better off through transacting than they ­otherwise would be? Is the idea of low wages fostering development sufficiently well supported by social-scientific evidence to accept exploitation as a stepping

214  On Trade Justice stone? Can the force of the objection be mitigated by invoking the idea that those receiving low wages have given genuine consent, or at least could not reasonably object to being so treated? Does sacrificing fairness really result in significant systemic benefits? Simply listing these questions reveals how tall an order passing that test is.

12.8  Can Higher Wages Justify Deficits in Health and Safety? Our final question for this chapter addresses health and safety. Violations of workplace health and safety standards through unsafe buildings, lack of emergency exits, hazardous equipment, or lack of ventilation constitute moral wrongs. Straightforward explanations of what is wrong with such violations draw on notions of respect and harm. To employ workers under unsafe conditions is equivalent to unjustifiably harming them.20 But could higher wages justify lower safety standards? After all, workers may face choices between higher wages and lower safety standards on the one hand, and lower wages and higher safety standards on the other. Workers sometimes prefer the former to the latter. Could appeal to such preferences justify lowering health and safety standards? Our answer is negative. Advocates of the claim that low health and safety standards are sometimes permissible may present both a principled argument and an analogy. At the level of principle, they may appeal to respect and argue that lowering health or safety standards may be what respect for workers requires. The conditions under which production occurs, including health and safety conditions, are part of the compensation package. There are different ways of combining wages and working conditions in compensation packages valued identically by workers. Where workers prefer packages containing lower health or safety conditions but higher wages to packages of better conditions but lower wages, their preferences ought to be respected. Reasoning by analogy, advocates draw attention to cases where similar trade-offs seem appropriate. We often accept reductions in health and safety for monetary benefits. For example, when purchasing a less safe but cheaper car we expect our decision to be respected. But to begin with, respecting a person does not always mean respecting their choices. There are cases, health and safety scenarios among them, where to respect an individual’s agency is not to respect decisions but to ensure continued existence of (the pre-conditions of) her agency. As accidents and severe illness threaten to undermine the status or capacity of workers as agents and persons, respect requires effective protection, even if offering it contradicts the agents’ own preferences. Secondly, there are multiple ways for choices not to be relevantly free and voluntary. Economic circumstances might pressure workers to neglect health

Dealing with Workers: The Question of Wages  215 or safety conditions. Within severely constrained option sets, choosing one option over another lacks the normative credentials usually associated with choice. The choices might also be uninformed, reflecting lack of understanding of what each option implies. Since higher wages bring short-term benefits, whereas lower health and safety standards entail long-term risks, workers’ choices may not adequately reflect their best interests. Finally, in response to the argument by analogy, trade-offs between safety and monetary benefits seem permissible only above a threshold. Choices for cheaper but less safe cars ought to be respected only as long as the car is reasonably safe and meets minimal standards. Just as unsafe cars are forbidden on roads even if people willingly buy them, unsafe working conditions ought to be prohibited even if workers willingly accept them. Given the low health and safety standards in many textile factories, trade-offs between wages and safety are well below the threshold. To meet that threshold to begin with, no further compromise on health and safety standards, chosen or not, is acceptable.

12.9 Conclusion We set out to show how compensation becomes a topic of trade justice, offer a perspective from our account of exploitation as power-induced failure of reciprocity, and explore whether from this perspective corporations like Nike pay workers wrongfully low wages. Wages are one feature of trade as a ground of ­justice. We dismissed initially plausible ways of complaining about wages, identified one attempt to justify low wages as prima facie successful, and developed an exploitation-based view on just wages and compensation that lets us criticize some wage levels as wrongfully low. We also elaborated on conditions that render exploitatively low wages all-things-considered justified. Finally, we argued that an increase in compensation fails to justify low health and safety standards.

Notes 1. Chapter  13 discusses normative issues associated with the question of who gets employed. 2. A discussion of whether issues of wage justice arise independently from questions of social justice in general is beyond the scope of this chapter. For a brief discussion and argument in defense of the independence of wage justice, see Moriarty, “Is ‘Equal Pay for Equal Work’ Merely a Principle of Nondiscrimination?” 442. 3. Discussions of just wages or justice in compensation have not been prominent in recent philosophical debates. Philosophers have focused on how to criticize sweatshop wages as too low or CEO compensation as too high. Contributions to the former debate

216  On Trade Justice include Meyers, “Wrongful Beneficence”; Snyder, “Needs Exploitation”; Zwolinski, “Sweatshops, Choice, and Exploitation”; Hidalgo, “Do Employers Have Obligations to Pay Their Workers a Living Wage?” Contributions to the latter include Boatright, “Executive Compensation: Unjust or Just Right?”; Moriarty, “Justice in Compensation”; Moriarty, “How Much Compensation Can CEOs Permissibly Accept?” 4. In that respect, Jordan and Woods resemble Wilt Chamberlain, who in Nozick’s famous example acts like a monopolist. See Heath, “On the Very Idea of a Just Wage,” 18. Depending on one’s preferred perspective for thinking about justice and ­exploitation in the context of wages, Jordan’s and Wood’s wages may not only turn out to be excessive but it may make sense to say they exploit Nike. The cost-of-production approach discussed below supports such a verdict. 5. For the link between relative scarcity and talent, see Heath, 19. As argued by Heath, considerations of relative scarcity or abundance also underpin ideas about the relevance of talent in the context of wages. 6. Features of individuals not due in any way to their choices or actions are morally arbitrary in the sense of being undeserved. That they are undeserved constitutes a prima facie case for why these features should not matter morally—which can only be defeated by considerations that show them to be morally relevant after all (as is for instance the membership in states, see Risse, On Global Justice, chapters 1–2). In the context of a highly interconnected economy, such defeating considerations are ­unavailable for morally arbitrary features like the possession of inherited talents or whether the number of laborers is comparatively abundant or not. 7. The contribution view, on which this argument builds, is one of the most prominent theories of wage justice. It is discussed (and partly embraced) in, among others, Friedman, Capitalism and Freedom, 162; Nozick, Anarchy, State, and Utopia, 187ff; Boatright, “Executive Compensation: Unjust or Just Right?” 172. Moriarty distinguishes between an absolute version, according to which wages should reflect contribution in absolute terms, and a comparative version, according to which those contributing the same should earn the same, see Moriarty, “Is ‘Equal Pay for Equal Work’ Merely a Principle of Nondiscrimination?” 443. 8. For discussion, see Heath, “On the Very Idea of a Just Wage,” 12. Moriarty raises the same objection we raise, see Moriarty, “Compensation Ethics and Organizational Commitment.” For a comprehensive discussion of the contribution view, see Freeman, “Capitalism in the Classical and High Liberal Traditions,” 37 ff. 9. For these numbers, see International Labour Office, Sectoral Activities Dept, and Sectoral Activities Dept, “Wages and Working Hours in the Textiles, Clothing, Leather and Footwear Industries.” Heath discusses similar differentials in the automotive industry, where Mexican workers receive $4 per hour and Canadian workers receive $40; see Heath, “On the Very Idea of a Just Wage,” 15. What is striking about that case is that the workers in Mexico and Canada use rather similar equipment. So while ­productivity considerations restricted to what happens in those factories cannot explain the phenomenon, the productivity of the respective economy does. 10. One concern could be that we now face the dual challenge of (a) determining the extension of an “economy” and (b) showing that membership in a particular economy is not in the relevant sense morally arbitrary, that is, that wage differentials as a

Dealing with Workers: The Question of Wages  217 function of which economy one is born into do not generate wage injustices. Regarding (a): There are two natural extensions, the objector may say, the world economy and the individual (one-person) economy; for any level in between, there needs to be an argument why this is the appropriate level. We address the question of how to ­delineate the relevant economic context in section 12.6. A full-fledged argument must be developed parallel to the argument for why membership in the state is a ground of justice. That is, the response to this worry depends on the characterization of the state, or in the present case the economy, as an especially intensive cooperative system; see Risse, On Global Justice, chapters 2–3. Regarding (b): The notion of moral arbitrariness should be seen in the context of how we propose to think of wage justice. Wages are a way of satisfying claims on what has been produced jointly. Within schemes of cooperation or joined production, morally arbitrary factors should not matter. Whether somebody can contribute using a good tool or a bad tool is morally arbitrary and should not matter for claims on the joined product. Yet whether somebody is part of a cooperative scheme or productive enterprise, even if due to morally arbitrary factors, does matter for whether she has claims on the joint product. Here issues of wage justice do not extend to non-cooperators. Since somebody who is not a ­co-producer does not have claims on the joint product, she cannot complain about wage differentials arguing that such claims must not depend on morally arbitrary factors. That is so even though the fact that she is not a co-producer is morally arbitrary. 11. Reiff, Exploitation and Economic Justice, chapter 4. In medieval debates about the just price both human need and costs of production feature prominently, especially in the Commentaries of Albert the Great and Thomas Aquinas. According to them, economic goods should be exchanged in proportion to an equality of value determined by those standards. See Baldwin, “The Medieval Theories of the Just Price,” section IV. See also again our brief discussion in Chapter 1. 12. Relying on a different conception of exploitation, Snyder arrives at a similar conclusion, with the list of relevant goods comprising those “necessary to live a distinctly human life,” Snyder, “Needs Exploitation,” 395. 13. Critics may object that under severe scarcity, there could be cooperation that leaves cooperators (who each provide equal inputs) below cost of reproduction but better off than they would be absent cooperation. Would it make sense to speak of exploitation in such cases? If cooperation arises without one of the cooperators exercising power over others, one should not speak of exploitation. If one party exercises power, it would be appropriate to do so. Since those who exercise power are better off as a consequence of getting others to cooperate, they are taking unfair advantage of those cooperators. 14. In some respects, the account defended by Chris Meyers is similar to ours. He argues exploiters “benefit disproportionately to their contribution,” Meyers, “Wrongful Beneficence,” 324. Snyder worries that for such an account to be convincing “more would need to be said about the standard of proportionality for measuring fairness,” see Snyder, “Needs Exploitation,” 391. This section does so. 15. One may see our view as a contemporary version of ideas prominent in mutualism and the anarcho-syndicalist movements of the nineteenth century. See “The Bases of Exchange” in Guerin, Anarchism, chapter 2. For an original discussion, see Proudhon, What Is Property?

218  On Trade Justice 16. For discussion of similar questions in a defense of an “Equal Surplus Principle,” see Dietsch, “Distributive Lessons from Division of Labour.” 17. Chapter 14 addresses the complications that arise in cases of outsourcing (where producers of different parts of the final product belong to different firms or legal entities). 18. Discussing the marginal-value version of the contribution principle, Freeman arrives at a similar verdict on the contribution of owners, see Freeman, “Capitalism in the Classical and High Liberal Traditions,” 40. 19. Discussing trade-offs between efficiency and fairness, Heath argues that insisting on the fair price would be “myopic,” Heath, “On the Very Idea of a Just Wage,” 25. Under the heading of “Exploitation in a Messy World”, Snyder discusses cases where due to “practical limitations”, employers may employ workers and “offering a living wage is not required,” Snyder, “Needs Exploitation,” 400. 20. For the argument that unsafe conditions amount to a violation of dignity, see Arnold and Bowie, “Sweatshops and Respect for Persons,” 231.

13

Dealing with Communities The Relocation of Jobs

13.1  Offshoring and Relocation Multinationals confront choices about where to locate facilities. This involves uprooting production at one location to move elsewhere. There is surprisingly little normative work on issues arising in such a context. This chapter accounts for moral concerns raised by relocation, offshoring, and outsourcing as problems of trade justice.1 We spell out when relocation is morally innocent and when it is not. Section 13.2 introduces empirics and public discourse, and explains the connection between our subject matter and trade justice. Section  13.3 dismisses some unconvincing ways of faulting relocation decisions. Section 13.4 explains how complaints about relocation are plausibly understood as complaints about ­exploitation. Section 13.5 discusses factors that may render relocation all-thingsconsidered permissible. Section  13.6 discusses complicating factors that arise when, after the initial offshoring decision, companies move production facilities between developing countries. It is harder to justify relocation from one developing country to another than relocation from a developed to a developing country. Section 13.7 draws some political implications of our argument.

13.2  Empirics and Connection to Trade Justice Impact on employment is one key controversy about trade in developed c­ ountries. In the US, for instance, competition through importing manufactured goods cost many jobs across industries, including in the steel, auto parts, and furniture industries.2 Economists estimate that between 1999 and 2011, up to 2.4 million jobs disappeared in the US as a consequence of China joining the WTO.3 In some regions, such as the Rust Belt, and among those most adversely affected by globalization, such as low skilled workers, trade-related unemployment is chiefly responsible for a backlash against free trade. That backlash is often taken to account for the political success of economic nationalism, which helped bring Trump into the White House in 2016. It also is manifest in the fact that nonfiction books about declining industrial regions and working-class families losing livelihoods became bestsellers.4 On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

220  On Trade Justice Several normative questions arise. Are gains from trade big enough to offset the economic and social costs, including adjustments and growing inequality, associated with it? What is the right policy response to trade-induced unemployment? We are interested in a related set of questions arising from the standpoint of the constrained agency of firms. What moral responsibilities do companies have towards workers at home and communities where they operate? What are the bases on which to object to decisions to move production abroad or purchase from foreign firms? For firms, questions of employment and relocation arise as matters of trade justice in ways similar to questions about wages and compensation (Chapter 12). Recall that there are two ways for firms to be linked to trade as a ground of justice. There is a direct link because firms and their actions are constitutive of the ground, and an indirect link because firms and their actions are directed at, and have an impact on, those within the ground’s scope. Employment and relocation decisions under usual conditions of trade matter in both ways. They are constitutive of the practice. Without firms moving production or purchasing abroad, important trade practices would not exist. Employment decisions also bear on, and are directed at, those within the scope of the practice. Through effects on who is employed and where, trade significantly affects individuals. The moral requirements (of non-exploitation) associated with trade thus apply to relocation and employment as one feature of trade as such a ground. Is there a morally relevant difference between offshoring that involves workers being employed abroad by the same company and offshoring that involves outsourcing production to another company abroad? From the standpoint of the firm, there will be circumstances under which the former makes more sense than the latter, and vice versa. It is sometimes more cost-effective to buy a good or service rather than to produce it oneself. Or it may be easier to start producing elsewhere. While Chapter  14 addresses some of the problems about delegating activity to another agent, for present purposes the two kinds of offshoring raise the same problem: Under what circumstances is relocation of productive activity morally permissible? And on what basis could those adversely affected by ­relocation complain about the corporate decision to leave?

13.3  Mistaken Ways to Complain Skeptics may object that decisions about where to produce and whom to employ are discretionary and do not come up for moral evaluation. Chapter 11 addressed these worries. What then speaks against relocation and outsourcing? One argument appeals to the fact that companies are ultimately owned by individuals with prima facie obligations to fellow citizens to help create and preserve standards of living in their community. A second argument appeals to a firm’s obligations of

Dealing with Communities: The Relocation of Jobs  221 social justice. By acting in ways that generate inequality and unemployment, firms violate justice, including Rawls’s Fair Equality of Opportunity and Difference Principles. However, neither argument succeeds. Advocates of the first argument may point out that even large corporations are owned and run by individuals. Those people have obligations towards fellow ­citizens. Just as individuals have special obligations to their family, owners may well have obligations to their political community. Among these obligations, one might count contributions to the community’s well-being by maintaining employment opportunities and refraining from acting in ways that jeopardize anybody’s equal-citizenship status. By uprooting production at home to move production elsewhere or buy from suppliers abroad, owners violate such obligations. However, there are three reasons to doubt that the special-obligation perspective captures the moral problem of relocation. The first is conceptual and applies to firms organized as corporations. As argued in Chapter 11, one ought to question the idea that there are individuals who own a corporation in the sense of enjoying the full set of rights standardly associated with ownership.5 The corporation is a distinct agent and it is the corporation that owns corporate property and assets. There are investors and shareholders with financial interests in the corporation, but it would be a mistake to conceive of them as owners. Individual shareholders do not own the corporation but merely hold some limited control rights. Just as it is conceptually mistaken to argue corporations have to be managed in the best interest of shareholders because those own the firm, it is conceptually mistaken to argue a corporation should not relocate because owners have special obligations to co-citizens. The second reason is empirical. Given the ownership structure of many companies, even if conceptually sound, the argument would fail to imply that owners owe it to their community not to relocate. Ownership of shares of publicly listed companies normally is geographically dispersed. The country of the shareholders’ citizenship often differs from the firm’s country of productive activity. With shareholders being citizens of other countries, a duty towards fellow citizens provides no reason to maintain production at any given location. On the contrary, when shareholders are citizens elsewhere, obligations towards members of the shareholders’ political community deliver competing obligations. Also, shareholders are likely to hold stocks of companies active in various countries. Obligations towards a shareholder’s country of origin thus cannot deliver requirements to maintain productive activity in a certain country. The third reason for skepticism concerns the nature of the obligation. Upon scrutiny, the owner’s alleged special obligations could a) depend on the “value of relationships” and would thus not, as we shall argue, matter in the context of ­relocation to developing countries, b) they may rest on considerations of justice that should instead be captured in a different way, or c) they may depend on claims of reciprocity. In the last case, the objection against relocation or

222  On Trade Justice outsourcing is best captured from the exploitation perspective. So why accept that owners have special obligations towards their community? The “value of relationships” answer to this question draws an analogy to the family, explaining special obligations as partiality that is permissible to maintain valuable relationships. Just as relationships within a family maintain their value through partiality and mutual acceptance of obligations, shared membership in a community maintains its value through special obligations and partiality.6 However, this reasoning faces problems. Partiality is permissible only if certain background conditions are met. Since partiality and special obligations disadvantage outsiders, such obligations hold only if outsiders can enter equally valuable relationships.7 Given the material inequalities between communities where production currently occurs and the communities which firms consider moving to, this condition is unlikely to be met in practice. While special obligations and partiality of owners towards fellow citizens may have force where relocation from one developed country to another is at stake, partiality-based complaints have little pull regarding relocation to developing countries.8 Instead, one may point directly to the significance of equal citizenship and the nature of previous cooperative interactions between firms and citizens. Special obligations are necessary to maintain equal status. Firms ought not to relocate if as a consequence parts of the population would be excluded from social or economic participation. Or one may appeal to previous cooperative interactions between firms and others in a community. Having benefitted from cooperation, a company’s departure from that community violates obligations to those with whom it has collaborated. This latter consideration succeeds, and registers as a complaint about exploitation. Section 13.4 elaborates. However, the former consideration collapses obligations towards citizens into a matter of social justice, which is the argument we discuss next. The social-justice answer to the question of why firms may have special obligations to communities appeals to domestic obligations. Firms are essential participants in schemes of cooperation. As such they are subject to principles governing that scheme. Since, as we submit, Rawls’s principles apply domestically, firms ought to refrain from decisions undermining fair equality of opportunity or creating inequalities that fail to help the worst-off. Decisions to uproot production often violate these principles. Unemployment generates inequalities that do not aid the worst-off, and decline of industries that adversely affects particular segments of the population threatens fair equality of opportunity. So should complaints against relocation register in terms of social justice? The initial appeal notwithstanding, there are two reasons it should not. To begin with, relocations are part of a pattern of behavior that benefits society. Trade makes societies better off on aggregate. Benefits are distributed unevenly, creating winners and losers.9 But losers should be compensated. It is possible to

Dealing with Communities: The Relocation of Jobs  223 ensure trade, including relocation of production, helps the worst-off. Objecting to relocation in the name of social justice would be shortsighted. Trade in conjunction with redistribution is better than protectionism and isolation. The objection should really address the lack of redistribution, not trade itself which has welfareenhancing potential. Trade without redistribution is incomplete. However, the complaint should not be that one part of the picture has been completed (trade occurs), but that the other has not (gains not redistributed). The economist’s appeal to the Kaldor–Hicks criterion is insufficient. It is not enough that, in principle gains are big enough for re-distribution to compensate losers. Redistribution must happen.10 Resisting particular relocation decisions may be politically more feasible than redistribution, but this is no requirement of social justice. Additionally, governments rather than firms are tasked with redistributing gains from trade. Ensuring that trade serves social justice requires welfare provisions, educational opportunities, and forward-looking business policies. The instruments to achieve these ends, including taxation and public spending, rest with governments. Firms should do their share. When increasing profits through relocation, they should accept taxation of those profits. But social-justice complaints against relocation should primarily target governments.

13.4  Relocation as a Problem of Exploitation Having argued that special obligations and social justice are of limited force when it comes to objecting to relocation, let us explain our exploitation-based perspective. Chapter 5 has introduced exploitation as power-induced failure of r­ eciprocity as the trade-specific version of our view of exploitation as unfairness through power. This conception offers the right perspective to scrutinize decisions about where to produce. To see how and why, let us explain how notions of power and reciprocity apply among firms, workers, and communities, elaborate how judgments of exploitation apply in an ex ante, retrospective, and a non-agential sense, and finally address an objection.

13.4.1  Power and Reciprocity between Firms, Workers, and Communities Sometimes firms exercise power through direct application of force, but bargaining differentials are crucial in relocation cases. Firms exercise power by being able to threaten relocation. What generates this advantage is asymmetric mobility. While it is often easy and inexpensive for firms to leave, low-skilled workers and communities in places like the de-industrializing Rust Belt have no alternatives.

224  On Trade Justice To begin with, it is easier to move factories than communities. But public policy, too, confers asymmetrical bargaining positions. Capital mobility and lack of internationally-enforced or coordinated labor standards do so, for example. Use of power is exploitative if it generates failures of reciprocity. How should we understand reciprocity in the context of relocation? Between whom do failures of reciprocity occur? We have two building blocks in place to respond. To begin with, cooperators have claims of reciprocity in virtue both of providing benefits and of incurring costs for doing so. Secondly, we have offered an account of how costs and benefits ought to be understood, incorporating considerations of both well-being and agency. To render these ideas precise, one should examine how failures of reciprocity may occur in the context of relocation. Two levels matter. On an individual level, there may be a failure of reciprocity between workers and firms. Over and above labor time, which Chapter 12 discussed as a relevant factor for non-exploitation in the context of wages and compensation, workers may offer important benefits to a firm, say through specialized skills essential to production. They may also incur significant costs, for example by undergoing specialized training, developing skills in line with company needs, and by foregoing alternative opportunities. In light of costs incurred and benefits provided, reciprocity may require that firms continue to employ workers for certain periods. Uprooting production prematurely would be a failure of reciprocity. While it is hard to determine when exactly a firm is morally free to terminate workers’ contracts, there will be clear cases where they are not and thus where complaints about and resistance to relocation are warranted. On a collective level, there may be a failure of reciprocity between firms and communities. On municipal, regional, or national levels, communities benefit firms, most often through providing public goods such as infrastructure, legal security, or functioning institutions. They might incur significant costs, for ­example by absorbing social or environmental externalities associated with production. In light of costs incurred and benefits provided, reciprocity may require firms to keep operating within that community, at least for a certain period. Firms should reciprocate, for example, by generating tax revenues or employing people. Uprooting production prematurely is a failure of reciprocity.

13.4.2  Exploitation: Retrospective, Ex Ante, and Non-Agential Relocation is objectionable if, in relocating, firms exercise power over workers and communities in violation of the obligations described above. The link between exploitation and relocation may be threefold. In a retrospective or ex  poste sense, to relocate is to exploit, or actually, to have exploited. Firms ­terminating a relationship with workers and communities through uprooting production exploit because only continuation of the relationship would be reciprocal. Meeting requirements of reciprocity vis-à-vis individuals includes

Dealing with Communities: The Relocation of Jobs  225 providing continued employment. Meeting them vis-à-vis the community entails continued provision of benefits associated with productive activity. Termination ex post makes previous interactions exploitative. But there may also be exploitation ex ante. Rather than actual relocation, threats of relocation may lead to failures of reciprocity. In virtue of the power arising from such threats, firms go about their business without reciprocating. To keep their jobs, workers accept low wages, temporary contracts, or adverse conditions.11 Communities may put up with low tax revenues, accept environmental degradation, and refrain from tightly regulating industries to pre-empt departures. Again, we encounter power-induced failures of reciprocity. A comprehensive analysis of moral concerns in the context of relocation must comprise both ex post and ex ante notions of exploitation. To illuminate the link between relocation and power-induced failures of ­reciprocity, one should also incorporate non-agential and structural versions of exploitation as discussed in Chapter 5. Begin with non-agential exploitation, and recall how as part of our account of actor–pluralist exploitation we discussed cases of exploitation under conditions of a division of labor. For instance, A exercises power over C, as a consequence of which B gets away without reciprocating vis-à-vis C, without A and B forming a unified agent. Consider two versions of a simple example. Community C benefits from ­hosting companies A and B. Unlike B, A has power to relocate and threatens to leave. With A threating to leave, C increasingly depends on B. Now A’s threat to ­relocate, and C’s diminished bargaining position vis-à-vis B, might enable a failure of ­reciprocity between B and C.  Imagine A’s threat has the additional effect of lowering the wages paid by A. As a consequence, the value of outside options of B’s workers diminishes, such that the lower wages B is likely to pay in response constitute a failure of reciprocity. This case is best captured in terms of “division-of-labor exploitation”. In the first version, A’s power over C triggers a failure of reciprocity between C and company B. In the second version, A’s power over its workers generates a failure of reciprocity between B and its workers. There are power-induced failures of reciprocity without any one agent’s both using power and failing to reciprocate. These scenarios may even be indicative of structural exploitation. Insofar as structures enable and make it rational for those interacting within them to exploit, they count as exploitative. Particular rules of the trade regime, especially those conferring greater power to capital over labor, are exploitative in this sense. Rules and aspects of the trade regime that enable relocation and make it rational to relocate, including restrictions on workforce mobility in combination with capital mobility, can thus be exploitative. While firms may be partly responsible for these rules through lobbying and other initiatives, the question of “What would have to change for exploitation through relocation to end?” receives the most plausible answer not just in “Corporate behavior!” but also in “Features of the trade regime, including capital mobility and lack of unified wage and labor standards!”

226  On Trade Justice

13.4.3  An Objection Critics may raise an important objection. For the exploitation-based approach to get started, it must be common or at least possible for firms at their current location to interact with workers and communities on non-exploitative terms. If ­reciprocity in these interactions is impossible, there could be no exploitationbased complaint against relocation because to relocate would be to end a relationship of exploitation. To keep interacting with workers and communities would, on the other hand, continue exploitation. If reciprocity in interactions between firms, workers, and communities were uncommon in rich and developed countries, there would hardly be cases where one could mount exploitation charges against relocation to other countries. How could termination of exploitation be ­exploitation? Our account of non-exploitative wages as reflecting time spent working makes these problems vexing. When exactly (if ever) does it make sense to conceive of cooperation between firms, workers, and communities as nonexploitative? And given the dim prospects of non-exploitative cooperation, when (if ever) could ending cooperation through relocation be criticized as exploitative? The worry that, in virtue of our demanding account of non-exploitative wages, it is hard if not impossible for firms to interact on non-exploitative terms, and that hence exploitation-based complaints against relocation can never be mounted, should not be overblown. Our exploitation-based perspective on ­relocation is not primarily about wages. With regards to communities, it is about public goods, acceptance of risks, etc. Even in the case of workers, it is about r­ eciprocity owed in virtue of forgone opportunities, occupational choices made, etc. We suggest viewing the question of wages as a separate and distinct phenomenon. Wage exploitation is remedied through non-exploitative wages, or something close enough, which is possible in principle. We are here concerned with exploitation independently of wages. One may receive a non-exploitative wage and there may still be exploitation through relocation. For example, through its departure a firm might fail to reciprocate for years of training and forgone alternatives. And where workers receive an exploitatively low wage, premature departure adds a layer of exploitation. There is now exploitation through relocation in addition to previous exploitation through low wages.

13.5  Necessity, Permissibility, and All-Things-Considered Mitigating Factors Sometimes relocation is wrong for being exploitative. But may relocation be allthings-considered permissible or even required? Chapter 6 discussed cases where exploitation would be acceptable as a stepping stone or price worth paying. Such reasoning applies here too. Exploitative relocation may be all-things-considered

Dealing with Communities: The Relocation of Jobs  227 permissible or required if it meets permissibility and necessity. We explain first in what sense relocation may provide important benefits or could be a stepping stone towards a more just world. Then we discuss one aspect of permissibility that is of particular relevance here. For exploitation to be permissible, the separateness-of-persons requirement must be satisfied. There must be a justification for why it is permissible to exploit some to benefit others. Where relocation is at stake, the beneficiaries differ from those suffering from exploitative relocation, leading to a separateness-of-persons worry. But various factors may assuage this concern. Firms may say uprooting production helps poor countries. Arguments appealing to firms being engines of progress for poor countries could take two forms. As entities in the world society companies have duties to do their share to realize human rights. Relocation could help. But firms also have responsibilities vis-à-vis trade justice, including responsibilities to see to it that no exploitation occurs. Serving as agents of change through relocating to poor countries is one way of satisfying that obligation. For either argument to succeed, permissibility and necessity must be met. For example, anticipated benefits must materialize with sufficiently high probability within a sufficiently short period, and there must be no better alternative that would achieve similar effects. Importantly, these issues must be addressed from the standpoint of constrained agency of each firm contemplating relocation. Given the specifics of the ­relocation case, the separateness-of-persons condition imposes a tall order. In many cases of exploitation, victims also stand to benefit. Workers benefit from exploitative employment if otherwise they would be unemployed. But at least in its retrospective version, relocation is different. Workers and communities suffer from ­exploitation because companies prematurely terminate relationships and withhold future benefits owed as a matter of reciprocity. The benefits accrue to different individuals, for example workers in countries to which firms relocate. Since benefits to some do not straightforwardly offset wrongs to others, the question of how to meet the separateness-of-persons requirement arises. There are three candidates for answering this question: (a) compensation, (b) consent and (c) insignificant moral costs. Uprooting production adversely affects workers who lose jobs. Such effects are assuaged if workers are compensated. To begin with, firms themselves may offer compensation. They may provide alternatives to workers, or offset harm to communities by investing in new industries or taking other measures which ease the transition. Secondly, communities could compensate individuals. Sensible social policy should limit economic inequality (inspired by ideals of equal citizenship) without undermining the economy’s effectiveness. Relocation assistance, ­additional training, generous unemployment, or social-security payments let individuals adjust without excessive hardship. The separatenessof-persons requirement would thereby be satisfied.

228  On Trade Justice One may also argue that setbacks from relocation are acceptable because those suffering them have at least implicitly consented to such treatment. Suppose a social system is committed to a creative-destruction understanding of capitalism: it lies in the nature of capitalist production that businesses that have become unviable, or better pursued elsewhere, cease operations, and people move on. If it is plausible to say the country as a whole endorses such a view (e.g., in terms of how labor markets are organized), citizens can be taken to accept that setbacks are real possibilities. References to consent and acceptance of a creative-destruction view of capitalism can join forces with the compensation argument. The claim that a departure is acceptable to a community with such a view of c­ apitalism (as sketched) is strengthened if there are mechanisms to ease the transition for those whose interests suffer. A third way for setbacks to be acceptable and satisfy the separateness-ofpersons requirement is if the exploitation complaint against relocation is weak and consequently the moral wrong committed is not particularly serious. The wrong may be minor because neither individuals nor communities incurred significant costs or provided important benefit. Complaints that relocation violates ­reciprocity will be minor, for example, where the presence of a business has been a windfall. Economic activities may have sprung from ingenious creativity of a few and benefitted the community without imposing noticeable opportunity costs. Nothing else would have afforded them opportunities beyond the status quo ante. The setback of the business leaving would merely erase temporary improvements which they could not expect and which did not incentivize them to invest in certain lines of work. The wrong of relocation is also minor where costs are small because alternatives are readily available. If workers have easy access to employment and communities have alternative funding sources, ­relocation is morally unproblematic. We set aside how common real-world e­ xamples of this sort are. Our discussion so far has three upshots. First of all, as a rule, companies should not relocate if the gap left at home is disproportionately high compared to the good done abroad. Relevant comparisons are hard to make. But in relocating to developing countries companies would often shoulder their share of human-rights obligations or the responsibility to see to it that no exploitation occurs. Relocation may be morally desirable if it improves lives in poor countries. Secondly, there are multiple ways for communities to absorb setbacks in such a way that they become acceptable. Finally, where setbacks are not absorbed, those exploited should direct outrage not primarily at companies for relocating to a developing country, or to the country that made relocation economically sensible. Outrage should target their government or fellow citizens for refusing to support them through adequate social policy. Our line of reasoning is starkly at odds with national policies. Keeping jobs at home is a major priority even for governments that accept obligations to

Dealing with Communities: The Relocation of Jobs  229 developing countries. Consider an excerpt from an Economist article concerned with personnel changes at the helm of Volkswagen: But shifting work from VW’s German factories to foreign ones [ . . . . ] would be almost impossible for Mr. Winterkorn, and whoever succeeds him as CEO, to push through. The state of Lower Saxony has a 20% share of the votes on the supervisory board, and thus a veto on strategic decisions under a law passed when the firm was privatized in 1960. Unions also have representation on the board [. . .]. Both are likely to resist any big job cuts in Germany.12

What is reported here is a typical attitude towards relocation among union leaders and representatives. Relocations away from Germany would be especially hard on communities after the social policy reforms known as Agenda 2010. Widely credited with making Germany more competitive, Agenda 2010 withdrew much support from the unemployed, diminishing options we argued should be there. The challenge is to design social policy to provide assistance while keeping the economy competitive. But developed economies should not be competitive at the expense of developing countries.

13.6  Moving On: Second and Third Waves of Relocation In many cases our reasoning renders relocation from rich to poor countries unproblematic. But many relocations are from one developing country to another. Nike’s original decision, for example, was to produce in Asia instead of the US. This decision, by itself, seems unobjectionable. But subsequently, the company moved operations or changed suppliers within Asia. Relocation from one developing country to another is harder to justify. To begin with, firms cannot invoke the idea that by moving production they assume human rights obligations or help see to it that no exploitation occurs, if this is what they already do at their current location. Secondly, conditions that render relocation all-things-considered permissible by absorbing setbacks to workers and communities are less likely to hold. Many developing countries lack welfare-state institutions robust enough to redistribute gains from trade, offer training opportunities, and tackle unemployment. Policy space is more limited than in developed countries. It is also doubtful that relocation could be justified by appeal to a creative-destruction understanding of capitalism. Given that ­capitalism is a recent phenomenon in developing countries and one that often appears in malign variants, one cannot assume large parts of the population genuinely consent to risks associated with unrestrained competition. Finally, there is reason to believe developing countries made sacrifices to attract transnational companies. Prospects of attracting investment often lead governments to take policy measures that become pointless and individuals to

230  On Trade Justice acquire skills they can no longer use upon a company’s departure. In addition, these people have missed other opportunities for betterment. The argument that a firm’s presence is a windfall does not apply then. It is difficult to justify uprooting production in developing countries.

13.7  Political Upshots Relocation raises thorny questions. The theoretical issues lie at the intersection of social and global justice. The practical ones concern both states and corporations as relevant actors. Politically, relocation is at the heart of the backlash against free trade fueling economic nationalism and populism in the US and Europe. Three brief and related remarks conclude our discussion, criticizing policy agendas that prioritize domestic concerns, recommending policy strategies for state actors and identifying corresponding responsibilities of firms. To begin with, some policy agendas are normatively misguided despite ­electoral support in developed countries. Trade policies emphasizing job creation at home without giving sufficient consideration to what happens abroad are ­indefensible, as is insistence that domestic corporations ought to prioritize domestic concerns. Often relocation is, as a matter of global justice, the right course, while domestic policy has to redistribute gains from trade to compensate losers. This reasoning is in line with priorities identified by advocates of the New International Economic Order discussed in Chapter  2, who emphasized the importance of moving industries to developing countries. Furthermore, the need for reconciling global and social justice imposes demands on both trade and social policy. Non-exploitative relocation ought to be facilitated. In terms of trade policy, non-exploitative relocation requires working towards rules, preferably formulated within multilateral settings that lead to greater symmetry between labor and capital, and avoid adverse (e.g., race to the bottom) competition among developing countries. In terms of social policy, nonexploitative relocation requires institutions capable of redistribution, through effective welfare-state provisions or educational opportunities. States rather than firms are plausibly tasked with ensuring relocation occurs in ways that are morally unproblematic. Importantly, and to further illustrate the link between trade and social policy, the trade regime ought to be reformed such that it at least does not undermine the state’s ability to pursue policies that renders relocations non-exploitative. But firms are not off the moral hook. They ought to refrain from ex ante ­exploitation and from using threats of relocation to violate reciprocity. Firms generally ought to refrain from relocating between developing countries in pursuit of lower regulatory standards or higher margins. They should not undermine institutions that could effectively pursue policies to remedy moral defects of r­ elocation, and they should not lobby for lower taxation and less stringent regulation. Where

Dealing with Communities: The Relocation of Jobs  231 relocation is all-things-considered permissible, firms should shoulder some of the costs of making it morally acceptable, for example through accepting taxation of profits or compensating employees or communities. Firms have moral obligations to support and to refrain from acting against governmental measures aimed at making relocation non-exploitative.

13.8 Conclusion Decisions about where to produce raise questions of trade justice. Complaints against relocation are best captured as complaints about exploitation. Firms that relocate or threaten to relocate might exploit communities and workers by using power to induce failures of reciprocity. Often complaints should target state institutions. There are conditions under which exploitation is all-things-considered morally justified, most often when relocation is from developed welfare states to developing countries. It is harder to justify relocation from one developing country to another.

Notes 1. As explained in Chapter 11, we speak of “offshoring” when production that formerly took place in A’s country is now performed abroad, either by A itself, or an affiliated or an unaffiliated party. If the party is unaffiliated, “offshoring” is also “outsourcing,” and we refer to the phenomenon as “vertical specialization.” 2. Goodman, “More Wealth, More Jobs, but Not for Everyone.” 3. Autor, Dorn, and Hanson, “The China Shock.” Acemoglu et al., “Import Competition and the Great US Employment Sag of the 2000s.” 4. For instance Packer, The Unwinding; Vance, Hillbilly Elegy; Isenberg, “Left Behind.” 5. See Landemore and Ferreras, “In Defense of Workplace Democracy: Towards a Justification of the Firm-State Analogy”, 61 ff. 6. See Kolodny, “Which Relationships Justify Partiality?” 7. See e.g., the discussion of what Scheffler calls the “distributive objection” against the idea of special responsibilities; Scheffler, Boundaries and Allegiances, 82 ff. 8. This line of reasoning should be seen in conjunction with the limits-of-utopian-reasoning standpoint that the perspective of constrained agency generates. We do not argue that states have to be abolished or must open borders to provide opportunities for valuable relationships of citizenship to everyone. We merely argue that a complaint against relocation cannot be launched by invoking the family analogy and appealing to special obligations between owners and co-nationals. 9. Driskill, “Deconstructing the Argument for Free Trade,” 8 ff., 13 ff. 10. See also the discussion of the collective due-care principle in James, Fairness in Practice, chapter 7. 11. See again Chapter 12. 12. Economist, May 2, 2015, article on “Volkswagen: Driven Out,” 58.

14

Dispersed Responsibility Cooperating with Other Firms and Authoritarian States

14.1  Exploitation and Other Actors Trade generates a twofold dispersion of responsibility. First, companies hire other companies or individuals not directly under their control to perform tasks. Secondly, there is dispersion of responsibility when companies operate under authoritarian regimes and thus risk becoming implicated in injustices. Under what conditions can companies deny responsibility for wrongdoings of suppliers or sub-contractors? When should companies (not) cooperate with authoritarian regimes? These are the questions this final chapter explores. We illustrate how a theory of trade justice as non-exploitation applies to complex settings involving actors of various kinds. More specifically, we formulate normative yardsticks for corporate behavior under conditions of dispersed responsibility. Along the way we offer perspectives on phenomena like outsourcing that are vital aspects of international trade, and render more precise firms’ threefold obligations not to violate, to respect, and to support the principle of trade justice. To capitalize on reduced cross-border transaction costs, firms may delegate parts of the production process to firms abroad. Consider the following example: Firm A used to perform productive activity XA, say, assembling engines. After engaging in trade, firm B performs XB and A buys engines from B. As discussed in Chapter  11, the link between trade and outsourcing is twofold. Outsourcing increases trade volumes in case goods or services are traded across borders. The trade regime facilitates outsourcing because it makes transactions easier and less costly. Typically, outsourcing is mutually beneficial: A benefits from delegating production because costs of XB are lower than costs of XA. B may be more efficient, pay lower wages, or be subject to less stringent regulation. B benefits because XB is better than B’s next best alternative, for instance because B otherwise has no productive activity to engage in at all. Now suppose in performing XB, B pays exploitative wages or violates health standards. This is where questions of dispersed responsibility enter: having delegated X to B, to what extent is A morally responsible for violations committed by B? According to the obligation to respect the principle of trade justice, A commits the wrong of supporting B in its violation of the requirement not to On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Dispersed Responsibility  233 exploit. But A could question the plausibility of our second principle by denying moral responsibility for wrongs committed by others. We argue, however, that the most promising attempts to deny responsibility on A’s behalf fail (section 14.2), leaving A with at least secondary or accomplice responsibility. Moreover, we ought to conceive of cooperation between A and B as joint action generating shared responsibility (section  14.3). And even where B does not exploit, outsourcing may be morally problematic (section 14.4). Trade creates opportunities and incentives to do business in jurisdictions with authoritarian regimes. There are many ways in which repression can give rise to an attractive business environment and provide incentives to relocate, ranging from suppression of unions to lacking enforcement of workplace protection. Against this background questions of dispersed responsibility and about the link between firms’ three trade-related obligations (not to violate, to respect, and to support trade justice) arise. Do firms operating under oppressive regimes violate or fail to respect the requirement not to exploit? May it ever be permissible to violate trade justice to support trade justice in other ways? For example, is c­ ooperation with authoritarian regimes permissible so companies can be agents of change? The division-of-labor version of our actor-pluralist account of ­ exploitation from Chapter 5 supports the claim that firms may be guilty of ­exploitation even if the failure of reciprocity is not induced by their power but by an authoritarian regime (section 14.5). We apply moral-force-of-exploitation reasoning from Chapter 6 to shed light on the dirty-hands problem firms face (section 14.6), and discuss a case in which a firm clearly acts impermissibly (section 14.7).

14.2  Exploitation and Individual Responsibility Having delegated X, firm A could deny responsibility for B’s performance of X.  After all, an independent agent commits that wrong.1 Multinationals often pursue such strategies (as Nike once did), denying responsibility for wrongdoings of sub-contractors or misconduct at factories they do not own.2 It is worth identifying the most sophisticated version of this strategy. Suppose action X directly violates the requirement not to exploit. There are four ways of substantiating the claim that the presence of another agent makes a moral difference, absolving A of responsibility for the wrong of XB and casting doubt on our claim that firms ought not to support those violating trade justice. Invoking B’s role in XB, A could deny responsibility first of all by arguing that intervening agency of other agents reduces or negates responsibility; secondly, by pointing to its lack of control over B’s action; thirdly, by arguing A makes no difference to outcomes generated by B’s action; and finally by claiming to be ­unaware of the nature of B’s action and its consequences.3 However, none of these arguments absolves firms involved with suppliers abroad from responsibility

234  On Trade Justice for wrongs committed in performing XB. Depending on details, outsourcing ­companies have secondary, indirect or accomplice responsibility.4

14.2.1  First Argument: Intervening Agency Does intervening agency reduce or even negate responsibility? It seems one cannot be responsible for outcomes that arise only because another agent freely and voluntarily intervenes. If a wrong is committed or a harm occurs as a consequence of A’s action, but only because B intervenes in some way, then A’s responsibility is at least reduced if not negated.5 If intervening agency did not suspend responsibility, A would not only end up with responsibility for outcomes properly attributed to others, but B could not see herself as responsible for the outcomes of her actions.6 Consider an example.7 Suppose the UN imposes an embargo on oil from Iraq with the aim of lowering government revenues and thus making it more difficult for Iraq to purchase military equipment. Faced with lower revenues, however, the Iraqi government reduces medical expenses, which increases child mortality. Even though UN sanctions led to increased child mortality, not the UN but the Iraqi government should plausibly be held responsible, in virtue of its intervening agency. Drawing on such reasoning, outsourcing firms may seek to deny responsibility for wrongs committed by suppliers. If outsourcing by firm A generates a situation where workers are harmed or exploited, but only because B intervenes or responds, say, by securing high returns for investors at the expense of safety conditions, A might seem to no longer be responsible. Imagine A is auctioning off opportunities to perform tasks on its behalf, looking for bidders charging the lowest price. B secures the offer, relying on low wages and poor health standards to offer a good price. Invoking intervening agency, A may deny responsibility for outcomes arising from B’s actions. This reasoning possesses intuitive pull: that some harms or wrongs occur only because suppliers act in particular ways matters for Nike’s moral responsibility. But one should resist the idea that intervening agency serves as a full excuse. To begin with, consider cases where intervening agency does not negate responsibility. Think of a suicidal person who cannot bring herself to inflict harm upon herself. Imagine further that she attacks the police, anticipating that she will be shot. Despite the police’s intervening agency, she will share responsibility for her death.8 More generally, cases where intervening agency does not negate responsibility seem to exhibit one of two features. There is either a moral defect in the option set from which the intervening agent must choose, or the intervening agent’s choice is not relevantly free and voluntary. Considering the first feature, there is the question of whether A’s creation of the option set from which B must choose involves a wrong. Was the UN allowed

Dispersed Responsibility  235 to present Iraq with a choice between low child mortality and military spending? That the answer presumably is affirmative may explain why Iraq’s intervening agency reduces the UN’s responsibility for the outcome of higher child mortality. Do suicidal people have the right to make police choose between their own safety and somebody else’s life? That the answer is negative may explain why intervening agency does not entirely negate responsibility. Returning to outsourcing firms and suppliers, the question is this: is A allowed to present supplier B with a choice between a particular return for investors, and health and safety standards? To be sure, there is a difference between the sanction case and the outsourcing case. In the latter, A does create options the other party otherwise would not have, that suppliers sell the product from XB to A. But it might still be that A should not present B with the choice of either earning a profit or securing adequate safety conditions. A might well be obligated to provide B with another option, for example to transact at higher prices, enabling B to ­produce in morally innocent ways. Or it might be wrong for A to give B an option she could realize only through committing a wrong. Since intervening agency does not effectively mitigate responsibility if the original agent wrongs the intervening agent, and given that it might be wrong for A to provide B with a severely limited option set, B’s intervening agency does not generally negate A’s responsibility. Considering the second feature, the notions of exploitation and asymmetric power as threatening free choice become relevant: generally exploiters commit a wrong if they exercise power to gain unfair advantages. This exercise of power may render the supplier’s action unfree. But intervening agency reduces or negates responsibility only if that agency is free. Where firms like Nike exercise power when offering sub-contractors to interact on particular terms, and thus render the supplier’s action less than fully free, a sub-contractor’s wrongful agency does not absolve the firm of responsibility for an ensuing harm or wrong. Where interaction is exploitative, A inherits responsibility for those wrongs committed by B, at least for those B commits because of B’s relation to A. This first strategy of denying responsibility thus fails. Intervening agency leaves at least secondary or indirect responsibility. While it may diminish responsibility, it falls short of delivering moral absolution. In deciding what to do, one must consider how others will likely react. Pondering whether to sell you a gun, I must consider what you are likely to do. Knowingly selling guns to psychopaths with criminal records, I cannot invoke intervening agency to deny responsibility for an ensuing murder.9 Companies that outsource must anticipate how sub-contractors or suppliers will act. In particular, intervening agency does not deliver absolution where the relationship between agents is one of asymmetric power. Powerful companies bear at least some responsibility for actions of their sub-contractors and suppliers.

236  On Trade Justice

14.2.2  Second Argument: Lack of Control Appealing to another dimension of how B’s presence makes a difference, A could seek absolution by invoking lack of control over B’s action. This second argument asserts it would be a mistake to hold A responsible for actions or consequences beyond her control. Just as individuals cannot be responsible for the weather, companies cannot be responsible for wrongs committed by suppliers or subcontractors. Can outsourcing firms get off the hook by invoking lack of control? There are two sets of considerations in support of the view that they cannot, the first conceptual and the second empirical. The first set of considerations comes in two variants. To begin with, let us take some cues from drunk-driving cases. A drunk driver lacking control over her actions should nonetheless be held responsible for accidents she causes. One may first point out that even where agents lack control over their action when a wrong or harm occurs, moral responsibility can be traced to some earlier time when control was exercised.10 Intoxicated drivers are morally responsible because they decided to drink before driving. Similarly, one may insist that even though outsourcing firm A lacks control over sub-contractor B’s action once production has been handed over, moral responsibility for the wrongs committed by B can be traced to A’s control over its outsourcing decision. The second variant of the conceptual argument points out that there can be moral responsibility without control. One may, for example, think that responsibility depends on some other attitude or action. Instead of holding drunk drivers responsible because of earlier exercises of control, drivers may be responsible because of recklessness or negligence.11 Similarly, in handing over production to suppliers whose actions are beyond their control, outsourcing firms might be reckless or negligent. One may also point to special relationships, such as principalagent relationships, where responsibility without control is appropriate. Officers are held accountable for actions of soldiers even if they have no direct control over them. Heads of agencies are responsible for what happens in their agency even where they lack immediate control. There are reasons to believe the features generating responsibility without control are present in the relationship between firms like Nike and sub-contractors or suppliers. Even though c­ orporations might not enjoy formal authority, sub-contractors or suppliers execute actions or deliver goods they ask for. Invoking empirical considerations, one may wonder if large firms engaged in outsourcing in fact lack control over suppliers. Given asymmetries in size and power between outsourcing companies and suppliers, the former presumably not only have control over outsourcing decisions but also have at least indirect control over which labor conditions suppliers enforce. Even if they currently lack control, they may be obligated to gain it to avoid negligence or recklessness.12 In

Dispersed Responsibility  237 sum, there are weighty conceptual and empirical reasons to be skeptical about this second strategy of denial.

14.2.3  Third Argument: Making No Difference Outsourcing company A could argue, thirdly, that partly because of supplier B’s presence, A did not make a difference to the occurrence of the wrong or the harm. If the wrong or harm would have occurred without A’s action, A did not cause it and hence cannot be responsible. Suppose the same workers would be employed under the same adverse conditions regardless of whether A outsourced ­productive activity, because some other company would just have taken its place. Then A, so it may claim, cannot be responsible for wrongs or harms suffered by these workers. Resisting this claim, one should point out that making a difference is not n ­ ecessary for causation and thus responsibility.13 Consider cases of over-determination where a firing squad shoots a victim and having a sniper more or less would not change whether the victim dies.14 Those who shoot should not be absolved simply because the harm would occur anyway. They are causally connected to the death even without making a difference. Thus responsibility cannot be denied on grounds of not making a difference or lack of causal connection. Similarly, if company A forces supplier B to employ children, A is (at least partly) responsible for child labor, even if company C was ready to take A’s place, cooperate with B, and force it to employ children. Even if a wrong or harm would occur without A’s outsourcing, A is still responsible for what it did. Leaving aside the issue of whether making a difference is necessary for ­causation and responsibility, one should also point out that often the harm would not occur without a corporation’s outsourcing activity. Given their market power and role in offering opportunities, companies like Nike may very well make a difference. They make a difference to whether B engages in productive activities at all. There are supplier-run factories that, without big players like Nike, would not exist. Such players also make a difference to how production occurs. Nike can demand that suppliers meet certain standards, say of non-exploitation or health and safety. Finally, note how an alternative way of dealing with difference-making and responsibility would render the second argument all the more convincing. Responding to cases of over-determination and trying to maintain a link between difference-making and causation (and thus also responsibility), one could accommodate the firing squad case by weakening what it means to make a difference. Even if no individual sniper made a difference, each was part of a group that did.15 This response would make it all the more uncontroversial that firms like Nike do in fact make a difference, even in cases where they do not possess market

238  On Trade Justice power. As long as they are part of a group of multinationals that jointly make a difference, firms cannot get off the moral hook individually by claiming not to be making a difference.

14.2.4  Fourth Argument: Epistemic Ignorance Finally, A may seek absolution claiming ignorance: “we did not know B would commit a wrong by doing XB.” Ignorance may help some of the earlier exculpatory arguments to get off the ground. The less a company knows about wrongful actions of suppliers, the more plausibly intervening agency reduces responsibility. But ignorance may also serve as an independent excuse: agents may argue they cannot be responsible for what they did not know. Ignorance frequently serves as an excuse. The hotel guest who presses what looks like a light-switch and sets off the fire alarm should not be held responsible for the ensuing chaos. Similarly, a company may claim it should not be held responsible for the wrongs outsourcing inadvertently triggers.16 But not all ignorance excuses that way. There is culpable ignorance.17 If the guest presses the switch in spite of its unusual location and bright red color, she cannot avoid responsibility by claiming to have been ignorant. To establish that ignorance does not excuse outsourcing firms, one would have to show how ­unawareness of wrongs committed by suppliers is an instance of culpable ignorance.18 The argument builds on the idea that firms should have known about actions of suppliers. By failing to find out they committed a wrong and violated epistemic obligations. Just as medical doctors are obligated to keep up with research about effects of medications, companies are obligated to learn about conditions under which suppliers produce.19 Not to know, or not to make reasonable attempts at finding out, violates ­epistemic norms and thus constitutes a wrong. In cases of culpable ignorance, lack of knowledge about something (say adverse effects of medications or wrongs committed by suppliers), results from some other action (say the failure to read medical journals or engage in supply chain due diligence), of which the agent knew that it might lead to a situation where out of ignorance harm might be done or wrongs committed.20 The doctor’s failure to read journals is culpable if she knows ignorance may lead to inadvertent prescriptions of unsuitable medicine. The outsourcing firm A’s failure to learn about supply chains is culpable if the firm knows it may lead to the purchase of products by B, ignorant of the wrongdoing their production involved. Outsourcing company A has epistemic obligations to inquire about B’s activities to ascertain if those involve wrongdoing. Ignorance implies innocence only if A took reasonable efforts to ascertain whether B was committing a wrong. Unlike hotel guests or doctors, companies often seek excuses for not knowing about wrongs committed by others. Consider the analogy of trade in stolen goods.

Dispersed Responsibility  239 Whether A commits a wrong by buying such goods from B depends on whether A should be aware of the fact that the goods are stolen. Suppose cyclist A buys a second-hand bike at a corner for an unusually low price from seller B, who cannot produce any receipt. Under such circumstances A cannot normally deny responsibility by claiming she did not know the bike’s origins. Her ignorance is culpable and does not excuse. But if A inquired and received a credible ­explanation, A would not be blameworthy. Similarly, firms purchasing at prices only suppliers who exploit workers or violate some other standards of trade justice could offer cannot straightforwardly claim ignorance. It is only through reasonable inquiry into the working conditions of suppliers that they could discharge their epistemic obligations and turn culpable into innocent ignorance.21 What counts as reasonable inquiry depends on the agent’s capacities (expectations are much lower for individuals than for companies or governments), the nature of the transaction (there is more urgency to conduct thorough inquiries in cases of repeated exchanges than one-time interactions), and the nature of the goods (there is more pressure when goods are valuable or likely to have originated under dubious conditions). While determining thresholds of diligence will be difficult, it is often clear enough that even if one did not know, one should have known. So what remains of these four strategies? Suppose A’s suppliers and sub-­ contractors exploit workers or degrade the environment. In what sense, if any, is A responsible? The strongest case for absolution is available if (a) A satisfied its (epistemic) obligations, for instance, by paying suppliers reasonable prices, demanding tight monitoring on health and safety conditions, and doing business in locations with effective regulation; (b) its act of outsourcing made no difference to occurrences of the wrong; (c) it genuinely lacked control, say, due to lack of market power or absence of well-established relationships with suppliers; and (d) suppliers unilaterally made choices to violate standards for which they are responsible. Aside from such “as clean as it gets”—cases, A would not receive absolution. Putting pressure on suppliers to lower prices, ignoring violations, or doing business in an environment lacking effective regulation all render a company like Nike responsible for wrongs committed (at least in a secondary sense).22

14.3  Exploitation, Outsourcing, and Collective Responsibility So far we have focused on whether it would be appropriate to hold firms responsible for wrongs committed by suppliers or sub-contractors. But there is another perspective, emphasizing the significance of cooperation: A might be morally responsible for what B does because cooperation creates joint action, making A and B jointly responsible for consequences. One may resist this move by observing that outsourcing in the context of trade is a strategic interaction that could not count as a joint action due to its large

240  On Trade Justice scale. There is a clear difference between exchanges where B manufactures and sells shoelaces to A for producing sneakers and the joint activity of A and B walking together or having a picnic. On the most influential accounts of joint action, manufacturer A and producer B would not straightforwardly count as acting together, for example because they lack the kind of plural “interlocked,” “meshed,” and (mutually) “responsive” intentions required for shared or joint action.23 Instead of A actually intending that A and B produce together because of their shared intention to produce together, and B actually intending that A and B ­produce together because of their shared intention to produce together, A and B might just care about profits rather than the overall success of their cooperation.24 However, attempts to make sense of joint action at a large scale, where cooperators are too many to develop shared intentions and not everyone is committed to cooperative success, reveal how outsourcing production may give rise to joint action. If it suffices for joint action that cooperators share a plan, are prepared to play their part, and accept mechanisms for coordinating and resolving disagreement, then manufacturer B and producer A might well count as acting together.25 If Nike devises plans for bringing a particular shoe to the market that involves various suppliers manufacturing parts, with coordinating mechanisms like contracts in place, Nike and its suppliers engage in joint action. What is the moral significance of joint action where one party commits a wrong like exploitation? Producer A may be responsible for wrongs committed by supplier B because exculpatory attempts appealing to intervening agency, lack of control, “making no difference”, and ignorance have limited force. Viewing outsourcing to suppliers as joint action introduces another perspective. Instead of being responsible for wrongs committed by B, A is responsible for wrongs committed by A and B together. The joint action of producing Nike sneakers then generates joint responsibility for consequences of doing so. Performing one’s part in joint actions involving a wrong implicates A even if B carries out the wrong. A’s participation in a plan involving performance of XB as part of a joint action links A with the wrong or harm of XB, and leaves A as co-author of a wrongful act.26 When Nike and a supplier act together, both are responsible for wrongs committed in producing sneakers.

14.4  Outsourcing Without Suppliers Committing a Wrong We have assumed that in performing XB, say in producing an intermediate good sold to multinational A, supplier or sub-contractor B commits a wrong. But one may ask whether outsourcing leads to moral questions if XB does not constitute any wrong. Could there be cases where A commits a wrong in performing XA, say producing under particular conditions and paying a certain wage, but it is ­permissible for B to produce under such conditions or pay such wages? Perhaps

Dispersed Responsibility  241 in virtue of size or capacity, Nike owes workers different treatment than small firms elsewhere do. Would there then still be a moral problem of outsourcing? We discuss two ways of answering this question affirmatively. According to the first, a moral code according to which XA is wrong but XB permissible ought to be revised. The possibility of morally innocent outsourcing is indicative of a d ­ efective moral theory. According to the second perspective, the structure of morality might be such that it is impermissible for A to do XA but permissible for B to do XB. Would A commit a wrong in outsourcing X to B? We argue it would. To appreciate the first perspective, suppose owners of an apartment complex contemplate renovations to increase revenue.27 Renovations would mean current tenants must leave, many of whom have lived there for decades and would have difficulties finding alternatives. Suppose the owners commit a wrong by renovating. What if instead they hired lawyers to do so on their behalf? According to Thomas Pogge, a moral code that allows lawyers to perform acts impermissible to owners contains “loopholes” and is defective. Analogously, a code according to which it would be impermissible for A to commit XA but permissible for B to commit XB would be defective. Just as interests of tenants should be protected no matter who is about to act against them, worker protection should not be diminished because another agent does the harm. All cases where A outsources an act it would be wrong for A to perform are cases where it would be wrong for B to perform a relevantly similar act. They would thus fall into the category of cases discussed in sections 14.2 and 14.3. But there is another perspective. One may think that because morality contains agent-relative requirements, it is sometimes impermissible for A to perform XA but permissible for B to perform XB. A’s obligations might be more demanding than B’s because some of them are agent-relative or arise from a specific context. As it would be impermissible for A to perform X in light of her obligations, A delegates X to B, for whom X is permissible. Suppose company A has special responsibilities towards its workers, owing them higher pay than B owes its workers. If A employs its own workers, it must treat them on particular terms. B has no such responsibility. Does A commit a wrong when it delegates production to B? Those who believe the answer is negative will say it would be odd if A committed a wrong in getting another agent to perform a permissible act. No requirements are violated if A fails to perform impermissible XA while B performs permissible XB. But even on this view outsourcing raises questions. A takes strategic advantage of the structure of morality in problematic ways. The relevant principle could be this: at least sometimes one ought not to perform acts intending to avoid (costs of complying with) otherwise applicable moral demands. There are judgments such a principle helps explain. Recall Peter Singer’s pond case, in which a toddler falls into a shallow pond and a person must decide whether to rescue the child and sully her suit.28 Somebody intentionally carrying rare vaccines to avoid having to wade in—by creating a situation where something of larger moral relevance than

242  On Trade Justice her suit or interviews is jeopardized—behaves questionably. Since it is ­permissible not to rescue a child if something of comparable significance (like ruining essential vaccine) is sacrificed, our principle explains where those err who aim to avoid rescue duties. Or suppose a company, growing beyond a certain size, would have to permit unionization. Suppose the company strategically remains just below the threshold. While there generally is no obligation for companies to grow, this seems to be a problem. The principle that one ought not to take strategic advantage of the structure of morality explains why. Outsourcing is of the same kind. Even though it is permissible for B to perform XB, A ought not to outsource to avoid otherwise applicable demands.29 But when and why is taking strategic advantage of the structure of morality problematic? While avoiding rescue duties or preventing unionization are, other cases may not be. Moving to another city where property taxes are lower to lower one’s taxes seems innocuous if lower taxes are offset by fewer public goods. Two factors matter for distinguishing innocent from problematic cases. What is the intention of performing the act? And are those doing so gaining an advantage? Potential rescuers who carry vaccine for independently good reasons and without intention to avoid obligations are morally innocent. And unlike the ­relocating resident, recalcitrant rescuers and union-avoiding firms benefit from avoiding otherwise applicable requirements.30 Relying on these distinctions, at least some cases of outsourcing seem more akin to the morally dubious rescuer than the innocently relocating resident. Firms that outsource to gain advantages from avoiding moral requirements act wrongly because they take strategic advantage of the structure of morality.

14.5  Dispersion of Responsibility and Actor-Pluralist Exploitation Do firms that move production to jurisdictions with authoritarian regimes violate the principle not to exploit? Relying on an argumentative strategy similar to the one pursued in the case of outsourcing, firms might claim they do not by pointing to actions of other actors, in this case authoritarian regimes. We briefly sketch the responsibility-avoiding strategy before explaining how the actor-pluralist dimension of our ecumenical account from Chapter  5 implies that such firms both violate and fail to respect the requirement not to exploit. Firms ought to refrain from exploiting, i.e. from using power to induce a failure of reciprocity in interactions with workers, suppliers, or local communities. But firms might argue that when doing business within oppressive regimes, failures of reciprocity are not induced by their power but that of the regime. Consider wages. As a consequence of suppression of unions or lack of labor regulation, there is

Dispersed Responsibility  243 failure of reciprocity in the interaction between firms and workers, in terms of how cooperative surpluses are divided. Firms might admit such a failure but insist that the fact that workers willingly accept low wages is induced by state power. Similarly, firms might insist they do not fail to respect obligations not to exploit either. They cannot be said to support the regime’s exploitative activity. For strictly speaking, that state does not exploit anyone. State power enables failures of reciprocity between firms and workers. But there is no such failure between the state and either of these parties. In pursuit of this dual exculpatory strategy, firms might enlist our account of exploitation. No agent fits the bill of the exploiter. The state uses power over workers, and there is a failure of reciprocity between workers and firms. But nobody is guilty of joint violations of an interactive and a distributive norm. However, firms and oppressive regimes together exploit even though they do not form a unified agent. Note first that the plausible idea that exploitation must result from agency does not imply there has to be one agent that exploits. It would be mistaken to conclude from “Interaction I counts as exploitative only if p ­ roduced through agency” that “I counts as exploitative only if produced by an agent.” Nonagential groups, including the combination of oppressive regimes and foreign firms, can coordinate activities, anticipate aggregate consequences of their actions, and thereby advance their interests without exhibiting unified agency. Secondly, consider a hypothetical that is relevantly analogous.31 There are cases where division of labour creates a situation where no individual takes unfair advantage but coordinated action of a non-agential group does. Suppose A is a good swimmer, B is drowning, and paraplegic C needs a kidney. Suppose A offers B to rescue her if B donates a kidney to C. A does not exploit B since A does not benefit at B’s expense. The kind of transfer T characteristic of exploitation does not occur. Nor does C exploit B: C has no power over B and hence cannot take advantage. Still, A and C together exploit B.  The pattern of A’s and C’s actions exhibit characteristics of exploitation. This case captures what is going on when firms produce under oppressive regimes. Just as A and C exploit B in a divisionof-labor mode, firms and oppressive regimes exploit in that same mode. Oppressive states use power to get workers to interact with foreign firms on non-reciprocal terms. Firms thus violate the duty not to exploit as well as the responsibility not to support others in exploitative activities.

14.6  Dirty Hands, Agents of Change, and Complicity Wherever firms use power to flout norms of reciprocity, they directly violate the duty not to exploit and also fail to respect that duty. This may be so even if the failure is not induced by their own power. But firms might argue that in doing business under oppressive regimes, they can satisfy the third obligation of trade

244  On Trade Justice justice: they function as agents of change, and by advancing development see to it that future transactions occur non-exploitatively. Companies like Nike may tell the following story. In authoritarian regimes like Indonesia, there was little opportunity for prosperity and employment, and average skill sets were restricted. Workers had few options, and their power was limited because they needed particular jobs so desperately that they could not take risks to fight for improvements. But over time, as more opportunities arose, and as workers acquired better skillsets, they had more options and became more empowered. To set such processes in motion, companies must be present in the country. Exploitation may serve as a stepping stone to a more just world. This reasoning, however, gives rise to the problem of dirty hands. Dirty-hands problems arise if a wrong seems required to create a good result.32 Companies in repressive states may face relatively mild versions of this problem, making arrangements with corrupt regimes that nonetheless likely benefit victims. In severe dirty-hands cases, either such arrangements would be made with, say, perpetrators of mass atrocities, or else the interests, possibly lives, of some people are discarded for the greater good. Our reasoning about the moral force of exploitation helps distinguish cases where companies should get involved from cases where they should not. Acts of exploitation are all-things-considered justified only if they satisfy the conditions of necessity and permissibility. To satisfy necessity, alternatives must be ruled out as unfeasible, relying on correct standards of feasibility. Importantly, one must avoid the scope mistake of inferring collective inability from individual inability, as well as the first-person mistake of taking one’s motivational setup as given. To satisfy permissibility, moral costs associated with exploitation must be low, and exploitation must meet the separateness-of-persons requirement that benefitting some cannot easily justify wronging others. Those defending their acts must ensure there are no feedback effects such that exploitation renders morally preferable options unavailable. Links between exploitation and reaching the goal must be well understood. So how can firms meet the necessity and permissibility requirements? Suppose a firm offers conditions at the upper end of what productivity permits and there is reason to think such economic presence will contribute to improvements within a predictable timeframe rather than lock the economy into a dead end. Also suppose firms have reason to be confident nothing else on the horizon could lead to improvements; they fight discretionary exploitation (especially attacks on personal integrity rights); they do due diligence to be aware of the human rights situation; they are supportive of efforts to improve deficiencies and do not get implicated in making things worse. The firms also support industry-wide efforts to generate improvements in a coordinated manner. They would then do as much as reasonably possible to improve things without ceasing to be profit-oriented. Those firms’ presence could be a stepping stone towards justice. The conditions sketched outline a fairly “clean” situation. Even though e­ xploitation is an injustice, the firm should get involved so it can play its part in overcoming

Dispersed Responsibility  245 the moral shortfall. But often it will be unclear whether necessity and permissibility hold. The government may not be callous, incompetent, or patrimonial but oppressive, making it less likely that benefits of development outweigh moral costs of exploitation in the short run. Political structures might favour a small elite to the exclusion of much of the population,33 again making it unlikely that the separateness-of-persons requirement is satisfied. In situations harbouring slim prospects for substantive improvements for workers, firms would merely be co-opted into maintaining a despicable status quo. There will be much ambiguity in ascertaining whether a particular case offers an identifiable path towards development. Consider the garment industry in Bangladesh. On April 24, 2013, Rana Plaza, an eight-story commercial building in the Dhaka area in Bangladesh collapsed. The official death toll amounted to 1129, the deadliest garment factory accident ever. In spite of warnings issued after large cracks had appeared, workers were ordered back to work. The building was structurally deficient, built on a pond, with substandard construction materials, and subsequently converted from commercial to industrial use. Firms in Rana Plaza are primary bearers of responsibility and clearly committed serious wrongs. But responsibility should also be placed on the business climate in Bangladesh. The tightly organized garment lobby is powerful, and intense profit-orientation and both national and international competition created conditions where safety and well-being were neglected. Workers could not organize to compel owners to take their interests seriously. The political clout of the garment lobby (Bangladesh Garment Manufacturers and Exporters Association, B.G.M.E.A) prevented workers from effectively pursuing their interests. The lobby worried unions would increase labour costs and jeopardize the garment industry’s viability. The B.G.M.E.A is unusually powerful, not only by de facto being its own regulatory authority and controlling which companies get to export products bearing the label “made in Bangladesh,” but also by having strong parliamentary representation. About 10 percent of legislators own garment factories. At the same time, garment exports have been an engine of progress in Bangladesh for decades, accounting for 80 percent of manufacturing exports in 2013. Factory owners see themselves as providing public services, by offering jobs and income, but also by doing much regulatory work the corrupt state fails to do. Demand for the products of its workers is high. Bangladesh is trailing only China in garment exports. The collapse, so the garment industry may argue, was a tragic consequence of an economic boom.34 Leaving the clear case of the firms running places like Rana Plaza to one side, the role of business in such scenarios is ambivalent. The garment industry is an essential ingredient of economic betterment in Bangladesh. Companies should get involved with that sector. At the same time, one should not accept that economic betterment and workers’ rights and safety present mutually exclusive options. To make their involvement permissible, firms must be agents of change, and the conditions spelled out above must be met. Where the overall political and

246  On Trade Justice business climate is shaped by corruption it is difficult for companies to be credible as such agents. Business should stop lobbying against effective regulation of the industry and campaign for more international oversight. The record of developments in Bangladesh since the collapse of Rana Plaza is at best mixed. While real wages in the industry have decreased since 2013 and the number of workers’ rights violations has gone up, the “Accord on Fire and Building Safety” has greatly improved safety conditions in garment factories.35 While the typically realistic scenario in which business must operate does not invalidate the moral advice above, it does require rethinking which bits of it are most important under given circumstances.36

14.7  Hands Too Dirty The underlying assumption so far has been that foreign firms are minor players in an authoritarian country. Perhaps they have some influence, but not the kind that shapes the political and economic climate. But what if a company does have such influence? On the one hand, great influence comes with the chance of serving as an effective agent of change. On the other hand, it might make it less likely that necessity and permissibility are met, and lead to new instances of exploitation. One example (setting aside entities like the Dutch or British East India Company) is the Boston-based United Fruit Company (UFCO) that wielded enormous power in countries like Costa Rica, Honduras, or Guatemala, and whose activities coined the term “banana republic”. In Guatemala after World War II, UFCO was the largest landowner, largest employer, and also the second largest railway company (via its subsidiary). It owned almost all railway tracks. The company acquired lands and pre-eminence under dictatorships, without having to deal with labor organizations or codes. Most US policymakers involved with Guatemala had ties to UFCO.37 UFCO had, at best, a mixed record of promoting development in countries where it operated. It built railroads and ports, providing employment and transportation. It created schools on company land. But it also left vast tracts of land uncultivated to discourage competitors and reserve possibilities for expansion, blocking other ­avenues of development. It discouraged the government from building highways, which would reduce the profitability of its railway monopoly. UFCO exploited workers but also the country as a whole by stymying selfdetermined development. Could such exploitation be a stepping stone, a move towards justice? Perhaps, but not unless the only realistic alternative was an oppressive dictatorship providing almost no benefits for the people. But if this was ever true, this constellation of factors (one company dominating the economy of a small country with one product, with assistance of powerful politicians in a

Dispersed Responsibility  247 bigger country) could work towards a more just world only for a brief period. After that, the company’s obligation would be to advance the country by liquidating itself, in a way that preserves the good things it has created while generating as few new problems as possible.

14.8 Conclusion We illustrated how a theory of trade justice as non-exploitation applies to complex settings involving various actors of different kinds and generating problems of dispersed responsibility. We have formulated normative yardsticks for ­interactions of firms with suppliers and authoritarian regimes, and rendered more precise their threefold obligation not to violate, but to respect, and to support trade justice. Discussing the issue of outsourcing, we argued that on standard accounts of individual responsibility, firms’ most promising attempts to deny responsibility for actions of suppliers fail, that sometimes one ought to conceive of cooperation between A and B as a joint action generating shared responsibility, and that even where B does not exploit, outsourcing may be morally problematic. Discussing their activities under authoritarian regimes, we have argued that firms exploit even if the failure of reciprocity is not induced by their power. We also elaborated on the circumstances under which firms may permissibly cooperate with authoritarian regimes to act as agents of change.

Notes 1. We are primarily concerned with questions of moral responsibility, for instance, whether companies are liable to being blamed for the wrong of exploitation. Questions of remedial responsibility, for example, of who ought to do what to end exploitation raise independent issues. For the distinction between moral and remedial responsibility, see Miller, “Distributing Responsibilities.” 2. For the argument that denial is a frequent reaction by corporate actors, see Zadek, “The Path to Corporate Responsibility.” For an overview of how Nike moved beyond denial, see Birch, “How Activism Forced Nike to Change Its Ethical Game.” 3. These strategies of denial mirror (part of) the structure of what Kutz calls the “deep structure of individual accountability” (Kutz, Complicity, 17 ff.), and they rely on “common sense principles,” including the “Individual Difference Principle” and the “Control Principle,” Kutz, 116. 4. For the difference between “direct” or “principal” responsibility and “secondary” or “indirect”, or “accomplice” responsibility, see Lepora and Goodin, On Complicity and Compromise, 23 ff. The two most influential general theories of complicity are offered by Kutz (who emphasizes the significance of intentional participation in complex collective actions) and Lepora and Goodin (who emphasize causal contribution to the

248  On Trade Justice wrong in question), see Kutz, Complicity; Lepora and Goodin, On Complicity and Compromise. We draw on elements from both. 5. For a seminal version of this view in the context of causal ascriptions, see Hart and Honore, Causation in the Law, 129. “The free, deliberate and informed act or omission of a human being, intended to produce the consequence, which is in fact ­produced, negates causal connection.” Feinberg calls this view the “voluntary intervention principle”; Feinberg, “Causing Voluntary Actions,” 153. 6. Bratman, “What Is the Accordion Effect?” 14. 7. For intervening agency and this case in just war theory in particular, see Hurka, “Proportionality in the Morality of War,” 47 ff. 8. See Feinberg, “Causing Voluntary Actions,” 156. 9. As Feinberg puts it, “the more expectable human behavior is, whether voluntary or not, the less likely it is to ‘negative causal connection’ [. . .]”; Feinberg, 166. (In this quote, ‘negative’ is a verb.) 10. For a defense of “tracing” accounts of responsibility, see Fischer and Tognazzini, “The Truth about Tracing.” 11. For a proposal along these lines, see King, “Traction without Tracing.” 12. For illustration of the claim that corporations have power to control their supply chains, see the discussion of Nike and Apple in Guthrie, “Building Sustainable and Ethical Supply Chains.” 13. An alternative would be to deny that a causal connection is necessary for responsibility, see e.g., Sartorio, “How To Be Responsible For Something Without Causing It.” 14. For similar cases, see Honoré, “Causation in the Law.” 15. A position that could, for example, be developed drawing on the discussion of ­causation in Mackie, “Causes and Conditions.” 16. For the light-switch example, see Ginet, “The Epistemic Requirements for Moral Responsibility,” 269. 17. See e.g., Smith, “Culpable Ignorance.” 18. A full account of culpable ignorance would have to address questions like what it is for an agent to act from ignorance and when exactly ignorance offers an excuse. See Rosen, “Kleinbart the Oblivious and Other Tales of Ignorance and Responsibility,” 592. 19. For the doctor case, see Smith, “Culpable Ignorance,” 543. 20. The first, ignorance-creating action or omission is called the “benighting act” and the action out of ignorance the “unwitting act,” Smith, 547. In the case of outsourcing firms, the failure of due diligence would count as the “benighting act,” the outsourcing under ignorance as the “unwitting act.” 21. Firms may of course seek excuses for not knowing. Some potential excuses would warrant further scrutiny, including the claim that it was impossible to know or too difficult or costly to find out. Other potential excuses will be similar to the excuses firms invoke to deny responsibility for wrongful outsourcing; they may even claim ignorance about epistemic obligations. Our skepticism about excuses for wrongful outsourcing carries over to excuses for not knowing. 22. This reasoning is in line with the human rights due diligence obligations the UN’s Guiding Principles on Business and Human Rights impose on companies all the way down the supply chain. See again Ruggie, “The UN Guiding Principles on Business and Human Rights.”

Dispersed Responsibility  249 23. See for example Michael Bratman’s “planning theory of acting together,” Bratman, Shared Agency, 40 ff. 24. Shapiro refers to activities of this kind as cooperation among “alienated participants” and argues it should still count as shared activity or joint action, see Shapiro, “Massively Shared Agency,” 271 ff. 25. Shapiro suggests a modification of Bratman’s account of shared agency along these lines to accommodate “massively shared agency,” schemes of joint action that involve many participants and might be characterized by asymmetries of power; see Shapiro, “Massively Shared Agency.” 26. Kutz’s account of complicity relies on a similar account of joint or collective action; see Kutz, Complicity, 138. 27. Pogge, World Poverty and Human Rights, 83. 28. Singer, “Famine, Affluence, and Morality,” 231. 29. This claim is compatible with morally innocent outsourcing, for example, when outsourcing does not occur for the strategic reason of avoiding the costs of complying with moral demands. From a legal and regulatory standpoint, this distinction does, of course, raise questions. 30. Sceptics may object that our principle is still too broad, for example because it would make all special relationships non-dissolvable. But note that first, we claim that leaving a special relationship is morally problematic only if the intention is to avoid special duties. There are many other morally innocuous reasons for dissolving special relationships. And secondly, we do not claim that even where our principle is violated, leaving special relationships is all-things-considered wrong or impermissible. 31. This is a case familiar from Chapter 5. 32. For the seminal formulation of the problem, see Walzer, “Political Action.” For a recent overview and discussion, see Coady, “Dirty Hands.” 33. As for example described by Acemoglu and Robinson, Why Nations Fail. 34. See “Death Traps: The Bangladesh Garment Factory Disaster,” by Sarah Stillman, in The New Yorker, May 1, 2013. 35. See the analysis in Anner, “The Sourcing Squeeze, Workers’ Rights, and Building Safety in Bangladesh Since Rana Plaza.” 36. On corruption, see Rothstein and Varraich, Making Sense of Corruption; Fisman and Golden, Corruption. 37. See Schoultz, Beneath the United States, 337. For greater detail, see Chapman, Bananas. For a charitable take on UFCO’s record in Guatemala, see Stanley, For the Record.

Conclusion What Can Be Done?

Over the last several hundred years, globally, human life has arguably become safer, healthier, longer, more peaceful and prosperous, better educated, more tolerant and, from the standpoint of those who lead it, generally more fulfilling.1 Science, technology, and sophisticated governance have enabled us to make progress along these lines and amass colossal wealth to drive further advances. Looking forward, the nature of work is likely to change profoundly, at least in developed nations, and chances are the next decades will witness enormous scientific and technological breakthroughs ranging from transportation, communication, computation, and entertainment all the way to, and especially in, medicine. Human life will offer possibilities our ancestors could barely imagine. Yet not all is well; far from it. As of 2019 conflicts rage in Syria, Yemen, Myanmar, Congo, Burundi, and other places, accompanied by a lack of preventive action or international intervention owing to UN Security Council vetoes by Russia, China, or the US. Xenophobia and racism are rising in Europe, fueled by the devastating refugee crisis around the Mediterranean. Elsewhere in the world, too, millions are on the move. Religious and political freedoms are in precarious shape in many places, and authoritarian governance is rising around the world. Such issues prompted then-outgoing UN High Commissioner for Human Rights Zeid Ra’ad Al Hussein to ask in February 2018 whether “we have all gone completely mad” acquiescing to human rights violations in a world with such enormous resources to do more about them, a world that in many ways has come strikingly far.2 Then there is inequality. We can learn from Thomas Piketty that capitalism left to itself in times of peace generates ever increasing inequality. Those who own the means of production benefit from the economy more than those who just work in it. Over time, life chances have increasingly come to depend on social status at birth.3 More recently, we have learned from Walter Scheidel that, historically, substantial decreases in inequality have only occurred in response to calamities such as epidemics, social breakdowns, natural disasters, or war. Otherwise it is hard to muster political will for change.4 Nowadays those who produce technology or know how to use it to magnify their impact can command higher and higher wages. It is possible that a widening technological divide will leave millions excluded, rendering them redundant as market participants and possibly undermining the point of their membership in political community altogether. When wealth was determined by land ownership, the rich needed the rest because the point of On Trade Justice: A Philosophical Plea for a New Global Deal. Mathias Risse and Gabriel Wollner, Oxford University Press (2019). © Mathias Risse and Gabriel Wollner. DOI: 10.1093/oso/9780198837411.001.0001

Conclusion  251 land ownership was to charge rent. When wealth was determined by ownership of ­factories, owners needed the rest to work the machines and buy their products. But once ownership of data and technological prowess determine wealth, as they might well do in the future, those on the losing side of that divide may no longer be needed at all. Things might turn out differently, of course: after all, there is so much wealth and knowledge that prudent and wise policies could just make it happen that everybody gets their fair share of what our human capacities for cooperation make possible. Advancing trade justice—through the creation of a New Global Deal—would be one straightforward way of helping to make sure this will be so. As part of a progressive agenda also encompassing other policy areas, a New Global Deal could contribute to a much-needed reconsideration of which institutional arrangements can achieve justice in light of the challenges sketched above. In that spirit, we conclude by offering a list of recommendations that flow from our discussions. These are not policy recommendations in the sense that they could be readily implemented in the world as it is. But nor would they only make sense in ideal theory. They are realistically-utopian in the sense that they are well within our capacities and connect to normative convictions many people have, or could find persuasive.5 To be sure, in our era of increasing economic nationalism the tide is going the other way. But what the future holds is not a foregone conclusion. Our recommendations for a New Global Deal are as follows: 1. States should discharge their responsibilities of trade justice through building a trade regime free from exploitation, that is, free from power-induced failures of reciprocity. 2. Existing international organizations must be harnessed to realize justice. The WTO should be reformed to focus on eradication of exploitation but also to take its human rights and development mandates seriously. Its internal decision-making and dispute settlement should be reformed to avoid that developed countries use their power over and take advantage of developing countries. The latters’ participation must not come at the cost of sacrificing much-needed domestic policy space. 3. Countries ought to reconsider trade policies—including subsidies and ­tariffs—in light of these responsibilities. Economic nationalism conflicts with global responsibilities and ought to be abandoned. Politicians involved in trade policy are accountable to constituents beyond their nation state. Thus in most cases export subsidies ought to be cut and in many cases trade with authoritarian regimes ought to be suspended. 4. There should be one global organization charged with trade justice, rather than several regional ones. Trade justice can only be achieved through strong and reformed multilateral institutions. Mega-regionalism may well be similarly detrimental to global justice as economic nationalism, and should not replace global multilateralism.

252  On Trade Justice 5. Firms ought to not violate, but to respect, and to support trade justice. Alongside states, firms too have duties of justice, in particular in the domain of trade. Occasionally these duties can be suspended if exploitation or other violations are stepping stones towards a just world, or a price worth paying. But making a case for that imposes a tall order. 6. Wages fall under the domain of trade justice. Firms ought to (a) refrain from paying exploitatively low wages, (b) join and support initiatives to solve ­collective action problems in this domain, (c) refrain from obstructing union activity, and (d) refrain from lobbying against effective regulation and ­legislation. States ought to (a) introduce minimum wage legislation, and (b) support and facilitate unionization. 7. For firms to relocate from a developed to a developing country can be a suitable way of advancing global justice. It is up to governments to adopt forward-looking industrial and social policies to mitigate the negative effects of such departures. To avoid exploitation, firms ought to absorb costs associated with leaving their current location, for example, through paying taxes on profits or compensating to offset the costs of premature departure. Relocation from one developing country to another is generally more problematic and thus should occur more rarely. Local communities will often be unable to assuage the negative effects of such departures. 8. Outsourcing and other ways of delegating tasks do not absolve firms from responsibility for trade injustices down the supply chain. Interactions of firms with suppliers are a type of joint action giving rise to shared responsibility. When operating under authoritarian regimes, firms are generally responsible for exploitation even if the failure of reciprocity is not induced by their own power. However, they should nonetheless keep up operations when a plausible case can be made that such economic activity is likely to bring about positive change. Our book has been a philosophical plea for a New Global Deal along such lines.

Notes 1. For a passionately positive (if inevitably controversial) account of the current state of humanity, see Pinker, Enlightenment Now. 2. He said this in a speech to the Human Rights Council on February 26, 2018: http:// webtv.un.org/search/zeid-ra%E2%80%99ad-al-hussein-high-level-segment-1st-meeting37th-regular-session-human-rights-council/5739858818001/?term=&lan=english& page=4, last accessed December 14, 2018. 3. Piketty, Capital in the Twenty First Century. 4. Scheidel, The Great Leveler. 5. The term stems from Rawls, The Law of Peoples.

On Trade Justice: A Philosophical Plea for a New Global Deal Mathias Risse and Gabriel Wollner https://doi.org/10.1093/oso/9780198837411.001.0001 Published: 2019

Online ISBN: 9780191874116

Print ISBN: 9780198837411

END MATTER

Bibliography  Published: October 2019

Subject: Political Economy, Political Theory

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Index agency, constrained 90116–117171n.28 domestic justice 69 duties and agent-partiality 124–128 for rms 193–196210–211214–215220227 in ideal and non-ideal theory 1013 necessity of exploitation 109–112 and organizations 145–146148–149 requirements of justice 106–107 and the standpoint of the universe 5109–110 structural exploitation 100–101 agriculture 23566–67 development mandates 66–67140 regulatory measures 175177–178 subsidies 141156n.39158160–162166177–178 Al-Hussein, Zeid Ra’ad 250 Amoral Trade 134452–53 market transactions and comparative advantage 45–46 rejection of 46–47 vs. Trade-as-One-Ground 53–56 Anderson, Elizabeth 199n.1 Anderson, Kym 161 apartheid 167–168 Aquinas, Thomas 7 Aristotle: Nicomachean Ethics 6 Atlantic Charter 2426 autarky, and Structural Equity 1344–4551–52 authoritarian regimes 6 outsourcing and responsibility 199232–233242–247 trade with, moral issues 167–169 Bangladesh 245–246 Bangladesh Garment Manufacturers and Exporters Association (B.G.M.E.A) 245 Bank for International Settlements (BIS) 67 Baran, Paul: Political Economy of Growth 31 Barry, Brian 65 Barry, Christian 145 Beef Hormone Case 175 Beitz, Charles 36–37 bene cence failure, and exploitation 838691–93 Brandt, Willy (report) 34–35148–149 Bretton Woods 2326–2731–32147 Burke, Edmund 160 Caney, Simon 113744 capitalism 18n.282325250–251 in coordinated economies 162–163 creative destruction 228242 and exploitation 828793211–212 as step towards communism 31 China 32367178219 export subsidies 161 outsourcing and working conditions 197–198211 Christensen, James 1156n.258n.24 Churchill, Winston 24 Ciepley, David 196 citizenship 1174–175 in authoritarian regimes 168

claim to subsidies 162–163165 and distributive justice 60–61 and duties 125135144159 equal, and rm obligations 220–222227 and fairness in trade 7174 and Instrumental Trade 50–51 Clinton, Bill 34–35198 Coase, Ronald 188199n.5 co ee 3 Cohen, G.A. 18n.30328284200n.9 Columbus, Christopher 3–423 common humanity 159–160 grounds of justice 14–5113765123145 and human rights 145 and Instrumental Trade 49–50 and shared state membership 128–129132 comparative advantage 3545–4652140161 compensation: investors’ 176 and fairness 203–208211–212214–215 Kaldor-Hicks criterion 47222–223 and relocation 220222–223227–228230–231252 See also wages competition 23446 and export subsidies 162–163166 of rms, and market pressure 193–194 and just wages 204–205208 complexity of distributive justice 6264–65 consequentialism 1144127161 and Instrumental Trade 51–52 corporations  See  rms corruption 165198244–246 cotton 3 Long-Term Arrangement 28 deglobalization 23 democracy: and accountability 143–144169 domestic, weakening of 146–148 value, and the TTIP 174–177 development 122325 conference on (UNCTAD) 2731–323438140148–149151–152 debates on 27–28 Doha failure 141150 and exploitation 32–33113–116 p. 274

mandates on

141144–146148–149151–153

and subsidies 162164166 and trade in oppressive regimes 243–247 and wages 213–214 dispute settlement 28 GATT 2867 investor-state (ISDS) 172175–176 in poor countries 150 and property law 168 WTO 6771140151251 distributive justice: claims of stringency 60–61133–134 complexity 6264–65 and cooperative surplus 208–212 and exploitation 582868992 and fairness 73–75108 “globality” 36–3962–65

grounds of 4–538–3961121187 and parity 123–124 principles of 122–123 public-reason extensiveness 62–63 relationist and nonrelationist 48–51 and relocation 222–223229–230 and social justice 61–62 state-shared membership 70–71 Doha Round 2835141150173179–180 failure of 149177–179 domestic justice: and rm concerns 222230 individual compliance to 132 state obligations 5122127–128157 and trade justice 69–70136203 Donselaar, Guy van 85 duties 11154131133–134 agent-partiality 124–128 assignment of, and associated principles 128–129 of rms 6133187191–197220–223252 of humanity 54–55 of individuals 132221 of international organizations 133 of non-exploitation 106–107 ranking and adjudication principles 129–132134–135 of states 5132–133141–144150–151 Economic and Social Council (UN) 26 Economic Commission for Latin American (ECLA) 29–31 Economist 228–229 egalitarianism, global 4 and Instrumental Trade 11444751–52 electorate, obligation to 144159–160 Elster, Jon 118n.20 Engels, Friedrich: German Ideology 8–9 equality 47 of opportunity 69123135–136220–222 and Structural Equity 51–52 Ethiopia 3 European Union: bilateral agreements 172–180 and export subsidies 161 expansionism 3–423 exploitation 1–24–578–81121 criticism of conceptions 85–88 and distributive justice 582868992 and failures of bene cence 838691–93 rms, and trade justice 192–199 and ideal theory 1069–70 and individual responsibility 233–239 Marxist thought 79–80 moral signi cance of joint action 240 necessity 109–112114–115 and NIEO measures 33 non-agential 97–100 non-individual 96–97 normative and descriptive components 80–81 power-induced failure of reciprocity 5–694–95101–102107149203206–212223–226 and relocation 223–225 and rights violations 83–8486–8792108167–168

structural 100–101 trade with authoritarian regimes 167–168 unfairness through power 5–674–7581–828588–93 as violation of reciprocity 81–82 as violation of respect 8082–83868891–93107233 and voluntariness 848791–93195 as a way of harming 84–858792–93 by the WTO 148–149 See also permissibility of exploitation fairness 169 and assurance 194 claims 9194–95 fair trade 6776n.25 and trade justice 7073–7579116160 See also unfairness Fanon, Frantz: The Wretched of the Earth 29 Ferdinand I, Emperor 133–134 Fichte, Johann Gottlieb: The Closed Commercial State 8 rms: adversarial practices 195 characteristics 189–190 division of labor 196–197 market pressure 193–194 obligations 6133187192–193195–196252 theory of 188–189 and trade 190–192 See also Nike; See also outsourcing; See also relocation; See also wages Fleischacker, Samuel 62 food: regulatory policies 175 subsidies as collective preference 164 freedom: four freedoms 24 free choice, and exploitation 84235 violation of voluntariness 848791–92195 free trade 6 advocates 7–823 and globalization 23 and ITO 28 multilateral agreements 67 Friedman, Milton 30 G77 31 Garcia, Frank 56n.4 garment industry: trade in authoritarian regimes 245–246 wage di erences 205–206 General Agreement on Tari s and Trade (GATT) 2834–35177–178 and reciprocity 103n.11 vs. UNCTAD 31–3235 vs. WTO 66–67140150 Germany 23–24162–163 p. 275

relocations

228–229

globalization 23139–140171n.28 and domestic democracy 146–148 global justice 1–262101–102144–145 and complexity 63–64 and distributive justice 36–3962–65 grounds of 4–665 and mega-regionalism 173177–178180–181251 philosophical literature on 36–37 and relocation 230252 and Trade-As-One-Ground 4853–55 Great Depression 423–2463 Gri

n, James 118n.20

Grotius, Hugo: Mare Liberum (Free Sea) 7–8 grounds of justice 157–158 and fairness 73–75 and rms 192196220 and “globality” 64–6568 pluralism of 4872–73122 policy-making 158–160 and principles of distributive justice 4–661122–123 and reciprocity 94–96 trade as 114951–5265–6670–71 See also  Guatemala 246 Gulf Cooperation Council 67 Gunder Frank, Andre 31 Haq, Mahbub ul 25 harming, and exploitation 84–858792–93 Havana Charter 27–2831–32 Hayek, Friedrich August von 3034–35 Heath, Joseph 188–189216n.59218n.19 Heilbroner, Robert 8 Hertel, Thomas W. 161 Herz, John 39n.8 Hobbes, Thomas 7–8 Howse, Robert 17n.21 Hsieh, Nien-he 196 Hull, Cordell 23 human rights 265369123250 exploitation as violation of 72 rms’ obligations 133192–193227–229244 mandates on 144–146148–149 and trade justice 123–124136 Human Rights Council (UN) 192–193 Hume, David 143 “On the Balance of Trade” 8 ideal theory 19–10135568–69251 and empirical disagreement 12 and exploitation 1069–70 immigration proposal 10 See also non-ideal theory imperialism 32326–2747 inequality 303336250–251 and shared state membership 123135 Instrumental Trade 11134452 relationist and nonrelationist approach 47–51 vs. Trade-as-One-Ground 53–56 intellectual property 35173–174 WTO mandate 66–6771140 International Bank for Reconstruction and Development (IBRD) 67 International Labor Organization (ILO) 67205–206 International Monetary Fund (IMF) 26–2767150 International Organization for Standardization (ISO) 67 International Telecommunications Union (ITU) 67 International Trade Organization (ITO) 27–2834148–149 investor-state dispute settlements (ISDS) 172175–176 James, Aaron 1244–465176n.20 Japan 23–24160–163 just price 6 and commutative justice 6 and exploitation 581–82

and theories of economic value 7 Kaldor-Hicks criterion 47222–223 Kant, Immanuel 860–61 Keeney, Roman 161 Kennedy, John F. 31 Keynes, John Maynard 2326–27 Kissinger, Henry 33–35 Knight, Phil 197204211 Kristof, Nicholas 107–111114–115 labor: and claim to subsidies 162–166 Marxist theory 779–80 moral division of 33193196–197 and non-agential exploitation 99–100 organizational commitment to human rights 145 policy, ideal theory 10 sweatshops 76n.22848697107–110113115–116213 See also relocation; See also wages Latin America 29–32172 and the New Deal 26–2729–30 Lawrence, Robert 180 League of Nations 23 Leahy, Patrick 158–160 liberalism 34–36163 embedded 39n.8147 and globalization 36–37 and just prices 204–205 Locke, John 7 Long-Term Arrangement on Cotton 28 Marrakesh Agreement 35148 Martin, Will 161 Marx, Karl 2331 Critique of the Gotha Programme 18n.32 German Ideology 8–9 labor theory of value 7 Marxism 36 p. 276

and exploitation

79–8082

Mazower, Mark 233539n.8 McCarthy, Cormac: The Road 126 McNamara, Robert 34 McNeill, J.R and W.H. Mcneill 16n.347 mega-regionalism 51518n.3128 concerns on 179–180 vs. multilateralism 67172–173180–181251 as a response to Doha failure 177–179 mercantilism 7–828 Meyers, Chris 217n.14 Mill, John Stuart 114448 Miller, Richard 102n.3151 moral ontology of trade 1244 Amoral Trade 44–47 Instrumental Trade 4447–51 Structural Equity 44–4551–52 Trade-as-One-Ground 454853–56 Multi-Fiber Agreement 28140161 multilateralism 152433139251 GATT 28 vs. mega-regionalism 67172–173180–181251 trade regimes 66–68

Myrdal, Gunnar 30–31148–149 Nagel, Thomas 64108 natural law 7–8 necessity of exploitation 110–111 constrained agency 109–112 moral mistakes 114–115 and relocation 226–227 neoclassical economics 46205 neoliberalism 430 and NIEO 33–34 von Hayek’s 30 New Deal 1–243638121 debates on 24–26 establishment 23–24 termination 34–35 and the UN 26 New Global Deal 1–2461338–39121169181 recommendations for 251–252 New Guinea 3 New International Economic Order (NIEO) 2532–38140148–149 Nike: outsourcing, and responsibility 233–241243–244 relocation policy 229 and wages 197–199204–205208–209211215 Nkrumah, Kwame 31 non-ideal theory 19–10 empirical disagreements 12 immigration proposal 10 and trade 10–1168–69 See also ideal theory nonrelationism 48–5170 North American Free Trade Agreement (NAFTA) 67 North Korea 68 North-South cooperation 3234 Nussbaum, Martha: Frontiers of Justice 36–37 Nyerere, Julius 32 Obama, Barak 67172 TTIP agreement 18n.31172–174 obligations  See duties o shoring 190–191203219–220 O’Neill, Onora 196–197 Organization of the Petroleum Exporting Countries (OPEC) 3267 organizations 152–153251 accountability 142–144 development mandate 141144–146148–149151–153 human rights mandate 144–146148–149 obligations 133141–142 principles of justice 144–146 See also General Agreement on Tari s and Trade (GATT); See also World Trade Organization (WTO outsourcing 16158191198200n.17219–222232–233247252 within authoritarian regimes 242–247 collective responsibility 239–240 individual responsibility 233–239 permissibility 72240–242 Pax Americana (American Peace) 2536 permissibility of exploitation 106–108112–113 constrained agency 108–110 failure of, moral mistakes 114–116 in outsourcing 240–242

and relocation 226–229 separateness of persons 113–116226–228 standpoint of the universe 109–110 stepping-stone and price-worth-paying arguments 108–109113–114212–214 pesticides 158–160 Piketty, Thomas 250–251 pluralism: actors 95–99 and exploitation and dispersion of responsibility 242–243 and exploitation as unfairness through power 91–93 of grounds 72–73 and internationalism 48 plurilateralism  See multilateralism Pogge, Thomas 37241 power-induced failure of reciprocity 594–95101–102107149203 and relocation 6223–226 and wages 206–212 Prashad, Vijay 35 Prebisch, Raúl 2729–32 price worth paying, and exploitation 5252 moral mistakes 115 and permissibility 108–114 property: corporate 189196221 intellectual 3566–6771140173–174 law, authoritarian regimes 140168 protectionism 283497140 p. 277

and export through subsidies

160–161165–166

Rawls, John: A Theory of Justice 18n.3036–374560–626469108118n.27128133–135145204–205220–222 Reagan Ronald 34–35 reciprocity: commutative justice 6 power-induced failure, and exploitation 5–694–95101–102107149203206–212223–226 and state cooperativeness 71 violation of 81–828591–92 WTO’s 66 Reddy, Sanjay 145 Rei , Mark 209 Reiman, Je rey 84 relationism 48–5170–71 See also nonrelationism relocation 219229–231250 corporate obligations 220–223 exploitation, power and reciprocity 223–225 necessity and permissibility 226–229 policy issues 230–231 and trade justice 219–220 respect 107131–132192–193232–233252 violation of, and exploitation 8082–83868891–93107233 responsibility, and outsourcing 232–233247 and di erence-making 237–238 dirty-hands problem 244–247 dispersion of, pluralist exploitation 242–243 and epistemic ignorance 238–239 and intervening agency 234–235 and joint action 239–240 and lack of control 236–237 Ricardo, David: Principles of Political Economy 45–46 rights violation, and exploitation 83–8486–8792 See also human rights Risse, Mathias: On Global Justice 4–513–144856n.466577n.27103n.16155n.21 Rodrik, Dani 59n.27146–148151161

Roemer, John 82 Roosevelt, Franklin Delano 423–2426 Ruggie, John 39n.8147192–193 safety 53115175213 labor, rms, and exploitation 53115194198 and responsibility 235239245–246 risk compensation through wages 214–215 Scheidel, Walter 250–251 Schumpeter, Joseph 7–8 Seneca 7–8 Singer, Hans 2729–31 Singer, Peter 37–38241–242 slavery 3168 Smith, Adam 8 Inquiry into the Causes of the Wealth of Nations 6–845 social justice 42561–62136230 rm obligations and relocations 220–223 Southern Common Market (Mercosur) 67 Srinivasan, T. M. 41n.32 states 51264157–158251 authoritarian 167–168 and corporations 189–190 labor, and claim to subsidies 162–164 membership in 4–5656870–71123125–126128–129134–135142144159 obligations 5132–133141–144150–151 and Structural Equity 44–4551–52 stepping-stone argument 514168–169246–247252 and failures of reciprocity 212 moral mistakes 114–115 and necessity of exploitation 111–112 and permissibility of exploitation 108–110113–114212–214243–244 Structural Equity 1344–4551–52 vs. Trade-as-One-Ground 4553–56 subsidies 160–161169177–178251 bene ts and harms of 161 claims to 162–164 and collective preferences 164 and moral consistency 164–167 removal 161–162 sugar cane 3 Sun, Yat-sen 23 sweatshops 86213 and duties of non-exploitation 107–110113115–116 exploitation as violation of voluntariness 84 and non-individual exploitation 97 Tari

Act (US, 1930) 165

textiles 366–67 Multi-Fiber Agreement 28140161 production, bene cence of labor exploitation 86 Trade-As-One-Ground 511–1338–394548505355–566065–6674157187 and duties of humanity 54–55 multiplicity of actors 454853–54 and obligations to justice 11–1355191203 trade justice 1–274–75121251 and domestic justice 69 and duties of non-exploitation 106–107131–133 and exploitation 14535569–707982101–102

and rms 188–199 and global justice 70–71 and human rights 123–124157166168 ideal and non-ideal theory 9–101268–70 and multilateralism 181 and organizations 134–136139141–142144–146148150–153 and relocation 6220227231 responsibility for wrongdoing 6232–234243–244247 state obligations 5 and wages 6202–203212215252 p. 278

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

66–67140–141177–178

Transatlantic Trade and Investment Partnership (TTIP) 172–174180–181 debate on 174 and democracy 174–177 and mega-regionalism 177–180 Trans-Paci c Partnership (TTP) 172 Trump, Donald 158160172179–180219 UN Conference on Trade and Development (UNCTAD) 2731–3234–3538140148–149151–152161176 unfairness, and distribution 73–74108 unfairness through power 51474–7578–8185–8688–91144 in authoritarian regimes 168 and pluralism 91–93 and wages 6 WTO’s 148–149 See also power-induced failure of reciprocity United Fruit Company (UFCO) 246–247 United Kingdom 24–25 United Nations (UN) 426–2967250 and corporate duties 133192–193 Economic and Social Council 26 Human Rights Council 192–193 and the NIEO 32–33 responsibility as intervening agency 234–235 Universal Declaration of Human Rights 26 See also UN Conference on Trade and Development (UNCTAD United States: bilateral agreements 172–177 “Good Neighbor” policy 26 trade-related unemployment 219 use of TRIPS Agreement 140 See also New Deal U Thant 26–27 utilitarianism 4447–48 Vattel, Emer de 8 voluntariness, exploitation as violation of 547981848791–92195 Vrousalis, Nicholas 83102n.9103n.22 vulnerability, and exploitation 82–838699–100176207 wages 6202215250–252 and feasibility of non-exploitation 111–112115 as a ground of justice 202–203 and health and safety standards 214–215 justi ability of low wages 205–206212–214 and market pressure 194 at Nike 197–199204–205208–209211215 and power-induced failure of reciprocity 206–212 and prices 204 and trade justice 6202–203212215252 Wallace, Henry 24–25 Walton, Andrew 76n.1925 Waltz, Kenneth 56n.1 Wenar, Leif 167–169

Wertheimer, Alan 117n.2 White, Henry Dexter 26 Wilkinson, Rorden 152180 Wol , Christian 8 World Bank 26–2734117n.7161 World Customs Organization (WCO) 67 World International Property Organization (WIPO) 67 World Trade Organization (WTO) 1434–3565–66118n.26139–140148152–153190219251 as exploitative 5148–149 multilateralism, Doha failure, and mega-regionalism 172–173177–181 and reciprocity 103n.11 reform of 5149–152 trade regime 66–6771 TRIPS agreement 66–67140–141 Zwolinski, Matt 72