“Services generate about 70% of rich-world GDP” says a recent Economist article, which highlighted the drafting of a new regional trade agreement between Canada and Europe. While this trade treaty, called the Comprehensive Economic and Trade Agreement (CETA), includes many of your boring, old-school tariff and farming talk, it more importantly looks to liberalize the rapidly-growing trade and service sectors, too.
Why is this approach innovative and potentially awesome?
Unlike antiquated trade-agreements which focused only on things like widgets, oil, and corn, this new model looks to open up deals on intellectual property and professional certifications, allowing architects, designers, and engineers to work across oceans.
Old-school trade agreements, including those set by the World Trade Organization (WTO), could produce arguably-lopsided treaties between rich-countries and emerging markets, with their focus on natural resource extraction and cheap labor. Often, to fund the expansion of infrastructure needed to meet these resource- and manufacturing-based agreements, developing countries could rely on loans from organizations like the World Bank.
While these loans undoubtedly help build transportation, energy, and production facilities, they didn’t necessarily focus on investments in things like schools, housing, and sustainability. It was expected that these quality-of-life investments would inevitably occur as the wealth of the emerging-nation increased (or trickled-down). This was perhaps one of the biggest complaints from the free-trade detractors: trade agreements did not encourage the investment in a nation’s people.
CETA looks to change this paradigm.
When ideas and people become the product-of-choice, and a trade-agreement allows them to work freely across borders, it could level the playing field between rich- and emerging-countries. First-off, unlike natural-resource extraction, people are a renewable resource. Furthermore, investing in people has huge social and environmental benefits, unlike old treaties which rely on inexpensive and unskilled labor pools. Finally, this sort of investment doesn’t encourage a race to the bottom, where countries vie for lucrative deals with tax breaks, land grabs, and maintaining low-wages.
The Economist article concludes it “would mean that international norms would be set on terms advantageous to the rich world. But at least it would give emerging countries clear goals to aim for: bring your accountancy qualifications up to scratch, and we can do a deal.”
Could cities benefit?
This new model of trade and competition relies on an educated and creative population: those with the most engineers and patents would almost always “win”. We have already seen the growing national trend in North American cities, from San Francisco to Brooklyn, as centers of tech innovation. But this growth relies on a lot of the more abstract economics of quality-of-life, things like schools, transit, and affordable housing. Keeping this trend in mind, and the looming US and European Transatlantic Trade and Investment Partnership (the biggest trade agreement in the world), cities will have an advantage, and be able to compete directly with other cities from around the world. Hopefully this competition will spur investments in the people of the world, instead of mines, transmission lines, and gmo agriculture.