TRADE AND GLOBALISATION: BRINGING EVERYONE ALONG COMMENTS FROM TUAC Ronald Janssen April 2017 Paris

Is there a further shift inside the OECD ? “They believe that the system is not working for them, they feel that it is unfair and there is increasing evidence that many of them may actually be right” (Remarks by Angel Gurria at Economic Club of Minnesota 19th April 2017)

Specifically on trade induced disruption - From ‘compensating the few losers’ to - Recent evidence suggests that losses from opening to trade have been - more widespread - larger - more region-specific - more durable … than previously realised How to bring all along ?

Getting economic policy right « Creative destruction » does not work well when there is slack in the economy Economic policy has not done a particular good job here If trade/change is to work better, restore full employment as the principal objective of monetary and fiscal policy Story of austerity and long slump in recovery after financial crisis Background : Since the monetarist counterrevolution, objective of full employment has been abandoned by many policy makers

Rediscover labour markets institutions LMI’s often thought of as rigidities But what about the their positive role ? Unemployment benefits smooth consumption and make it financially possible for workers to engage in training and jobs search Job protection provides early warning signal Multi-employer bargaining overcomes problem of individual employers leaving training to others Macro is of course not enough We also need labour market policy to step in

Job Security Councils in Sweden

Lower inequality supports change Lower wage and income disparities imply workers moving into new job will be easier… Workers also more willing to take risks when majority of jobs are stable jobs with decent pay Triangle of ‘flexicurity’ actually a quadrangle: Low(er) inequality, backed up by wide collective bargaining coverage Not just through a (longer term) educational effect…

Globalisation, trade and inequality: There are links Capital gets an outside option, thereby lowering bargaining position of workers New generation of trade agreements: Investor protection (replacing job protection) If low inequality is important, we do have a problem here

One quarter of explained by GVC’s and financial integration

Summarizing Full employment macro economic policy Invest in labour market institutions (ALMP’s but also unemployment benefits, stable jobs with advance warning in case of dismissal…) not deregulate them Keep rising inequality under control by rebalancing relative bargaining power of trade unions and employers.

And do not do this (ECO WP 1342)

A final word: Communication has been too succesfull ! One key line of communication: « Globalisation forces us to become more competitive » Systematic downwards pressure on wages, social security, workers’ rights

The result In Europe, large majorities of the people are of the opinion that globalisation benefits large companies and not average citizens. In the US, surveys indicate that a good half take the view that involvement in the global economy is a bad thing because it lowers wages and destroys jobs Stop this line of communication