Making sense of the Wallonian veto

IF CLEVELAND were given the right to veto any potential trade agreement between American and another country, how many trade agreements would ever be enacted? One reasonable guess is: none. If the federal government then deprived Cleveland of the right to veto trade agreements, would that be anti-democratic?

For those who missed the news: last week the parliament of Wallonia (one of the three regions which make up the state of Belgium) voted to block the Comprehensive Economic and Trade Agreement (CETA), which is an ambitious trade deal negotiated between Canada and the European Union. Wallonia’s population is less than 1% of that of the EU has a whole: comparable to the share of America’s population residing in the Cleveland metropolitan area. It seems slightly perverse that so small an area could block so important a deal which had been so long in the making. Especially when the other party in the deal in question is Canada, seemingly as innocuous a trade partner as one could wish for.

Dani Rodrik, an economist at Harvard University, says the vote is in large part a statement of frustration with elites. He writes:

I’d put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people’s concerns with earlier trade agreements.

Those concerns include worries that gains would be smaller than promised, that sovereignty would be compromised, and that there might be serious distributional inequities. Walloons, it seems, were in this case all too aware of the possibility of an unequal distribution of costs and benefits. A piece in The Economist this week points out that:

Wallonia boasts one cow for every three humans and its lavishly subsidised farmers are wary of cheap Canadian competition. Erwin Schöpges, a Walloon dairy farmer who joined the protests outside parliament, says he already faces milk prices below his production costs. “We want to trade with Canada, but we would rather not abolish tariffs,†he says.

Another thought experiment: were London (or, to separate things from the elites, Scotland) able to block the Brexit vote, would it? The answer, of course, is yes. Would empowering British regions in this way then represent a move toward greater democracy? Or different democracy?

Many readers will be familiar with Mr Rodrik’s globalisation trilemma, the idea that the world can have at most two of: economic integration, national sovereignty and democracy. Liberalisation, like many economic shifts, creates winners and losers. Many existing political structures advantage the votes of the losers, giving them, in many cases, the ability to block changes that generate net, though unevenly distributed, benefits. In order to move toward greater liberalisation, then, one either has to ignore popular opinion in these places (abandoning the democracy leg of the trilemma), or change the locus of political decision-taking (abandoning national sovereignty). Indeed, Mr Rodrik once argued that globalisation implied a long run shift toward supra-national rules and democracy.

Sometimes, however, we seem to confuse the abandonment of a particular hierarchy of sovereignty with an abandonment of democracy. But that need not be the case. Shifting political power from Wallonia to the Belgian federal government, or to the European parliament, is not less democratic. It is, however, a shift in power. One important question for those pondering the future of globalisation is: what distribution of political power can best reconcile global openness and broad-based prosperity (the latter being relatively important to maintaining the legitimacy of the former). 

Broader polities should support more openness than narrow ones, since the balance of winners and losers within them is closer to the global balance, which should be positive. If disadvantaged groups within those broad polities are unable to form effective coalitions, however, in order to bargain for compensation against the costs of liberalisation, then trouble is bound to result. It is possible that the Wallonia vote, or Brexit, for that matter, are less about the legitimacy of particular policies, like freer trade, than about the legitimacy of particular polities. And that, actually, should worry us more.

From The Economist
Making sense of the Wallonian veto