World Trade

The Lies in Our Prices

Hunderte toter Fische schwimmen am 01.08.2016 auf der Oberfläche des Machnower Sees in Kleinmachnow (Brandenburg). Wahrscheinliche Ursache des Fischsterbens ist ein Sauerstoffmangel im Teltow-Kanal nach den Unwettern der vergangenen Wochen. Foto: Ralf Hirschberger/dpa +++(c) dpa - Bildfunk+++
Those who make a profit from free trade need to pay the price for the environmental damage it entials.
  • Why it matters

    Why it matters

    The prices we pay for cheap goods do not reflect their true social and environmental costs. Globalization in its current form is antithetical to protecting the environment and the climate.

  • Facts

    Facts

    • Today’s so-called free markets favor the relatively few people who benefit from deregulation and its adverse effects on man and the environment.
    • Cheap transport, one of the factors that make many products so affordable in the West, relies heavily on container ships, which burn the dirtiest of all fossil fuels.
    • Companies that do business internationally are not subject to any global liability system.
  • Audio

    Audio

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Can globalization and protecting the environment go hand in hand? It doesn’t look that way, at least judging by the global record on the environment. We are consuming resources as steadily as we emit greenhouse gases. Biodiversity is declining and fields and forests, water reserves and fish populations are shrinking.

Globalization isn’t entirely to blame but it has greatly accelerated these developments. Sir Nicholas Stern, former chief economist at the World Bank, once described climate change as “the greatest market failure the world has seen.” In my opinion, the global environmental crisis represents a total failure of globalization.

It doesn’t have to remain that way. Globalization, in its current destructive form, is not a law of nature that we have no power to resist. It is the consequence of political mistakes. To correct them, globalization needs to discard its ideological ballast.

Nowadays, “free markets” are usually unfair markets. They are based on ideology that favors the small number of people who benefit from deregulation, and its fatal consequences for man and the environment. Both the banking crisis and the environmental crisis demonstrate all too clearly what happens when companies do business at the expense of the common good.

Fair world trade requires honest prices. Many prices on globalized markets do not reflect the truth. The only reason all the “Made in China” products in our houses and all the “Made in Bangladesh” clothes in our closets can be so cheap is that the true price for these goods is paid elsewhere in the world. Cheap transport is the lifeblood of globalization, and one its biggest lies.

Transport costs are low because container ships are allowed to burn refinery waste products, the dirtiest of all fuels. Shipping is exempt from all climate protection agreements, as is rapidly growing aviation. No airline pays a petroleum tax, no frequent flyer pays sales tax, and there is no invoice listing the environmental costs.

The iPhone from China, the king-size shrimp from Indonesia, the café latte from Peru and the cheap shirt from Bangladesh – conveniently ordered online and delivered to your door, free of charge. The ecological failure of our globalized lifestyle is also a social scandal. Only exploitation of cheap labor and systematic disregard for human rights make these prices possible.

Companies are not held accountable for these practices. To this day, there is no global liability system that punishes companies for crimes committed across borders. Worse yet, international corporations and the politicians who do their bidding are currently trying to make governments liable for profit setbacks.

We don't need so-called free trade agreements with government liability. We need agreements to hold companies liable worldwide.

Trade agreements like TTIP and CETA are symbols of a perverted globalization that puts the interests of private players above the wellbeing of society as a whole. This is why a second condition of achieving a new, more sustainable globalization, is that economic players are called to account for their disregard of environmental and social standards.

We don’t need so-called free trade agreements with government liability. We need agreements to hold companies liable worldwide.

A central political project of a new Europe should be to make globalization environmentally sustainable and socially just. The subject of real prices is a case in point, and perhaps Germany, when it assumes the rotating G20 chairmanship next year, will secure a commitment from the large industrialized and emerging economies to abolish fossil-fuel subsidies.

If that happened, an idea that remains hampered by the false prices for fossil energy sources – the German Energiewende, or shift away from nuclear power and fossil fuel to renewable energy – could be globalized.

Cost transparency also requires reform of our fee and tax systems. When products are transported across thousands of kilometers, their prices must reflect both the environmental consequences and the disregard for social standards along the supply chain. Revenues from relevant fees could be used to pay for global projects to protect the climate and fight poverty.

Globalization in its current form is only possible because we as consumers take part, and it will only become more sustainable if our consumer behavior changes. This could be much easier than it is today, because sustainable consumption is still discriminated against. In today’s world, it is far cheaper and easier to feed ourselves and travel in ways that are harmful to the environment.

But it is also clear that this lifestyle will not change as a result of urgent appeals and relying on people to voluntarily change their ways. Politicians must manage this change, and the progressive parts of the economy can accelerate it.

In addition to imposing climate and social fees, we should give preferential treatment to regional products, longer product warranties, tax benefits for used goods, and promote the repair and lending economy. In the end, a fairer kind of globalization, and one that is more compatible with nature and human beings, doesn’t begin somewhere out in the world. It begins with us, at home.

 

To contact the author: gastautor@handelsblatt.com.

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