Is trading really a zero sum game?

"World trade is not a zero-sum game"

NZZ am Sonntag: In the globalized world, crabs are transported from the North Sea to Morocco to be peeled so that we can buy them cheaply in Switzerland. Does this make sense?

NZZ am Sonntag: In the globalized world, crabs are transported from the North Sea to Morocco to be peeled so that we can buy them cheaply in Switzerland. Does this make sense?

Peter Sutherland: You can argue about something like that. Nevertheless, I believe in two principles: competition is efficient, and excluding competition destroys competitiveness. The international division of labor is the basis for prosperity.

That sounds like something out of the textbook. In reality, however, there are losers and winners in globalization.

I do not agree with it. The losers become losers because they are prevented from participating in free trade. For years, globalization was blamed for the difficult situation in sub-Saharan Africa. But these countries do not suffer from too much free trade. First and foremost, they suffer from the fact that their population is excluded from international markets due to a lack of infrastructure, inadequate and often protectionist policies or nepotism. The subsidization of products by developed countries is one of the other reasons why less developed economies find it difficult to successfully participate in trade. The agricultural policy of the USA, the EU, but also that of Switzerland is only one example here.

Now politicians, not economists, have to win elections.

That is probably true, but it is also worthwhile for politicians to stand up for globalization and liberalization. I come from Ireland, a very small country. In 1990 we had a GDP per capita that was only 67% of the European average and an unemployment rate of 17%. Today we have a rate of 4.5%, the lowest tax rate and the lowest debt rate in Europe. Our per capita growth is 128% of the EU average. What happened? Also because of the application of the Maastricht criteria, Ireland was forced to develop a new policy of tightening its belt. Did that harm the ruling party? - no! In a short time, people realized that this policy was the way to go. This knowledge must be brought closer to the citizens of Europe by their politicians in order to increase the acceptance for change.

Looking at the EU parliamentary elections, for example, one does not get the impression that the governments have been able to make their citizens understand the urgency of reforms.

Who says it's easy to be a politician? One thing is clear: we are at a point where it can no longer go on. Our growth has lagged behind that of the USA for years, our pension systems can no longer be financed in their existing form due to demographic developments.

So it has to get worse first for it to get better?

No, we have already reached a level of stagnation that is unacceptable. People realize this. Reforms will come, but the US model with low social benefits and low taxes will not prevail in Europe. America's historical preconditions are different from those of continental Europe, where a stronger role for the state in establishing minimum social equilibrium has proven its worth. For us in Europe, however, the stagnation of recent years means that we have to ensure that our model works and that growth is generated again. As an Irishman, God knows I am not an advocate of high tax levels. But there are examples of economically successful countries, such as Finland or Sweden, which have combined relatively high tax rates with the flexibilization of the labor market, privatization and a general opening of the economy.

The opening of the economy also means that service jobs are being relocated to low-wage countries like India. There is resistance to this. Do you understand that?

This is what should happen if we believe in the theory that comparative advantage works for everyone. If it is cheaper to produce in certain countries, can we forbid those countries to take advantage of these advantages just because they are poor? That is morally outrageous. If, with our high level of education and better infrastructure, we are not in a position to replace these cheap jobs with higher quality work, it is entirely our fault. Such allegations fall short of the mark. The international division of labor and world trade are not a zero-sum game. Take a look at the trade balance between Germany and Spain. Since Spain joined the EU, both countries have benefited from each other. There were no job losses, on the contrary.

You said earlier that Europe is lagging behind the US. Isn't America buying its economic growth with an excessive deficit?

Of course. The size of the US deficit is very worrying and very damaging, with unpredictable consequences. A deficit of this size in an electoral term almost certainly means that countermeasures will have to be taken after the elections. This could mean high interest rates and less consumption. That has an impact on the dollar. And all of this is damaging the global economy.

Back to Europe. You see a need for reform. Wouldn't it have been wiser to postpone eastward expansion?

The enlargement was correct and desirable. From a moral point of view, we do not have the right to exclude those countries of the former Eastern Bloc that want to become members and meet the conditions to do so. Quite apart from that, the expansion unfolds a catalytic effect, because the new members promote intra-European competition through their relative location advantages.

How do you assess the situation in Switzerland?

The chances of Switzerland joining the EU are tiny. I am very sorry. I believe in an integrated Europe. I also believe that Switzerland would be a positive element in the EU. The Swiss economy has great qualities and strengths. Nevertheless, Switzerland has the same problems as the rest of Western Europe, for example staying competitive with an expensive economy. You mustn't pretend that you are different. Reforms are necessary, even in difficult areas such as agriculture.

After the failure of the Dauha round of negotiations, WTO representatives are currently again debating the dismantling of protective tariffs and subsidies for agricultural products in Geneva. What chances do you give of an agreement?

The EU has moved much further in the discussions than many thought. But there are plenty of sinners in agricultural policy, including Japan, Korea, India, the USA and certainly Switzerland. It is imperative that these countries move and that we can at least agree on a framework for the discussion. Otherwise we endanger the medium-term future of the WTO. This is unacceptable. We need a rule-based global economic system. Switzerland in particular, which does not belong to any economic bloc, should have a vital interest in the success of these negotiations.

In retrospect, wasn't it a mistake to focus on the liberalization of agricultural policy at the last round of negotiations in Dauha?

Possibly because important issues such as the liberalization of agriculture or services were already discussed in the Uruguay Round. The expansion to new areas brought about by the Dauha Round was not worth it for such problems to arise. But now we have to find a solution. If we fail, we will undermine the WTO.

Isn't free trade simply an excuse for the rich countries not caring about the developing countries, according to the motto that free trade will fix it?

There are ten countries that have decided to give 0.7 to 1% of their gross domestic product to the poor in the form of development aid. That is far too small a number, and many of the richest nations give significantly less. There is a moral obligation on the north to help the south. We need to make sure that the money is spent wisely. It is not acceptable to say in Black Africa: "Here you have free trade, now see for yourself how far you can get." These states lack the capabilities and resources to do this. If we don't help, we will soon have a problem given the demographics in these countries. Morocco is only seven kilometers from Spain. From there it is not far to the Swiss border either.

Interview: Katharina Fehr, Markus Spillmann