We need an International Minimum Wage, enforced by tariffs

Ian Taylor

Three decades on, it is clear that the globalisation enthusiasts of the 1990s – including Tony Blair as much as his Tory predecessors – have wrought the destruction to jobs, wages and equality that was always latent in such policies.

Okay, to begin with, many of us felt we could suddenly afford a bounty of abundant cheap goods. But that bounty was generated by a ‘race to the bottom’ as suppliers of goods and services relocated to the countries with the lowest wages, least demanding health and safety rules, and laxest environmental laws.

But as the years passed, our jobs here disappeared as suppliers vanished abroad or went under in the face of cheap global competition, and the jobs remaining suffered downward pressure on pay and conditions from competition with the relocated suppliers in lower wage  countries.

And it turns out that if you’re earning no wages, or crap wages, then you can’t even afford goods and services produced by nigh-on slave labour in China, Cambodia, or in our very own globalisation sweat shops here in the UK and in its informalised gig economy.

So now we have a ‘cost of living crisis’. And that’s not just in the UK, it’s right across all the ‘high income countries’ of the world, a terminology that begins to appear somewhat ironic.

Of course, none of the globalisation enthusiasts said that for us ordinary folks globalisation meant jam now, hunger tomorrow, whilst company bosses and shareholders laughed all the way to the bank. But that is what we now have to face up to.

And those vested interests are still not telling us that straight-talking story. What is the story the corporate bosses, owners and their political stooges are selling us?

According to them, we should blame the poorest and most desperate of people, those risking their lives crossing to the UK because they are so desperate to escape poverty, often fleeing despotic regimes that are happy to use violence to ensure their people work in wretched conditions for dismal pay whilst enriching themselves.

The race to the bottom world is a lose-lose world for ordinary folks everywhere. We see a downward spiral of degradation of jobs and labour conditions both in the global south and the global north. The result is an increase in both inequality and outright poverty, with many previously comfortably off feeling the pinch, and many more seeing their offspring denied the life chances they had themselves. Dissatisfaction with the politicians we have seen steering us down this spiral is fertile ground for extremist, in some cases fascist, populists.

Punitive measures

Donald Trump’s solution is a reversion to classic colonialist tariffs and immigration bars against those of other races. Just like the Victorian political rulers of the British Empire he is using his country’s immense economic and military power to impose tariffs that shut out cheap imports from less rich and powerful countries and that protect industries within the USA itself. Meanwhile he has adopted cruelly fierce punitive measures against anyone with the temerity to try to go and live on the richer protected side of the border.

These bully-boy policies are to the clear disbenefit of the rest of the world. If they, as some economists fear, generate a world recession then these tariffs will also act to the detriment of the USA itself, although that as yet remains to be seen.

Tariffs are, however, a weapon that can be wielded to mutually beneficial effect as well as to destructive effect. But precisely because they are a double-edged sword, progressive thinkers and politicians, aware of their role in still-raw unfair colonial economic discrimination, have tacitly steered clear of them. Perhaps also they have been avoided because neoliberal economics has been so dominant that there seemed no point advocating progressive uses of tariffs when there was apparently no chance of them being taken seriously and adopted.

But now unfair tariffs are back on the agenda – and they are back big time! – there is a pressing need to make the case for fair, progressive tariffs that could benefit the whole world.

This think-piece aims to provide a small start in that direction. For the purposes of this discussion we shall use the term ‘progressive tariffs’, taking that to mean tariffs that seek to decrease inequality and increase the incomes of ordinary people everywhere. The foundation for such a tariff regime is the idea of an international minimum wage. Progressive tariffs are the tool to push the entire world to an equal minimum wage (equal, that is, in money or ‘dollar’ terms, not in terms of local purchasing power).

‘Fair’

Broadly speaking, such progressive tariffs may also be termed ‘fair’ in so far as they seek, through a levelling-up process, to arrive at an end point where wages and working conditions are equal everywhere. In the shorter term however, they are also necessarily ‘discriminatory’, in so far as the country applying them is creating a charge its own domestic suppliers do not face in order to bring suppliers abroad up to its own domestic minimum wage levels.

Under an international regime, which is what is required, the UK could expect not just to levy tariffs against countries with lower minimum wages but also to have tariffs levied against it by countries with higher minimum wages.

An international approach to minimum wages is not a new concept. Nearly a century ago, in 1928, a conference of the International Labour Organisation signed off a ‘Minimum Wage-Fixing Machinery Convention’ and asked its member countries to ratify it. But this convention only asked that governments establish ‘machinery’ to put in place minimum wages (i.e. official processes that could be used to establish them if decision-makers decided they wanted them).

It did not broach the idea that the wage setting should go beyond the borders of each state, let alone the logical idea that a single global rate was required to prevent a race to the bottom. And the whole thing was voluntary, not going anywhere near considering the obvious levers that would be required to implement and enforce a single fixed dollar value international minimum wage, such as tariffs or trade quotas.

Ambition

A giant step up in ambition from this approach is now required. Our approach to an International Minimum Wage has to offer a clear and self-evidently attractive alternative to the extreme right’s divisive and racist arguments that people should blame their financial struggles on migrants at the bottom of the pile. And it has to be as bold and tangibly effective as Trump’s tariffs – which are palpably damaging to all other countries than the USA and set to increase poverty around the rest of the world, including many poor countries with weak economies and vulnerable populations.

The only countries that are in a position to drive forwards an international minimum wage agenda are the powerful, richer countries of the world. And to make progress, it needs to be pursued with the same vigour that Trump has pursued a tariff agenda based blatantly only on America’s self interest. The opportunity is now there to negotiate multiple trade agreements with a rapidity never before considered possible. We live in a new world of tariff and trade agreements. A coalition of the enlightened is needed to take advantage of this.

The process should be clear and rapid so it can garner and keep public and political support. However, it should also be considerate to supplier countries that will need time to implement the international minimum wage, and which will not be able to do it as a single step.

Transition periods

One logical and reasonable approach would be for the countries with higher minimum wages to agree transition periods with supplier countries so they have a number of years (maybe a decade for those countries with furthest to go) to ratchet up their minimum wages bit by bit. In the first years the incentivising tariff could be set quite low, then escalating as high as required to guarantee action. A timetabled programme could be negotiated between pairs of countries of yearly minimum wage steps and enforcing tariff steps should those fail to be met.

Where will this process lead and what will it achieve? Over a period of years, wages will be levelled up towards those of countries with the highest minimum wages. It may be that some progressive countries with high minimum wages do not have sufficient economic clout for bigger economies to care about matching them, but that will be a small impact at the margins. The big win will be from abolishing the biggest disparities.

It is likely to require coalitions of countries and the EU to take on China. Might the USA ever come on board to promote this agenda? Although at first sight that appears unlikely, a future administration might, and even though Trump has his own shopping list of demands for tariffs, he is a wild card and may conceivably find it attractive to promote this approach to his followers and gain the moral high ground that could go with it, rather than his current international isolation and opprobrium.

Unions and other labour organisations will point out that working conditions, security of employment, environmental and health and safety laws are also part of the race to the bottom and also need to be levelled up to avoid unfair competitive advantages. This is true, but is also harder to monitor and enforce than a minimum wage. And an ultra-clear simple public messaging – à la Trump! – is needed to propel the policy at pace.

These other race to the bottom factors are important, however, and could be incorporated as a parallel track subject to separate enforcing tariffs. This would have the benefit of not introducing wriggle room and loopholes, which as climate negotiations on carbon offsets have shown, can easily become problematic and imperil the main agenda.

Campaigning

To get this off the blocks, and at pace, requires campaigning by supportive influencer individuals and organisations (and potential monied funders) to generate groundswell public support and, in the present  political situation, adoption by some senior politicians of suitably central orientation to pick up the idea and sell it to government.

This is a huge agenda. It is going to need a long hard push. But the global change it could achieve is also huge. And in his usual wild brash way, perhaps Trump has not only shown the need for it to counter his own damaging tariffs, but has also shown it is feasible