Re-embedding Liberalism: Introducing 'Passporting Fees' for Free Trade

Abstract

Trade liberalization has proceeded on the assumption that eventual aggregate welfare gains will exceed the losses. While compensatory mechanisms exist in most countries, they tend to be underfunded and ineffective. To begin to address this problem, the direct beneficiaries from trade liberalization need to pay more than they do now. This essay proposes to introduce “passporting fees” to generate more public revenue. Transnational business actors would be required to obtain a “free trade passport” to receive the excludable benefits that a free trade agreement provides. This would change the political economy of trade radically and allow for the creation and expansion of compensatory mechanisms necessary to re-embed economic liberalism in systems of social protection.

Keywords: globalization, passporting, trade, embedded liberalism, Ruggie, winners and losers, multinational corporations

JEL Classification: F02, F1, F13, F15, F23, F55, F60, K33, O24