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Financialization, Trade, and Investment Agreements:
Through the Looking Glass or Through the Realities of Income Distribution and Government Policy?
Alex Izurieta, Pierre Kohler, Juan Pizarro
GDAE Working Paper 18-02
September 2018
Download the Working Paper

This paper assesses the effects of trade and investment agreements on income distribution and government policy. The critical process underpinning these effects is the rise of ‘financialization’. Global patterns of greater financialization and of worsening functional income distribution as well as tighter fiscal stances are identified in the data. Tests are conducted by combining financial statistics with databases of bilateral investment agreements and free trade agreements, as well as data generated by the UN Global Policy Model that encompasses several fiscal policy instruments. The empirical validation of these relationships brings to the fore the policy-oriented debate about the purported benefits of modern 'comprehensive' trade and investment agreements such as TTIP, TTP and CETA. The authors corroborate the findings of their respective earlier studies of these agreements and reiterate their call for caution. To preserve policy space and to avert increases of inequality, policy-makers should resist pressures to get their economies locked in such agreements and should look instead for sustainable forms of international policy coordination.

About the U.N. Global Policy Model:
Documentation and papers about the UN Global Policy Model are available on UNCTAD's website. [Note a log-in pop-up may appear; you can dismiss this by clicking "Cancel".]

Related Policy Briefs, Articles, Reprints:
Overcooked Free-Trade Dogmas in the debate over TTIP, Jeronim Capaldo, May 2, 2015 [Available in German]
TTIP: European Disintegration, Unemployment and Instability, Jeronim Capaldo, Queries, Spring 2015
For recovery, Europe needs to support labour not trade, Jeronim Capaldo, Government Gazette, March 18, 2015
Disoccupazione, diseguaglianza e instabilità. L'impatto del TTIP, Jeronim Capaldo, Italianieuropei, January 12, 2015
TTIP: European Disintegration, Unemployment and Instability, Jeronim Capaldo for the Foundation for European Progressive Studies, Economic Policy Viewpoint N.10. December 18, 2014
TTIP may lead to EU disintegration, unemployment, instability, Jeronim Capaldo, Reprinted in Third World Economics, November 2014

Further Analysis:

Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement, Jeronim Capaldo, Alex Izurieta, and Jomo Kwame Sundaram, GDAE Working Paper 16-01, January 2016

Trade Hallucination: Risks of Trade Facilitation and Suggestions for Implementation, Jeronim Capaldo, GDAE Working Paper 14-02, June 2014

Support to WTO Trade Facilitation Agreement is Insufficient or Misdirected, Jeronim Capaldo, GDAE Policy Brief, July 25, 2014

Will the WTO fast-track trade at the expense of food security?, Timothy A. Wise and Jeronim Capaldo, Al Jazeera, July 24, 2014

The Uncertain Gains from Trade Facilitation, Jeronim Capaldo, GDAE Policy Brief 13-02 December 2013

Read more on Modeling Policy Reform
Read more from GDAE’s Globalization and Sustainable Development Program

The Global Development and Environment Institute’s Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.

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