How to save democracy and the climate with the same idea

China is a dictatorship. Most recent evidence: Human rights groups say that China has detained more than one million Uyghurs (a mostly Muslim ethnic group in the north-western region of Xinjiang) against their will over the past few years in what the Chinese state calls “re-education camps” and sentenced hundreds of thousands to prison terms. 

What can Europe do about it? 

For a long time, the USA and Europe relied on change through trade. At least in the case of China, this hasn’t worked. On the contrary. China’s economic rise has consolidated the regime’s power.

So if change through trade has failed, what strategy should we then choose to shore up democracies and fight authoritarian regimes?

With the quote “freedom is more important than free trade“, NATO secretary general Jens Stoltenberg created a lot of fuss at the World Economic Forum in Davos this week. Is this the new mantra that we must choose between free trade and freedom? 

A new strategy is sought. One with trade still playing a central role. Simply because trade is the major link between states. One side’s actions affect the other side’s. So there is a lot of power in trade policy.

But how can trade policy promote democracy?

A look at climate policy could help. There, states have to find solutions to save the climate. No country can impose rules on another. Because states are sovereign. But smart countries apply strong incentives. 

William Nordhaus, the winner of the Nobel Memorial Prize in Economic Sciences in 2018, is known for the idea of founding a club to fight the main reason for the climate change problem: free-riding. 

Free-riding occurs when a party receives the benefits of a public good without contributing to the costs. In the case of the international climate change policy, countries have an incentive to rely on the emissions reductions of others without taking proportionate domestic abatement.

Nordhaus proposes a club model for climate cooperation to address the free-riding problem. Club members – those countries that move first to take climate action – would be rewarded and protected from competitive disadvantage. Members would harmonise their plans to reduce greenhouse gas emissions and work toward a shared goal. On the other hand: Nations that do not meet their international obligations to reduce emissions would be expelled from the club. They would incur penalties, such as a levy on exports to club member nations.

Nordhaus’ club model for climate cooperation could be the blueprint for saving global democracy. Democratic states join together to form a free trade zone. Only those who meet democratic standards are allowed to participate. Tariffs are imposed on those not part of the club of democratic states.

This would provide a strong incentive for more democracy. 

If you, as a ruler, strive for more economic prosperity, you have to introduce democratic structures. State leaders with signs of authoritarianism could at least decide whether they want to secure their power through widespread approval (economic boom creates approval for existing rulers) or through repression.

Such a new world order would be a threat to our prosperity today. China (18.0 per cent) is currently the largest exporter in the world, followed by the EU (15.4 the United States (10.0). 

With such a new world trade order, supply chains would have to be rebuilt entirely, and some raw materials would disappear entirely from the world market of the free states.

That is why a world trade order promoting democracy needed a long time in advance. Everyone involved should be able to adapt to the new rules. Authoritarian states, in particular, should be given the opportunity to change. In the best-case scenario, both could then increase: free trade and democracy. 

In such a new world, there would no longer be the choice between freedom OR free trade. There would only be these two choices left: no freedom AND no free trade (for repressive states) or freedom AND free trade (for and between democratic states).


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