Having just looked at the global economy, and more precisely, the efforts of the great powers, in significant measure through the G20 to avoid a new Great Depression, I thought it might be useful to turn my sights on another critical area of global governance – in this instance trade.
Clearly a subset but a critical subset in the global economy, a fair bit of attention has been given over to the G20 efforts to declare their collective desire to avoid protectionism since the start of the Great Recession. Now it is fair to say that of course Leaders had the historical experience of the Great Depression to draw on which saw in the 1930s the rising tide of trade protectionism that walloped the global economy in that era.
But notwithstanding the efforts, largely successful, of the great powers to restrain their trade protectionist impulses, the inability of the World Trade Organization (WTO) to advance, and eventually complete – or alternately to abandon – the Doha Round of negotiations has become all too evident leading many to reflect on the failure of international trade. The Doha Round, begun in 2001, is seen as the evident failure of this international institution and the failure to advance trade policy in the international system for the benefit of all.
Now to a degree this conclusion that the trade system is broken is misplaced. Trade liberalization in the post war world has been an enormous success. From 1990 to 2008 trade grew an average of 6.0%. A sterling record. Global trade – not necessarily the global trade system including the WTO – has been a significant factor in global economic growth.
The same cannot be said for the WTO itself. The conflation of the system with global trade has been only too evident. And I suspect it was one of the key reasons that the Bali package was received with such enthusiasm following agreement at the Ninth Ministerial Conference in 2013. It was after all the first agreement that had been reached in over 20 years and the first tangible agreement in the Doha Round that had been commenced so long ago. Four areas were agreed upon – trade facilitation, agriculture, cotton and development and least developed country issues.
But the ‘back slapping’ all ended abruptly when India – the new Modi government – refused to accept the Trade Facilitation Agreement – demanding a resolution of the question of food security. Otherwise, quite sensible commentators such as Rajiv Kumar (August 7, 2014) a Senior Fellow at the Centre for Policy Research. and the former Director of ICRIER and former Secretary General of FICCI argued the following: “At the WTO, the Modi government has rightly asserted its sovereign right not to be bulldozed in to signing on the dotted line.” Absolutely true but a statement of the failure of the collective effort to enhance global trade. And I would argue unnecessary since countries has agreed to a standstill on food subsidy while a final agreement was worked out.
So what does this Indian action mean? Is this just a tactical move and we will see India reversing itself in relatively short order? Or is this just another action that underscores the failure of yet another international institution?
Well if it is the latter, I was reminded of the view recently expressed by a number of colleagues ( Thomas Hale, Oxford, David Held, Durham and Kevin Young, University of Massachusetts at Amherst) that published a book with Oxford examining global governance and its institutions: Gridlock: Why Global Cooperation is Failing When We Need it Most. In sector after sector in global governance the authors chronicle apparently the same phenomenon afflicting contemporary global governance – “gridlock” according to these authors. Surveying the various global issues the authors find:
… countries have proven unable to cooperate effectively on issues of pressing global concern: the acute economic disparities across, growing economic imbalances within and across countries, the lack of effective environmental governance in a world increasingly vulnerable to climate change, the proliferation of nuclear arms and the basic insecurities that persists from violent conflict, to name just a few. … This book represents a breakdown of global cooperation that we call gridlock. As used in this book, the term refers to a specific set of conditions and mechanisms that impede global cooperation in the present day. The rise of new powers representing a more a more diverse array of interests makes intergovernmental agreement more difficult. The problems themselves have also grown harder as global policy issues penetrate ever more deeply into core domestic concerns. Existing institutions, created for a different world, have locked in dysfunctional decision-making procedures, while the proliferation of different organizations renders the institutional architecture ever more fragmented.
For the authors gridlock appears to arise in part due the previous success of institutional creation. So as the authors suggest:
… the mechanisms we consider are historically contingent, specific to global governance today. Indeed, many are in part products of previous, successful efforts to cooperate across borders. Global governance, that is growing institutionalization, has fed and deepened interdependence and in turn the interdependence has led to greater international institutionalization. The growth in the multilateral institutions now impedes their effectiveness.
For the authors gridlock across significant areas of global governance is endemic. It is apparent in the trade area. As the authors suggest:
International trade integration has reached incredible heights, also thanks to the institutions we have put in place which avert the worst forms of protectionism. Yet global trade deals have stalled, and are plagued by incredibly difficult problems that are the very result of such earlier successes. The next section argues the case for seeing such gridlock in contemporary global economic governance, pointing out the multilayered manifestations of the problem.
But I am not sure their notion of gridlock really explains the difficulties we see. First, as I pointed out trade growth has been a great success, Doha Round or no. Now that may becoming to end – recent trade growth has been anemic – but it is hardly a reflection on the WTO. A greater diversity of interests may be part of the problem, but I suspect the real culprit is the decision rule in the system. Now India is a significant player today – and wasn’t before – but so many members represent so little in global trade that the requirement of near consensus is hardly sensible. Also, the authors pay little attention to the Rise of the Informals. But it is exactly these informal institutions – whether G7, NSS or G20 or whatever, that today represent the means to contemporary decision making in the international system. And the informal trade structures have broken down over the decision making requirements.
So our colleagues look back without seeing the evolution in multilateralism. The road is tough but not I think gridlocked.