The “New” in New Multilateralism: A Reflection on Stein and Wolfe and adding Ikenberry

Somewhat surprisingly Art has chosen, in part,  to assert a structural explanation to the New Multilateralism – shades I guess of Grand Startegy.  He suggests that part of the “new” is: “historical institutions are dealing with a quite different distribution of power and any new instiutional arrangement will be constructed in the shadow of hegemony (I use this formulation to get across that it is not simply the current distribution of power, but also expectations about the future distribution of power that matter for institutional design today).”

Not surprisingly, Bob accepts the change in the distribution of material power but then asserts that the change in the distribution of power, presumably, currently or in respect to possible expectations for future distributions of power, do not necessarily give rise  to  a new multilateralism as an -ism.

First I don’t see why its structure as opposed to behavior most notably the behavior of the current Administration that explains the difficulties in collective action whether from a security or from a political economy framing rather than the change in the material distribution of power.

And here I turn to one of our colleagues John Ikenberry and a relatively recent contribution he made entitled “Grand Strategy as Order Building” at the America Abroad blog at TPM Cafe (see Links on the left frame).  For John one of the problems in current US foreign policy is that it  insuffuciently recognizes the need as hegemon even in, maybe because of the post September 11th world, to as the hegemon, “…to support support global rules and institutions, provide public goods, and bring countries together to solve problems.  In this sense, I am a American hegemonist to be sure – that believes that the world does not need to fall back to a more traditional balance of power system. But my point is that too remain the leading state the United States has to believe in enlightened ways that will keep it at the center of the global system.”  John argues that the US is likely to remain the hegemon, “[b]ut America’s relative power advantages will decline over the long term.”  In addition he argues that the US is not automatically indispensible.  If the US, according to John, “neglects its liberal hegemonic duties,” and fails to provide the enlightened behaviors then the US will find itself increasingly at odds with other states and these states will find ways to oppose and to work around the US.  For John then assuming the correctness of the above – the contingent indispensability of the US and its relative decline (obviously this will vary according to different dimensions of security, economy etc.) then the way is clear, and its behavioral – “the United States should be investing today in the rules and institutions of the global order – making itself indispensable and laying the ground work for a world where other global powers lurk.”  Thus for John grand strategy is the US,  “…wielding its power to craft consensual and legitimate mechanisms of international governance.”

Thus it is structure with behavior and I would suggest Art can find a more fruitful way forward by his remembering his own words in September at CIGI.  There he talked about “effective multilateralism.”  He posed the question unanswered then but usefully needing some illumination now on how to form appropriate institutions.  At that earlier September meeting  Art raised the question whether it was possible to use old institutions, or was it necessary to formulate new institutions.  Furthermore he suggested that new institutions come in various possible forms – new formal but also new ad hoc.  And if ad hoc then are they closed or open,  can they be regional or should they be global and if global in which dimensions – security, economic, etc.

I suspect new multilateralism revolves around US behavior first and then instrumental choices next.

The Legacy of Bretton Woods

CIGI Conferenc, Waterloo, Ontario June 9-10 2006

The “par value” exchange rate system designed in 1944 ended long ago, but the legacy of Bretton Woods persists in the International Monetary Fund, particularly in its core surveillance function. From the beginning, political struggle has shaped its evolution. Its trajectory, especially after 1973, signaled a continuing attempt by the Fund’s most powerful member-states to find the golden mean in a globalizing economy between binding monetary rules and unbridled national discretion. Principled intentions and ambiguous consequences have been its hallmarks, ever since a process of formal multilateral consultations on exchange rate matters gave it birth. That it remains the subject of tough criticism, sharp debate, and regular reform efforts, even as memories of the original rules and purposes of the par value system fade, suggests the endurance of the normative quest begun at Bretton Woods. As my friend David Andrews argues in a book we are working on, the “binding agent” at Bretton Woods was an “overriding commitment to the establishment, and later the maintenance, of a cooperative international monetary order consistent with two goals: a maximum degree of national policy autonomy and a massive expansion of international trade.” The experience of competitive currency depreciation during the inter-war period had left the strong impression that such an order entailed the development of consensual rules to guide the re-opening of national payments systems and an institutional mechanism to monitor those rules and encourage monetary cooperation. In the first section of the first article in the IMF’s founding document, its member states agreed “to promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration.” Upon this base developed what would become the core mandate and mission of the Fund.

Like an academic department comprised of tenured colleagues who do not necessarily all enjoy one another’s company but who soon come to realize that some minimal level of compromise is in their personal interest, the actual process of monetary collaboration in the Bretton Woods order depended on the existence, but not always the effectiveness, of an administrative entity. Like a department chair, the Fund’s own autonomy would be limited, both constitutionally and in evolving practice. It would, stand for certain principles. It would have privileged access to knowledge that could not always be fully shared. And it would have to be endowed with the legitimate authority to mediate and adjudicate, with the technical ability at best to forestall and at least to manage crises, and, in principle if not in always in practice, with the capacity to sanction. In a world of integrating markets and still-sovereign polities, the Fund’s delegated authority would have to be clear and universally applicable even if its actual power would remain ambiguous and variably applied. In this light, the historical discontinuity between what preceded the 1944 Bretton Woods agreement and subsequent practice remains sharp, sharper in a fundamental sense than the 1973 break in the par value exchange rate system.

Despite persistent external criticism concerning the scope, terms, and effectiveness of the Fund’s main role in the monetary system, member states have never moved to abolish it. To the contrary, formal reviews have been undertaken regularly since 1977, and the conclusion is nearly always the same: Fund surveillance remains central and should be enhanced and reformed.

Heightened attention both inside and outside the Fund has lately also been given to increasing the transparency of the surveillance process, heightening the candor of Fund advice, and (sometimes by the same critic in the same breath) encouraging humility among Fund management and staff. In truth, such ‘enhancements’ would typify the modest incrementalism that has characterized the evolution of Fund surveillance from the beginning. Member-states and critics always seem to want more from the Fund, what they mean by that is often contradictory, and no one is fully prepared to endow this or any other intergovernmental institution with the actual supranational power necessary to match the most ambitious aspirations for its legal authority.

Prominent voices have recently reiterated Keynes’ famous admonition that the Fund must be less in the business of banking and more in the business of “ruthless truth-telling,” that it had to become an “independent umpire” articulating and “policing” the “rules of the game.” Such advocacy is well-intended, even if ironic considering its source in key G7 central banks, but far from novel. The more serious challenge to Fund surveillance is the gathering erosion of normative solidarity represented by a proliferation of regional competitors and alternative forums with selective memberships and weak or non-existent secretariats.

After the emergence of the euro, European members understandably shifted their attention away from Washington toward Frankfurt, even as they demonstrated little interest in reducing their formal stakes in an IMF seeking ways to reform its internal governance. More recently, key East and Southeast Asian states indicated serious interest in constructing a regional system for voluntary consultations, technical assistance, and temporary financing. Parallel efforts in Africa and Latin America periodically gain and lose momentum. Ted Truman, in his new book on the subject, asks the key question: “Can the global monetary system function effectively with more than one set of understandings, conventions, and rules, for example about the trade-off between financing and adjustment or about the ultimate goals of capital account liberalization?”

At this moment, and hardly for the first time, the Fund seems to be going through an identity crisis. What should give us all pause to reflect is the following statement made last June at a BIS conference: “Under its rules, the IMF has responsibility for the exchange rate system and for preventing countries from using undervalued exchange rates to promote domestic employment objectives. Current policies in many Asian countries surely call for more effort by the IMF to enforce this rule. On the other hand, Asian countries are surely correct when they claim that the US national saving rate is a cause of imbalances. And US policymakers are correct when they claim that slow growth in Europe and Japan are part of the problem. Each is correct. That’s why a multilateral solution to put the world economy on a more stable path is both desirable and probably necessary.”

The speaker was none other than Allan Meltzer, the same conservative critic who wanted sharply to curtain the role of the

Fund just a few short years ago. The aspirations and the frustrations of Bretton Woods live on. QED.

Excerpted from: “IMF Surveillance and the Legacy of Bretton Woods,” in Bretton Woods Revisited, edited by David Andrews, under review.

Louis Pauly, University of Toronto

Defining Disapproval and Looking at Reform

So Art has now clarified his thinking on the unilatreral/multilateral disjuncture.  It is clear that Art avoids looking just at acting alone in the case of unilateral.  So the distinction – or in otherwords legitimate action –  is embedded in  the absence of disapproval by other states rather than the number of countries that join in and/or how much these states contributed to the action.  In this view then legitimacy is the “critical” states not opposing (this is actually a  form of consent where parties are not willing to stand in the way even where they are unhappy with the action) presumably Gulf War I and where states will stand in the way of action e.g. France and Germany standing in the way of the second resolution and American action in Iraq – Gulf War II this is then unilateralism. Now if unilateralism concerns state action in the face of ‘significant’ disapproval and multilateralism is action without disapproval what then is the distinction as the disapproval of one or Continue reading

What’s new in multilateralism?

I think that the current system is multilateral, which shapes how actors perceive what is appropriate. States do not invent a new response to each new problem. I have been puzzled since last fall, therefore, by the concept of a “new” multilateralism. Does this refer to the generic institutional form, or to the concrete shape it takes in a particular context? Recent posts by Art Stein leave me even more puzzled.

As an empirical proposition, Alan Alexandroff was right to suggest that Stein’s formulation might not apply to Canada, since we do not normally see multilateralism as an alternative to unilateralism. Only a power that believes itself to be (potentially) hegemonic has the ability to consider the possibility of unilateral action. Only a U.S. administration like the present one, that no more thinks in terms of an international “system” than Margaret Thatcher understood “society”, would even dream of as many unilateral options as it does. In a similar conceptual fuzziness, some writers conceive of the options in the response to problems in the control of inter-state violence as multilateralism vs. unilateral “preventive war”. If this opposition were useful, Patti Goff would be right to wonder if the use of force is fundamentally at odds with multilateralism. But surely collective security whether at the UN or NATO must envisage the use of force.  

Participants in this project might benefit from more discussion on this core idea, if a “new multilateralism” provides the reason we wish to argue for “global institutional reform”, though we can easily think of other motivations for the project. Here are three:

1)     the rise of new powers (e.g. BRICSAM) necessitates reform of international organizations

2)     globalization means that every state now wishes to be an activate participant in global governance, which requires a re-ordering of international organizations

3)     the basic structure of international organization was created in an earlier era, and the exiting organizations are old and tired, therefore global institutional reform is needed.

These three are not mutually exclusive, and none require consideration of a new multilateralism. So what does this phrase mean?

For realists of the Wall Street Journal persuasion, as for American sovereignists, “old” multilateralism is associated with universalism. Coalitions of the willing are a “new” multilateralism because they include no more countries than needed for the task at hand, and nobody (other than the USA) has a veto, especially not the French or the Russians. On the left, “new multilateralism” seems to mean a radical restructuring of multilateral institutions from the bottom up. In Canada, where the term was used in the Martin government’s foreign policy review, new multilateralism seems to refer to a diplomacy oriented to promoting democracy, public health, and sustainable development. Before offering some thoughts on our key term, let me offer some comments on recent posts.

Art Stein March 8

When people talk of multilateralism or the lack of it, they really have in mind the US and whether it is going it alone or in concert with others.  The US is the LRS (the lone remaining superpower), and thus other countries have a heightened interest in the US acting in concert with them rather than going it alone ….  For the US to act in concert with others, it must have an interest in doing so; any argument today about mutlilateralism has perforce to start with an argument about the interests of the US in doing anything but going it alone.
Wolfe comment

There are few issues on which the USA actually tries to go it alone, and few where it succeeds. Any argument about multilateralism and the USA, therefore, should actually start with the wide array of situations where that country does respect global norms, or seeks to work with others. There is a question of form and substance here. Americans (especially in Congress) do not like to believe that foreigners, even a treaty or an international organization, could compel the USA to do anything. In practice, U.S. action is often shaped by multilateral norms and rules as much as any other country, even if officials are not required to admit it.  

Art Stein March 20

When we talk about multilateralism then we mean more than a set of states combining their capabilities to achieve some objective.  We also have in mind the legitimacy that comes from states acting in concert because their objectives are not particularistic national interests but common interests.

This raises a number of issues about multilateral concerted action.  How many states are needed to achieve the legitimacy that multilateralism is intended to provide? Conversely, how much opposition and by how many and whom undercuts the legitimacy of multilateral efforts?  Moreover, does multilateralism require more than merely a signal of commitment?  The US obtained many signatories in the second Iraq War and even small and medium contributions and yet was seen as acting unilaterally?  Why was that?

Wolfe comment:

First, multilateralism is legitimate in itself because it is now deeply embedded in the constitutional structure of contemporary global order. The procedural norms of the society of states include notably sovereign equality and the peaceful settlement of disputes. The legitimate use of military or economic force other than in self-defense requires collective authorization. Action can be legitimate, in short, because it is multilateral.

So why was Iraq-2 seen as unilateral? Because it was unilateral, for reasons beyond an apparent unwillingness to wait for the Security Council to act. It was more that the Security Council was the concrete embodiment of a global discussion about how best to act against what might well have been a threat to collective security, but the USA was clearly not listening to the discussion, because there was no sense that the USA was open to being persuaded: it simply wished to get UN blessing for an action it had already decided to take.

Finally, multilateral need not mean universal, and legitimacy need not mean that all states agree. The familiar K group ideas are relevant to multilateral legitimacy as they are to action.

Art Stein May 2

All this implies that multilateralism, if it is to mean joint action in dealing with problematic global issues, must entail not only agreement on core values but also on the means of achieving desired outcomes in world affairs.  And does this imply that the price of multilateralism is the broad acceptance of the least common denominator when there is disagreement among a core group of states (however that core is defined) about tactics?  Is the price of multilateralism that it is subject to a unit veto?  Is it possible to sustain multilateralism on the basis of agreement on principles and values and objectives but with a recognition of divergent tactical approaches?

Wolfe comment:

Surely the answer to the last question is yes. Indeed Michael Walzer might argue that the only way to buttress democracy and avoid tyranny is to ensure that the answer is yes. He envisions a “third degree of global pluralism”, a possible future attempt “to overcome the radical decentraliza­tion of sovereign states [in anarchy] without creating a single all‑powerful central regime.”   The solution is, “create a set of alternative centers and an increasingly dense web of social ties that cross state boundaries,” … building “on the in­stitutional structures that now exist, or are slowly coming into existence, and to strengthen all of them, even if they are competi­tive with one another.So the third degree of global pluralism requires a U.N. with a military force of its own capable of humanitarian interventions and a strong version of peacekeeping ‑ but still a force that can only be used with the approval of the Security Council or a very large majority of the General Assembly. Then it requires a World Bank and IMF strong enough to regulate the flow of capital and the forms of international investment and a WTO able to en­force labor and environmental standards as well as trade agree­ments ‑ all these, however, must be independently governed, not tightly coordinated with the U.N. It requires a World Court with power to make arrests on its own, but needing to seek U.N. sup­port in the face of opposition from any of the (semi‑sovereign) states of international society. Add to these organizations a very large number of civic associations operating internationally, in­cluding political parties that run candidates in different coun­tries’ elections and labor unions that realize their long‑standing goal of international solidarity, as well as single‑issue movements of a more familiar kind. The larger the membership of these associations and the wider their extension across state bound­aries, the more they would knit together the politics of the global society. But they would never constitute a single center; they would always represent multiple sources of political energy; they would always be diversely focused. Now add a new layer of governmental organization ‑the re­gional federation, of which the EC is only one possible model. It is necessary to imagine both tighter and looser structures, dis­tributed across the globe, perhaps even with overlapping mem­berships: differently constituted federal unions in different parts of the world.”

 

For Walzer’s “pluralism” substitute “multilateralism.” Multilateralism, Ruggie argued, should be understood as a generic institutional form which coordinates relations among three or more states on the basis of “generalized” principles of conduct–that is, principles which specify appropriate conduct for a class of actions, without regard to the particularistic interests of the parties or the strategic exigencies that may exist in any specific occurrence. It follows that there is an agreed indivisibility among the members of a collectivity with respect to the range of behavior in question and that there is an expectation of “diffuse reciprocity.”   The concept of multilateralism here refers to the constitutive rules that order relations in given domains of international life. Within this architectural form there are “regimes,” which are more concrete than an order (typically, the term “regime” refers to a functional or sectoral component of an order) and formal international organizations, which are palpable entities with headquarters and letterheads.

Has this generic institutional form changed? I don’t think so, but it is generic. In my contribution, I look at the changes that motivate discussion of reform of the WTO. And need we worry that disagreements about life within an international organization endanger multilateralism? I think that the U.S. government has been unduly criticized on such grounds—the institution is too robust to be endangered by the actions of one administration, even if the current UN ambassador succeeds in doing real harm to the UN as an organization (as some suspect he will).

– Robert Wolfe

The WTO after the Doha Round: is institutional reform necessary?

This paper examines global governance through the lens of the World Trade Organization (WTO), the international organization at the centre of the trade regime. Whether the current Doha Round of multilateral trade negotiations succeeds or fails, when it is over many governments and observers will ask whether the round’s difficulties indicate a need for reforming the WTO, or putting it out of its misery. This paper will begin from a governance standpoint: does the world need the WTO? If the answer is yes, does the WTO we have, work? Is the WTO in its continuing operations relevant, or legitimate? Is the current organization the best way to structure future multilateral trade negotiations? This paper will not comment directly on whether the political economy of the trading system favours protectionism or further liberalization. Instead it asks whether the institutional design of the WTO is suitable for the tasks Members are likely to assign it. In the context of the “new multilateralism” addressed in other papers, it will evaluate the need and prospect for governance reform, starting with a critique of the Sutherland Report. Taking the Doha Round as a reference point, what do we learn about a) economic institutions in their own terms; and b) the changing role of old and new great powers within them? The focus is trade, but investment is considered in the context of the difficulties, which may have institutional design roots, of adding new issues to the WTO agenda. While centred on the WTO, the paper will consider the impact of the proliferation of regional and bilateral negotiations on trade governance.

Written by Robert Wolfe

How To Engage the Middle Kingdom in the New Multilateralism

Very recently Minxin Pei, Senior Associate at the Carnegie Endowment for International Peace reminded us in his “sober” and sobering analysis of China what a difficult issue China poses. In his Financial Times article of February 24, 2006 called “China is Stagnating in Its ‘Trapped Transition’ ” and also in the “Dark Side of China’s Rise,” in the current March/April 2006 issue of Foreign Policy reminds us about, ‘the anomolies of the Chinese economic transition’ and the failed efforts at democratization. Pei suggests “the ruling elites have little interest in real reforms. They may pledge reforms, but most such pledges are lip service or tactical adjustments aimed at maintaining the status quo.” And in the economic sphere Pei points to the bottom line: not withstanding the economic structural reforms the Chinese state still, “owns 60 per centof fixed assets and dominates vital industrial sectors, from financial services to energy. Today, Beijing’s guiding principle Continue reading

Petrocapital – A Threat to Capital Markets and Globalization

Jim de Wilde, a GIR Community Member, is delivering a very interesting speech in the next few days at the Haskayne Business School at the University of Calgary (note the location). Jim, today a venture capitalist (very important) and a long-time Liberal (less important) has a very important take on the impact of petrocapital on capital markets. He suggests that the source of capital is important. He raises it by identifying capital that is, “…just non-productive capital resulting from resource rents and geological roulette? How does the concentration of newly-formed capital in the hands of a few Continue reading

What’s Wrong with this Picture – The Dubai Ports Deal and Global Markets

Well it’s good to be reminded that populist pandering is not dead and definitely not in the United States. A severe case of it was identified in the US Congress and spread rapidly to Republicans and Democrats alike in Washington and in the country over the question of DP World’s acquistion of port’s management for US terminals including some of the biggest – New York, Newark, Baltimore and Miami . The issue may well have been defanged for now by the decision of the Emir of Dubai to sell or transfer control to an American-owned entity.

The real question is – what is the critical question over the terminal lease acquisitions. There certainly is a security issue for US ports. But the fact that DP World was acquiring the leases was a red herring. The fragile security protection is Continue reading

American World Order by Martin Walker on Michael Mandelbaum

Martin Walker is very good at describing in summary form what Michael Mandelbaum advocates in his book: “He explains cooly and clearly the various ways in which the United States now functions asa global government, offering the planet the services of physical security, commercial regulation, financial stability and legal recourse that are normally provided by national governments to their citzens.”

While Mandelbaum identfies the growing weaknesses in America’s leading management role and points with alarm to the growing doemstic bill that America is generating now and for the future in the out-of-control social spending, Mandelbaum argues that there is no credible alternative to the American role as, “linchpin and guarantor of the global system.”

Is it that simple? To the degree America asserts leadership international stability is assured and to the degree it does not – growing chaos can be expected?

Opening the Dialogue on New Multilateralism

The Global Institutional Reform Workshop (GIR) or at least the label that we settled on (it’s royal “we” I’m afraid – I thought it up, I admit) began as an idea when I realized the release of a number of reports and analyses in close proximity, e.g. Sutherland, High Level Panel, 2020.   These reports looked at the future of global security and economic relations.   It will not come as a big surprise that most of these Reports struck me as inadequate.   That being said, I thought it was vital that a conscientious group of experts – you examine the reports and bring an assessment and evaluations that seemed to be missing from the immediate efforts.  

With the assistance of a number of our CIGI colleagues, Daniel Schwanen in particular, we launched an initial session in September 2006 at CIGI in Waterloo Canada.   CIGI is the place for us to undertake such a Project.   With a mandate Continue reading