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Biden Trade Protectionism

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There is a continuing interest in capturing the state of the current global political economy and the global economic policymaking of the major states – the US, China, India, Brazil, Europe, Japan, Korea, and others. Not surprisingly the debate is most active in the US. Experts and officials alike are intent in describing current Biden Administration policy. Most recently some experts have been labeling the global economic framework as ‘post- neoliberalism’, defining it, apparently, in contradistinction to the previous dominant policy framework – ‘neoliberalism’.  The dilemma of course is a definitional one as much as anything else  – the terms are well known, their meaning not so much. 

Recently, colleagues of mine have kicked off a discussion. One, Dan Drezner, from the Fletcher School and the Substack ‘Drezner’s World’ has waded into the policy mix, actually in an article from Reason titled, “The Post-Neoliberalism Moment”. As Dan early in the piece thought to frame first neoliberalism he suggested the following: 

The term neoliberal has been stigmatized far more successfully than it has been defined. For our purposes, it refers to a set of policy ideas that became strongly associated with the so-called Washington Consensus: a mix of deregulation, trade liberalization, and macroeconomic prudence that the United States encouraged countries across the globe to embrace. These policies contributed to the hyperglobalization that defined the post–Cold War era from the fall of the Berlin Wall to Brexit.

Dan made it clear, however, that this economic model no longer dominates: 

In the 16 years since the 2008 financial crisis, neoliberalism has taken a rhetorical beating; New Yorker essayist Louis Menand characterized it as “a political swear word.” Until recently, no coherent alternative set of ideas had been put forward in mainstream circles—but that has been changing. 

And what has been the replacement, well Dan suggests that its the politicians and officials that have been most active in leaving neoliberalism behind:

These ideas are being shaped by powerful officials. The primary difference between Biden and Trump in this area is that Trump’s opposition to globalization was based on gut instincts and implemented as such. The Biden administration has been more sophisticated. Policy principals ranging from U.S. Trade Representative Katherine Tai to National Security Adviser Jake Sullivan have been explicit in criticizing “oversimplified market efficiency” and proposing an alternative centered far more on resilience.

For elements of this policy transformation one need only look to recent Biden Administration policies including the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act. As Dan concludes, the totality of these policy initiatives is: “all represent a pivot to industrial policy—a focus on domestic production.” 

In constructing this post-neoliberalism model, folks argue that there is a necessary trade-off between resilience and efficiency. As Dan suggests: “A key assumption behind post-neoliberalism is that policy makers can implement the right policies in the right way to nudge markets in the right direction.” 

Now another colleague of mine, Henry Farrell from Johns Hopkins, tries his hand at a definition in a recent Substack Post at his ‘Programmable Mutter’, titled, “If Post-Neoliberalism is in Trouble, We’re all in Trouble”. The Post partly responds to Dan, and further articulates Henry’s view of post-neoliberalism. As he describes it: 

A key assumption behind post-neoliberalism is that policy makers can implement the right policies in the right way to nudge markets in the right direction. … I see post-neoliberalism less as a coherent alternative body of thought, than as the claim, variously articulated by a very loosely associated cluster of intellectuals and policy makers, that markets should not be the default solution. … More generally, post-neoliberalism isn’t and shouldn’t be a simple reverse image of the system that it has to remake. It can’t be, not least because it has to build in part on what is already there.

The dilemma, as I see it, for understanding any of these  post-neoliberalism models, and also, though less intensely – neoliberalism, is pretty much all definitional. The base of the problem is not really understanding what ‘resilience’ and ‘efficiency’ really mean. And that in turn causes confusion over trying to then understand ‘globalization’.  And that unfortunately builds vagueness into our understanding of these economic models especially over what we are to understand to be – post-neoliberalism. 

But what isn’t so difficult to understand is the problem that has been created in this post-neoliberal period by current trade policy especially as seen in the United States. Layer it as much as you can but the Biden Administration policy is ‘protectionist’ and the Trump Administration, was, and will in all likelihood be, even more protectionist if Trump is returned to office in late 2024. As Inu Manak has written in a recent piece for the Hinrich Foundation in Australia – a foundation focused on global trade: 

Trade has become toxic, not just on the campaign trail, but in the way that it is discussed by both Democrats and Republicans. “Traditional” US trade policy, which began to form its nearly century-old roots under the leadership of President Franklin Roosevelt and his Secretary of State, Cordell Hull, has been described by US Trade Representative Katherine Tai as “trickle-down economics,” where “maximum tariff liberalization…contributed to the hollowing out of our industrial heartland. … The current US approach to trade, if it can be called an approach at all, risks weakening US influence abroad and economically disadvantaging Americans at home. It rests on the false belief that retrenchment of “traditional” US trade policy—by putting America First or catering to a select group of US workers and branding such efforts as “worker-centric trade policy”—will somehow restore the United States to a position of hegemonic dominance with no peer competitor. 

The Biden Administration’s allergy to new trade policy initiatives can be seen in its Indo-Pacific economic strategy – the IPEF – the Indo-Pacific Economic Framework for Prosperity. This framework is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for the fourteen countries negotiating the IPEF. The countries included are: Australia, Brunei Darussalam, Fiji India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam with the United States. The IPEF partners represent 40 percent of global GDP and 28 percent of global goods and services trade. Negotiations have proceeded well for three of the four pillars including supply chains, clean economy, and fair economy pillars but the Biden Administration has decided not to proceed in negotiating for fair and resilient trade. As William Reinsch at CSIS described the situation: 

The commentariat is busy these days debating the future of the Biden administration’s trade policy in the wake of its effective abandonment of the trade pillar in the Indo-Pacific Economic Framework (IPEF) negotiations. (The administration says the talks will continue, and I imagine they will, but I don’t see a conclusion, at least before the election.) The policy is clearly a failure at this point, …

As colleague Ryan Haas of the Brookings Institution, and a former US official – from 2013 to 2017, Hass served as the director for China, Taiwan and Mongolia at the National Security Council (NSC) staff – underscored in his examination of trade policy in the Indo-Pacific: 

These constraints will be most visible on trade. The absence of a credible trade and economic agenda for Asia has been the Biden administration’s greatest weakness. Political and national security imperatives will continue to drive the United States’ approach to trade. Do not expect any outbreak of creativity or boldness on trade by the Biden administration in 2024.

The Biden Administration failed to roll back the tariffs imposed by the Trump trade folk. It is a major failure of US trade policy and an expression of the Biden SAdministration’s trade protectionism. It bodes ill for growing the global economy and achieving productivity gains for the United States and others.

Image Credit: E-International Relations

This Post originally appeared at my Substack Post Alan’s Newsletter – https://open.substack.com/pub/globalsummitryproject/p/biden-trade-protectionism?r=bj&utm_campaign=post&utm_medium=web&showWelcome=true

 

The SDGs are faltering! What can be done?

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Returning to the SDGs

We have pointed out in the past – either through LinkedIn or in Substack posts that the Global Summitry Project (GSP) has targeted the Sustainable Development Goals (SDGs). The issue is now front and center as we enter the UN General Assembly’s return next week.  The 2023 SDG Summit will take place on September 18th and 19th. It will mark the beginning of, at least according to the UN Secretary General, Antonio Gueterres, “a new phase of accelerated progress towards the Sustainable Development Goals with high-level political guidance on transformative and accelerated actions leading up to 2030”. At least that is his hope.

Early on the GSP identified this initiative as a means to assess the health of current multilateralism. First, a quick review of the SDGs:

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The SDGs were passed unanimously at the UN General Assembly in 2015. Agenda 2030, as it was called at the UN, identified 17 goals, 169 targets and at least 241 indicators.

These goals, targets and indicators, unlike the earlier Millennium Development Goals Initiative  – the MDGs – were designed to apply not just to developing countries but to all countries, whether developing or developed. Agenda 2030 was not then just a classic development effort. This effort was, and is, a global project for all states. Achieving the SDGs is about securing global development and achieving global sustainability for all – developing, emerging market and developed economies, Global North, Global South – all. Here are the goals:

Goal 1: End poverty in all its forms everywhere

Goal 2: Zero Hunger

Goal 3: Good Health and Well-Being: Ensure healthy lives and promote well-being for all at all ages

Goal 4: Quality Education

Goal 5: Gender Equality: Achieve gender equality and empower all women and girls

Goal 6: Clean Water and Sanitation: Ensure access to water and sanitation for all

Goal 7: Affordable and Clean Energy: Ensure access to affordable, reliable, sustainable and modern energy

Goal 8: Decent Work and Economic Growth: Promote inclusive and sustainable economic growth, employment and decent work for all

Goal 9: Industry, Innovation and Infrastructure: Build resilient infrastructure, promote sustainable industrialization and foster innovation

Goal 10: Reduced Inequalities: Reduce inequality within and among countries

Goal 11: Sustainable Cities and Communities: Make cities inclusive, safe, resilient and sustainable

Goal 12: Responsible Consumption and Production: Ensure sustainable consumption and production patterns

Goal 13: Climate Action: Take urgent action to combat climate change and its impacts

Goal 14: Life Below Water: Conserve and sustainably use the oceans, seas and marine resources

Goal 15: Life on Land: Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss

Goal 16: Peace, Justice and Strong Institutions: Promote just, peaceful and inclusive societies

Goal 17: Partnerships for the Goals: Revitalize the global partnership for sustainable development.
The ‘Two Summits’

Now we are on the case of the SDGs at the GSP. As a result we are following what are often referred to as the “Two Summits”. The first is the SDG Summit: The UN Secretary-General calls the SDG Summit [HLPF Summit, September 2023] the “centerpiece moment of 2023.” It takes place at the midpoint – completion of the first 7.5 years toward the final goal – for fully implementing the development agenda, the SDGs, adopted by countries in 2015 in 2030.

In 2024, in addition, a second Summit will take place. The UN will convene the Summit of the Future (SOTF). The theme of this Summit – ‘Multilateral Solutions for a Better Tomorrow.’ In September 2021, the Secretary-General issued a report, ‘Our Common Agenda’ urging a speed up of the implementation of the SDGSs and advancing the commitments contained in the UN75 Declaration. In some cases, the proposals addressed gaps that emerged since 2015, requiring new intergovernmental agreements. The report, therefore, called for the convening of a Summit of the Future to forge a new global consensus on readying for a future that is rife with risks but also opportunities. The General Assembly agreed to hold the SOTF Summit on September 22nd and September 23rd 2024. A ‘Pact for the Future’ is expected to be put before the UNGA and approved.  The Summit’s aim is to reinforce the UN and global governance structures to better address old and new challenges and to formulate a ‘Pact for the Future’ that would help advance the SDGs by 2030.

Overall, the SOTF, it is hoped, will revitalize multilateralism and lead, possibly, to needed multilateral institutional reform and provide a convincing narrative spelling out how the SOTF can:

●  foster enablers of SDG acceleration such as digitalization and access to finance;

●  tackle obstacles to SDG implementation, for example, through the New Agenda for Peace, by promoting effective crisis response through the Emergency Platform, by addressing fake news, and by supporting global public goods financing;

●  reinforce international standards conducive for the SDGs, including Beyond GDP, ‘longtermism’ and rights for future generations, and of course those on human rights and gender; and

●  develop a more networked, inclusive, and effective UN for SDG acceleration through the Emergency Platform, Youth Office, and a biennial summit with IFIs and the G20, among others.

The Multilateral Disconnect

So, where are we? At the midpoint it is evident the implementation of the SDGs is in deep, very deep trouble. As former UN Deputy Secretary General and currently the President of the Open Society Foundations, Mark Malloch Brown has recently written in FP:

Confirmation of that gloomy picture will come at the summit on the Sustainable Development Goals (SDGs) on Sept.18-19 . This was meant to be a midway progress review: the implementation period for the 17 interlinked objectives, which include ending extreme poverty and hunger, began in 2016 and is due to end in 2030. The world is far from the right track. Out of 140 metrics by which the SDGs are measured, half are not on the desired trajectory and about one-third have stalled or gone into reverse. … Time and trust are running out, both on the SDGs and the wider restoration and renewal of the multilateral system.
There will be serious efforts at the UN meetings to urge all to focus on the SDGs and accelerate efforts to achieve these goals. But there is a huge problem – a serious disconnect. And it spells continuing problems for collective global governance efforts. There is an unfortunate glaring disconnect here. The urging is  occurring at the multilateral level but the implementation is at the national level. And efforts at the national level are either underwhelming or, sadly, non-existent. Multilateralism continues to largely occur at the national level and as I have pointed out before, key member states, read that the United States – are disengaged from any national effort. US executive and congressional budgeting processes and finance and development policy implementation are simply void of any SDG policy efforts. And the US is not the only member state in this situation. The rhetoric may be there at the international level but today it does not link to national policy action. Now, in the face of the absence of national policy, numerous local and regional actors and non-state actors, corporations and civil society organizations (CSOs) have stepped in. But their efforts, I am afraid, cannot substitute for national efforts. Without that the strong urging will continue at the international level but without serious progress.

What can be done? We will return to this here.

This Post was first uploaded to my Substack at Alan’s Newsletter:

https://globalsummitryproject.substack.com/p/the-sdgs-are-faltering-what-can-be

Feel free to comment and consider subscribing to my Substack.

 

Troubles with Global Summitry

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We are definitely in the midst of Global Summitry gatherings. With the BRICS Summit just recently ended, we are deep into the G20 weekend gathering in New Delhi. So much commentary has accompanied these summitry gatherings. But I caution casual observers and readers: there are way too many assessments and conclusions drawn by all those folks that unfortunately barely pay attention to Global Summitry through much of the year. You can see this in the various ‘hair on fire’ commentaries in the assessments and consequences of the actions of key players in both the BRICS and now especially with the G20. Too many declarations of the G20 demise; firm conclusions that China and Russia would block any consensus statement that sought to condemn Russia’s aggression against Ukraine; the fragmentation of global summitry with the rise of the BRICS plus and the demise of the G20 with leaders from Russia and China choosing to absent themselves from summit.

Now don’t get me wrong, the geopolitical pressures, particularly rising US-China competition and opposition and condemnation of Russia for its unprovoked aggression on Ukraine are impactful. The geopolitics has seemingly hindered the G20 in advancing global governance policies. Yet the global governance agenda and goals remain. Look at the G20 agenda as described by Damien Cave in the NYT:

The agenda in New Delhi includes climate change, economic development and debt burdens in low-income countries, as well as inflation spurred by Russia’s war in Ukraine. If members can reach consensus on any or all of these subjects, they will produce an official joint declaration at the end.

In the ‘hair on  fire’ camp here is a piece by Alec Russell in the FT

The countdown to the talks was dominated by news that Xi was not going to attend. This was widely seen as a major blow to the G20, and an acceleration of the shift to a world in which a China-led bloc is facing off against a US-led one, with many countries hovering in the middle.

But the collective global governance effort has not been stymied. Indian efforts to reach consensus have proven successful. The G20, thanks to India, has released the Declaration a day early. Our good fortune. As described by the Indian Sherpa the Declaration was:

… a complete statement with 100% unanimity” that highlights India’s “great ability to bring all developing countries, all the emerging markets, China, Russia, everybody together at the same table and bring consensus.

He went on:

Urging adherence to the United Nations Charter, the New Delhi statement says: “All states must refrain from the threat or use of force to seek territorial acquisition against the territorial integrity and sovereignty or political independence of any state. The use or threat of use of nuclear weapons is inadmissible.

So there we are, a consensus statement has been issued. As often is the case, the document was not short, some 29 pages of declaration plus pages of annex.  Nevertheless it ended on a ‘high note’:

81. We reiterate our commitment to the G20 as the premier forum for global economic cooperation and its continued operation in the spirit of multilateralism, on the basis of consensus, with all members participating on an equal footing in all its events including Summits. We look forward to meeting again in Brazil in 2024 and in South Africa in 2025, as well as in the United States in 2026 at the beginning of the next cycle. We welcome Saudi Arabia’s ambition to advance its turn for hosting the G20 Presidency in the next cycle. We also look forward to the Paris Olympic and Paralympic Games in 2024 as a symbol of peace, dialogue amongst nations and inclusivity, with participation of all.

But a reading of the Declaration raises again the question: what success has in fact been achieved? As Caves points out:

But how much progress has the G20 made toward its ambitions? And what can be expected from this year’s meeting in India on Saturday and Sunday? … Then what? Often, not much, when it comes to real-world results. Most of the grouping’s joint statements since it formed in 1999 have been dominated by resolutions as solid as gas fumes, with no clear consequences when nations underperform.

‘Solid as gas fumes’. Well, in many respects the Declaration is no more than a statement of collective progress – what have we collectively identified as worthy of committing to and implementing. And, I did note, in an earlier Substack Post, Not Simply the Pace of Summitry that Leaders and their official are working toward commitment but:

So, let me at least raise in this Post, what I believe is the ‘continuum of action and commitment’ available to leaders in these various Leaders’ Summits. This continuum identifies the extent to which global governance policies have been secured. We move from the aspirational, often set out in the leaders’ declarations or communiques all the way to implementation by a country. What is evident from the continuum is that these folks are governmental leaders. And, as a result no matter what the communique announces, individual leaders’ may, or may not, actually implement a collective wish set out in a declaration.  This is well beyond just the aspirational.

The continuum, as I see it, is:  Consultation/ Cooperation/ Coordination/ Collaboration – the 4Cs of global governance progress, as I see it. Distinguishing between these concepts can be quite difficult. And of course, beyond this is, collectively achieving the actions, proposals and policies that are set out in the communiques, or announced at the Leaders’ gatherings.

And that is paydirt. Collectively achieving the actions set out in all these Summit Declarations – implementing policy in other words – is global governance success. Such implementation lies generally at the national political level, although there are instances where international organizations do in fact implement.

Bottom line: it requires a lot more than a statement in a Leaders’ Declaration to achieve global governance progress. But a number of us are watching including my colleagues at the CWD process.

This Post was originally uploaded to my Substack – Alan’s Newsletter. Feel free to subscribe.

Image Credit: Al Jazeera

 

 

Puzzling over BRICS Enlargement

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As Global Summits go, and besides the leader-led summits, G7 and the G20, there is nothing with greater presence, and possible impact in international relations, than the BRICS. As noted by Ndzendze, Bhaso, Siphamandia Zondo (2023) in their recent article in The Conversation on the state of the BRICS: 

What began in 2001 as an acronym for four of the fastest growing states, BRIC (Brazil, Russia, India and China), is projected to account for 45% of global GDP in purchasing power parity terms by 2030. It has evolved into a political formation as well.

It is the political impact that is most interesting and, I would say, somewhat puzzling. For the BRICS club – Brazil, Russia, India, China and South Africa – all are members of the G20.  Like the G20, and for that matter the earlier created G7, the BRICS represent a ‘leaders club’ that is a leader-led global summit that has an annual meeting of those leaders – the centerpiece of the year-long hosting by one member or another. In some respects the BRICS are unique in what the group is not. That is, unlike the G7, the BRICS members have no  evident ideological dimension – neither democratic nor autocratic. Instead it appears to see itself as focused on opposition to US hegemony in the current global order and they appear to demand a greater development focus and attention to the Global South. Again, as pointed out by Bhaso and Zondo: 

Crucial to this was these countries’ decision to form their own club in 2009, instead of joining an expanded G7 as envisioned by former Goldman Sachs CEO Jim O’Neill, who coined the term “Bric”. Internal cohesion on key issues has emerged and continues to be refined, despite challenges. … Ever since, the grouping has taken on a more pointedly political tone, particularly on the need to reform global institutions, in addition to its original economic raison d’etre. 

Now, it is not that there haven’t been efforts to enlarge these informal leader-led institutions  – to draw in the systemically important Global South players – China, India, Brazil – and other regional powers, Turkey and Indonesia for instance.  Obviously, the G20 is the evident case. Still, it would seem that the BRICS members resisted absorption in the G20, indeed, just at the G7 members – Canada, France, Germany, Italy, Japan, UK and the U.S., and also the EU, failed to wind up the G7 and ‘live’ in an enlarged G20 after the Global Financial Crisis (GFC) in 2008. Though there has been constant academic and expert discussion over absorption, enlargement and continuing separation, there continues to be both a G20 and a G7 a G20 and a BRICS. Again my SOAS colleagues focussing on the BRICS suggest: 

Some may even bring destabilising dynamics for the current composition of the formation. This matters because it tells us that the envisioned change in the global order is likely to be much slower. Simply put, while some states are opposed to western hegemony, they do not yet agree among themselves on what the new alternative should be.

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Advancing Global Governance by Revitalizing a Regional Institution

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While I have suggested earlier that I don’t think an initial  focus on building regional or multilateral institutions is necessarily the best first step in global governance and possibly a means to ‘tone down’ geopolitical competition rhetoric and action, I am now about to contradict myself and this position. For, in the end, there are some obvious regional and international institutions that could encourage collaborative action and push global governance collaboration. And, in fact, I have in mind an obvious one that has – as a current Chinese slang term might well describe it – ‘tang ping’  躺平 – or ‘lying flat’. It is the Trilateral Summit.

Trilateral Summit, you say. Well, yes, actually. The Trilateral Summit is, periodically, a Summit of the ‘key’ East Asia leaders – South Korea, Japan and most meaningfully,  China. A little history here. The Trilateral Summit was first proposed by South Korea in 2004. At that time the three powers met for a separate session at the ASEAN gathering, described as ASEAN plus three. In 2007, at the eighth meeting of the ASEAN plus Three, the leaders agreed to initiate a separate Trilateral Summit. And, in December 2008, the first separate summit was hosted by Japan at Fukuoka. At its initiation the three powers saw the Summit focusing on: closer trilateral relations, the regional economy and disaster relief.  One of the regional security issues that has been in front of leaders repeatedly has been the nuclear weapons program of the Democratic Republic of Korea, the DPRK. In the 2018 summit the FT  described the leaders’ view of the DPRK nuclear weapons program: “the three leaders agreed to co-operate over North Korea and called for Pyongyang to give up its nuclear weapons completely.” While that agreement may no longer hold, it shows the value of this Summit.

The Summit is not quite a leaders’ gathering. While South Korea is often represented by its President and Japan by its Prime Minister, China has generally been led by its premier, not the President.

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The New and Rather Difficult Course of Global Order Relations

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‘The Decline of US Hegemony and its Consequences for the Global Order’ – A Roundtable at the International Studies Association

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ISA 2023: Exhibit, Advertise, and SponsorSo, the International Studies Association (ISA) just concluded in Montreal  after a visibly energetic in-person gathering following several years of virtual meetings only.

I was fortunate enough to chair the roundtable. All sorts of good folk attended including panelists: Arthur Stein, UCLA, Lou Pauly, University of Toronto, Yves Tiberghien, University of British Columbia, and Kyle Lascurettes, Lewis and Clark College. Unfortunately, our colleagues, Janice Stein could not join but I was fortunate enough to receive her speaking note and I have tried to reflect some of her thinking with the notes from other colleagues.

What didn’t surprise me, of course, during the session was the recognition from all that we have a fraught period of transition in the international system. There is the obvious Russian aggression against Ukraine and the challenge by Russia to some of the basic tenets of the current order – most notably territorial integrity and national sovereignty. There is also the obvious growing leading power tensions between the US and China and the growing threat of confrontation and conflict especially over Taiwan that currently stock the relationship. There was the obvious attention to US determination to sustain dominance even in the face of a dramatic power transition with the emergence of China and more broadly the Global South – India and other Indo-Pacific nations including Indonesia, etc. and other Southeast Asian states and then, of course, the return of Lula to Brazil.

But raw geopolitics did not dominate the discourse of the Roundtable. Equally significant in our discussions was the acknowledgement of the continuance of the intergovernmental institutions and collective actions of states to advance global order and achieve collective action within the framework of the current and evolving Order. While some decried the faltering of the global institutions, nevertheless, there was general acceptance that regional and other informal order-based institutions continued advance policies in various ways. AS one of my colleagues Kyle Lascurettes noted: “There is a truly global rules-based order that stands a good chance of outliving American hegemonic decline. But the so called “liberal” or “Western” rules-based order is and will be in trouble.” Indeed, the liberal order or the Liberal International Order (LIO) disappeared, I’d argue with the Global Financial Crisis” in 2008 but the Global Order does indeed remain. And, as Yves Tiberghien focusing on the dramatic power transition suggested: “today is a time of disruption and transition – a special phase. Major shocks, change, crises, innovation will take place over the next 1-2 decades … Also shift in awareness. Western dominated order was an anomaly of last 200 years, with a rise phase for 300 years before that. Return of multiple voices all over the world. Return to a diverse, polymorphic, poly polarity.” As Jagannath Panda recently wrote in an EAF blog on March 20, 2023:  “Obituaries of the US-led liberal international order may be exaggerated, but the shift towards multipolarity is in motion.”

And what then do we have as the Global Order, and how will it advance. Arthur Stein recalled the fragile nature of the Order, which he described for me in his opening chapter of my 2008 edited volume – Can the World be Governed? The global order, he wrote then, and repeated at our Roundtable was:  ‘a weakly confederal world’. As he said at the time (2008, 52) : ”In fact, one could argue not only that multilateralism is an existential reality but that weak confederalism is the nature of modern reality.”

So the LIO has faded,  and what remains is the global RBIO (rules-based international order). Weaker and less collaborative – indeed as Arthur pointed out, the low hanging fruit of cooperation has passed and it is and will be increasingly difficult to reach collaborative solutions . But as Yves points out that there is continuing support for aspects of the Order including with China where Yves notes the significant China support for COP15 the Conference on  Biodiversity where the multilateral conference came together to agree on a new set of goals to guide global action through 2030 and to halt and reverse nature loss and the recently concluded agreement on the text for the critical High Seas Treaty. The challenge for the leading powers is to maintain a forward collaborative thrust, and as Lou Pauly warned, it is critical for the US to accept: “The challenge is to overcome perennial tendencies toward either insularity or spasmodic over-extension, toward temporizing on necessary decisions, toward shifting the costs of adjustment to the relatively poor internally, and toward exporting the rest of those costs to other countries.” It will not be easy; and Arthur reminded us that American domestic politics has been a problem since 1919 and continues today with the failure to approve through the US Senate, international agreements and the often strained effort to use executive power.

As Janice Stein alludes to in her notes: “Plurilateral and minilateral institutions – from AUKUS to IPEF to Trade and Technology Councils will be the principal sites of innovation. I have called this process “taking it offsite.” New institutions are being stood up, led by the willing, who set rules and invite others to join if they wish. One could argue that we are entering a period of start-up innovation in the creation of new, smaller, more flexible, and more focused institutions.

Although Janice may be a touch pessimistic over multilateral collaborative action, the Global Order has its worked cut out for it to avoid great power conflict and achieve critical global governance policies in climate, global finance, global health and much more.

 

Image Credit: ISA

China-West Dialogue (CWD) Members Discuss the Global Debt Management Environment

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The CWD focused recent attention on the global management of debt and the growing threat of a sovereign debt crisis. After a number of virtual gatherings and much focused discussion, the CWD completed a Debt Management Proposal that CWD passed to folks in India as India scheduled the first G20 Finance Ministers and Central Bankers Ministerial at Bangalore, or its official name, Bengaluru.

The  CWD Debt Proposal Summary is currently posted at the Global Solutions Initiative. but we do anticipate that the full Proposal will be up at the Global Summitry Project shortly. Meanwhile, I also wanted give you a flavor for the intense discussions that went on among CWD principals working on the Proposal. First, I wanted to link you to the Debt Management analysis prepared by Deborah Brautigam at SAIS that was published as: “The Developing World’s Coming Debt Crisis: America and China Need to Cooperate on Relief” in Foreign Affairs published on February 20th.

And then I wanted to give you a flavor of the deep discussion that went on for several weeks. This is a short back and forth that took place with Deborah Brautigam, Johannes Linn and Richard Carey on February 21st. I have smoothed the discussion and elaborated on the many acronyms in the back and forth:

“Johannes Linn

If I had one wish, Deborah, after reading your excellent article in Foreign Affairs, it would have been that you had explained more fully the nature of the Heavily Indebted Poor Countries (HPIC) process. In my view it was not “debt cancellation” by the IFIs, but the paydown of IFI debt with resources from bilateral donors and some International Bank for Reconstruction and Development (IBRD) net income (which could otherwise have been contributed to International Development Association (IDA)). If I understood the [current] Chinese proposal for the establishment of a World Bank trust fund in parallel with an existing IMF trust fund to pay off IMF debt (as you mention), then that would in effect be parallel to the HPIC approach, and one wonders why the World Bank didn’t accept that. It  could be that World Bank did not want to risk having bilateral donors reduce their new IDA contributions in reaction, which would have meant less new IDA money for the poorest countries.

It appears that the issue with multilateral debt relief is the following: there is no free lunch — if the Multilateral Development Banks (MDBs) take a hit on their balance sheet and give up their long-established “preferred creditor status”, they risk a downgrading and higher risk exposure and thus more restricted prudent use of capital market funding. IDA will have fewer resources for new lending. In effect, other developing countries will pay the price for multilateral debt cancellation. If they go for a HPIC-like solution then bilateral donors will have to pay, burdening either donor countries’ tax payers (which, one could argue, is not unreasonable); this might risk that their contributions to IDA and other concessional multilateral windows will drop and thus concessional new money from MDBs for the poor countries will decline (in which case other developing countries would again pay the price).

By the way, a straightforward comparison of debt outstanding across creditor classes, while relatively easy to compile, tells only a partial story. One really should look at the net present value of debt service obligations across creditor classes, since that reflects the real cost of debt to countries, allowing for very different terms under which different classes of debt are contracted. Under this approach private debt will weigh much more heavily and MDB debt less so. It would be interesting to see what happens to Paris Club debt versus Chinese debt.

Deborah Brautigam

My own view is that the World Bank should have explored the establishment of a Catastrophe Containment and Relief Trust (CCRT) – an IMF trust – equivalent more seriously. There was a view expressed that China wanted it to be funded in proportion to voting shares, which was deemed infeasible, but the IMF trust is, I believe, funded by voluntary contributions. This would have been a start.

As I recall during HIPC, since the debt relief was counted as “aid”, countries did reduce their non-relief funding. I remember that Japan warned that this would be the consequence.

Richard Carey

The decision to adopt and implement the “enhanced HIPC” was taken at the Cologne G8 Summit in 1999, after agreement at the previous Summit in Birmingham in 1998 that the following year the Summit would definitively deal with debt.

In that intervening year, the details were hammered out in the contentious process as previously described. Funding of multilateral debt reduction came from the OECD’s Development Assistance Committee (DAC) concessional aid essentially (the IMF used some of its own resources for the Multilateral Debt Relief Initiative (MDRI), with a call for bilateral contributions to cover additional needs, and the MDRI was extended to all countries with less than $380 per capita, whether they had been in the HIPC program or not).

The key mover was Clare Short, then new Labour Government Secretary of State with a new Department of International Development (DFID) and a new White Paper which endorsed the 1996 DAC International Development Goals (IDGs). She flew to Washington to help Brian Atwood, then the Head of USAID, face down Treasury and State who held that the 1996 DAC Goals had not been endorsed. The position was that this initiative did represent US agreement for what eventually became the IDGs. The story of how the HIPC became linked to the goal for poverty reduction is told in Chapter 10 of the recent history of the DAC.

In 1998 the Jubilee 2000 Campaign for Debt Reduction was having a major impact on  public opinion. Short saw an opportunity to make debt relief conditional on poor countries drawing up poverty reduction strategies. To establish that link, Short had to fly to Washington to face down USAID Administrator Brian Atwood and objections from Treasury and State that the US had never agreed to the OECD’s DAC International Development Goals. With her position that Prime Minister Blair would publicly criticize President Clinton if he failed to support the IDGs (eventually to become the Millennium Development Goals (MDGs), the 1998 G8 Communique endorsed them in resounding terms. That is how the enhanced HIPC came to be based on Poverty Reduction Strategy Papers. (Note that CWD Common Framework proposal involves countries adopting medium term strategies based on the “new development narratives”…).

A subplot in this story was that the Comprehensive Development Framework (CDF), was lost to the Poverty Reduction Strategy Papers (PRSPs), although the 1999 Cologne G8 Communique had briefly welcomed the CDF. As Chapter 10 in the DAC History relates, a joint note circulated on April 5, 2000, by James Wolfensohn and Stanley Fischer sought to square the circle of the urgency of the PRSPs to deliver fast on debt relief and the more time-consuming task of bringing multiple stakeholders into a country-led long-term development platform:

For some time the formulation of “PRSPs incorporating the principles of the CDF” became a standard phrase. But eventually the battle for the CDF was lost and this formula faded away. And without the CDF, the HIPC PRSPs essentially left out agendas such as infrastructure, urbanisation  and rural development. The MDGs were essentially human development/wellbeing- based proxies  – these left-out agendas only came back with the Sustainable Development Goals (SDGs) in 2015.

In the present case of the CF, medium term country strategies based on the “new development narratives” can in principle be built on the basis of nationally owned SDGs and Nationally Determined Contributions (NDCs)  to the Paris Climate Change Agreement. But let us see what is emerging in Finance Ministers and Central Bankers meeting in India this week and beyond. And, with bond financing now a major part of the picture, impact investing by the private sector and asset managers on the basis of projects and programs that are green, social, sustainable and sustainability linked  (GSSS) seems to be in vogue.  Also, as mentioned, the article by the Lazard Sovereign Debt Unit has useful ideas  -e.g., on how bondholders can be brought into early agreements with special bonds that provide a payoff for “haircuts” if and when the economy is in much better shape.

Johannes Linn

By the way, one question we all seem to studiously avoid in this discussion about debt relief is how to prevent a new debt crisis a few years down the road, after we solve this one. In the mid 1990s I was involved in establishing the broad design of HPIC – moving from basic concept to decision in principle –  with President James Wolfensohn at the World Bank, so it is particularly frustrating to see the debt issues being replayed all over again, except that it may be an even more intractable problem now than it was then.”

Hope you like it.

Image Credit: IMF

Indonesia’s G20 Win: behind-the-scenes gatherings and unity in a time when global governance needs it most – and now to India

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Dominating our smartphone screens, televisions, and front pages were photos of Justin Trudeau, Xi Jinping, Joe Biden, and Giorgia Meloni in traditional Indonesian attire, participating in a ceremonial mangrove tree planting event and gathering late night to discuss the missiles that killed two Poles, contemplating potential next steps using NATO’s Article 4. These leaders are – whether they want to be or not – celebrities. They are simultaneously praised and critiqued depending on who is watching them. Yet, what is not seen by mainstream audiences, perhaps even those more politically astute, is the intricate machine of behind-the-scenes work taking place throughout 257 meetings between December 2021 and December 2022 under Indonesia’s presidency of the G20 Summit.

In 2011, the Director of the Global Summitry Project, Alan Alexandroff, wrote about the notion of the G20 not being solely about its leaders, but rather surrounding the Leaders’ Summit an array of complementary “personal representatives, ministers, other officials, IFIs, IOs, [and] global regulators that make the G[20] system work – or not”. Whether the G20 is successful (a subjective term, in any case), is a different conversation.

Alexandroff’s Iceberg Theory of Global Governance positions the G20 Leaders’ Summit at its tip, but the vast bulk of the iceberg is situated below the surface, and often goes unnoticed by the majority of observers and experts.

This underwater all-encompassing mass is formed by numerous assemblies: from Ministerial meetings regarding health, environment and climate, women’s empowerment, trade investment and industry, the energy transition, development, labor, research and innovation, and tourism; to Finance Ministers and Central Bank Governor meetings, Finance-Health Deputies meetings, joint Sherpa and Finance Deputies meetings, individual Sherpa meetings, Foreign Ministers meetings, G20 Digital Ministers meetings, and Education Ministers meetings; and lastly, engagement group gatherings (including the U20, B20 on climate/energy, integrity, compliance, and business leaders; the T20, with numerous recommendations from think tanks around the world, the Y20, with priority areas on digital transformation and youth empowerment, and the L20 Employment Summit).

It would be hard to contest that the G20 indeed has been a platform that has developed and advanced key collaborative actions toward policies and priorities, from the Leader Declaration identifying the Pandemic Fund, the Financial Intermediary Funds for Pandemic Prevention, which employs the World Bank and World Health Organization.

The incoming G20 Troika – Indonesia, India and Brazil – will mark a unique shift in global governance deliberations. It will be led by three Global South countries with emerging large market economies hosting the year-long activities. The hosting will pass from India in 2023, Brazil in 2024, and South Africa in 2025.

We anticipate this three-year spread of Global South presidencies will tackle issues that have been brushed to the side or missed in other G20 Summits. This is certainly a significant step in the effort to construct a multilateral network to seek mutually beneficial responses to growing challenges impacting all countries.

The Financial Times released an article following Indonesia’s Leaders’ Summit, deeming its outcomes “remarkable”. Russia, represented by its Minister of Foreign Affairs, Sergei Lavrov, seemed isolated on the world stage as China put forth a more neutral stance in its support towards Moscow. Xi commented that his administration “resolutely opposes attempt[s] to politicize food and energy issues or use them as tools and weapons”.

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The Twin Threats to Global Governance and Global Summitry

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It is a challenging G20 Summit. For any host. No less so for Indonesia, the first Global South leader in a follow on series of Global South hosts.

This year in November the G20 Summit is scheduled for Bali to then be followed in 2023 by India. India will then be followed in 2024 by Brazil and presumably, though not yet announced South Africa in 2025. So, what’s the problem? Well, in principle nothing. But these Global South hosts are only slowly becoming accustomed to leadership roles where advancing the global governance agenda is called for in the leadership role.

The second dilemma is the dramatic impact of renewed geopolitics. The growing tensions and rivalry between China and the US now dominate relations between these two leading powers. These bilateral tensions have been amped significantly higher by the Russian aggression against Ukraine.  War in Europe, as we haven’t seen in decades now sharpens differences between China and the United States. These difficult bilateral relations have now been further strained by Taiwan tensions following US House Speaker Pelosi’s visit to the island state. These strains are reflected in the undermining of collaborative global governance relations between the two, and more broadly the apparent hobbling of multilateral relations.

So, two threats to advancing critical global governance policy at the global summitry level. These threats are particularly enhanced where domestic politics dominates and global leadership emerges rather more as an afterthought.  And it would seem that is exactly what our Host faces. First, the dominance of domestic politics. This feature of Indonesian leadership politics is precisely what is identified by Shafiah Mushibat in his recent post at EAF titled: “Indonesia steps innocently onto the international stage”:

In Indonesian politics, the domestic audience and interests still trump the global audience and global common interests. This is not unusual, and it’s reasonable, considering that foreign policy involves actions and activities by governments that aim to defend and promote national interests. But Indonesia is quickly discovering that marrying its international roles, responsibilities and expectations that go with them to national interests that please domestic audiences is not altogether easy.

Mushibat concludes that the Indonesian President has chosen to emphasize the domestic politics of Indonesia’s leadership of the G20. He writes:

Approaching the G20 presidency, the Indonesian government initiated many activities to promote its role domestically. This included raising awareness of the G20’s ‘benefits’, such as the direct economic benefits of hosting the summit. In a November 2021 speech, Widodo pressed the country to make the most of its strategic position in the G20 presidency and ‘prioritise national interests’. Explaining how the G20 presidency will benefit the country has been a main part of the government’s effort to ensure domestic support for all the efforts.

And as to the second and growing threat – the destructive impact of geopolitical tensions – they are real:

Indonesia has been lauded as representing the voices of developing nations and emerging economies outside of the G20, but its presidency faces major challenges — mainly because of the geopolitical implications from the Russia–Ukraine war. While the G20 has performed important functions for member states and the world at large, it struggles with balancing the pursuit of its members’ national interests with a genuine commitment to the global common good. As the world grapples with economic and health recovery from COVID-19 and the impact of the Russia–Ukraine war on food and energy supplies, the global common good and how to achieve it is the vital interest.

The corrosive impact of Russia’s war in Ukraine on global cooperation cannot be underestimated. It has ramped up Biden Administration efforts to build alliances and partnerships. Included in that circle of partnership efforts is the G7 where the United States has emphasized the ‘like mindedness’ and democratic character of the G7. With all the emphasis on the G7 there seems to be little room for a Biden collaborative focus on the G20. Working the G20 with China in particular with all its Ministerials, Working Parties and Task Forces is a key but apparently a key not willing to be turned by the Biden Administration.  The G20, of course, includes Russia and much of the US G20 public discussion has urged the exclusion of Russia from the Summit. Rather than a focus on advancing collaborative efforts the public statements have been on Russia’s exclusion and questioning China, at least in public, on its positioning with respect to Russia.

Meanwhile Widodo has tried to smooth the difficult Russian presence by inviting the Zelenskyy, the President of Ukraine to attend at Bali as well. But the critical focus has to be on the Biden Administration to ‘grab’ the G20 ring, avoid the Russian distraction, and focus on critical multilateral global governance initiatives.

Image Credit: East Asia Forum