Encouraging Multilateralism

Suresh Prabhu, MP, Sherpa to the Prime Minister at G20, delivered a Keynote Address during the Synergia Conclave-2019 and made a strong case for multilateralism.

Background

In order to establish a rules-based world trading system and facilitate mutually advantageous trade liberalization, the General Agreement on Tariffs and Trade (GATT) was signed by 23 nations in 1947. By the time GATT evolved and morphed into the World Trade Organization (WTO) in 1993, both the above goals had largely been achieved. Based on the norms respected by 163 members, the WTO presides over a rule-based trading system. Tariffs are below 5 per cent in most trade and zero for a very large percentage of imports. The WTO, which officially commenced on 1 January 1995, under the Marrakesh Agreement, is now the largest international economic organization in the world.

The G20 is an international forum for the governments comprising essentially of central bank governors from 19 countries and the European Union (EU). 

Today, multilateral organizations like G20 and WTO are under threat. Organizations like these were largely responsible for the globalization of world trade.   

Analysis

Suresh Prabhakar Prabhu noted that the world is entering a phase where every big international institution seems to be facing a serious challenge. These challenges were arising because of lack of preparation or because these organizations are not able to deal with issues at an institutional level. 

At a time when global cooperation was most needed, there is not enough of it taking place. The importance and relevance of an institution like G20 lie in the fact that such institutes represent more than 85 per cent of the world's economy. This institution could address challenges like climate change and terrorism, but it is not being done.  

Climate change is taking place, the scientific community is talking about it, but for the common man, it is business as usual as there is never adequate proof on the ground. Meetings like Cope 25 in Chile have not been able to find any concrete solution. We hope that G20 will do a better job. Directly linked to climate change is energy which will be directly affected by climate change. Increase/ decrease in global temperatures affect energy consumptions as will rising sea levels and falling river discharges.

The last G20 at Osaka came up the so-called 19+1 formula on climate change. The US reiterated its decision to withdraw from the Paris Agreement because it is disadvantageous for Americans, although as the world leader in reducing emission, it was committed to deploying advanced technologies to clean up the environment. The other 19 nations committed to the full implementation of the Paris Agreement and its "irreversibility."

G20 is also badly fractured on refugee migration. The refugee influx has imposed a huge cost upon Europe along with the political cost as mainstream political parties have had to cede space to right-wing parties. Climate change and refugee influx are both intrinsically linked because a climate change triggered migration with millions displaced, say by rising sea levels and loss of homes, will flood the neighbouring countries. We have to only look back to 1971 to imagine the consequences when 10 million refugees flooded into India

WTO is facing an existential crisis. A ruled based, democratic WTO is under challenge. The US has raised serious issues about its relevance. Is there an alternative to WTO? Developing countries depend upon industry, services, agriculture and stand to gain when all three sectors open up. Some countries in Africa have a single commodity to trade, and when that market collapses, they are left in economic limbo.

Another important issue he highlighted was terrorism. It is a threat to national security, regional security and global security. Terrorism has a unique characteristic. "The motivation comes from one country; financing may come from another country; terrorists may come from another country, and a fourth country is facing the consequences." Therefore, he argued this requires global intervention and cooperation. It is like a global supply chain, and we need global alliances and cooperation to halt it. G20 is working on it to make the cooperation more effective. Economic offences which cut over national borders are even more difficult to define and curb. Global action, as part of the global supply chain, can only stem their tide.

Assessment

  • Global problems and crises require global solutions. We need a principled and effective multilateral system that offers a platform to tackle global issues, including protracted humanitarian crises, climate change-induced disasters, and widening inequality.
  • Despite the success of WTO, it is widely regarded as suffering from a deep malaise due to the latest WTO negotiation, the Doha Round, which has staggered between failures, flops, and false dawns since it was launched in 2001.
  • WTO'sWTO's rules and procedures were designed for a global economy in which made-here–sold-there goods moved across national borders. But the sharp rise in offshoring from high-technology nations to low-wage nations has created a new type of international commerce where trade rules that matter are not mostly about tariffs. Protection of investments, Intellectual Property along with legal and regulatory steps to assure that the two-way flows of goods, services, investment, and people will not be impeded is what matters the most. 
  • These rules are being made and written in regional and mega-regional agreements like Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union. 
  • The future of governance of international trade can be the outcome of a two-pillar structure in which the WTO continues to govern while the new rules for global value chains are set by mega-regional agreements. But the challenge remains that these mega-regional agreements are mostly decentralized and may lead to overlapping and inconsistency. 

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