How to Uphold Multilateralism and Defy Protectionism: Listen More to Developing Economies

By: Anita Prakash
Director General, Policy Department, Economic Research Institute for ASEAN and East Asia (ERIA), Jakarta and Research Associate, Global Governance Center, Graduate Institute, Geneva

anita.prakash@eria.org

 

Multilateral governance bodies are mandated to represent the interests of all of their member countries. Their governance rules mostly evolve through common understanding of the needs of their member countries. Global governance systems must resonate with the interest of all of their members, small or large, developed or developing, including those which have special or differential requirements.

Human rights, human development, labour, health, peace, conflict, disarmament, communication, finance, environment – the list of international governance issues addressed by multilateral bodies is long. Trade and economic integration, however, always remain in the foreground, as these are among the more visible aspects of international cooperation in the 21st century and have a direct and immediate influence on the conduct of business in bilateral and multilateral relations.

 

The World Around Us Is Changing

Even as countries recover slowly from nearly a decade of slow, and even stagnant growth, there are global headwinds challenging policies that promote openness and growth in the global economy. The uncertainties created by Brexit in Europe and the withdrawal of the US from the Trans Pacific Partnership (TPP) are still being assessed for their adverse impact on global investment and trade. These are further clouded by the tariff barriers being put in place by USA and China – the two largest economies in the world.  A rising support for trade restrictiveness is compounded by rising borders against the movement of people. In a scenario where globalization and its benefits are being questioned, global governance and multilateral systems are also under strain. There is no doubt that the current decade has brought the focus on those ‘left behind’ both in the developed and developing world.

And yet, an informed and forward looking position for multilateral systems would be a more, not less connected world. Multilateral bodies such as the World Trade Organization (WTO) and inter-governmental platforms such as the G20 should lead member countries and regions to participate in trade, investments, and economic integration. Multilateral forums and policy makers should reflect this inclusive strategy in their workings, and for this, multilateralism itself must become more inclusive in practice.

 

Developing Asia Has Practical Lessons for Multilateralism

The aggressive showdowns on tariffs are recent, but protectionism has been finding support for some while among many countries. Asia, however, continues to provide momentum to global economic growth and also repose its faith in multilateral systems. East Asia  especially leads the way. Representing the most vibrant part of global economy, it accounts for half of the global population, 30 percent of global GDP and nearly 30 percent of global trade. The following figures reflect the engagement of East Asia in global trade. (ASEAN+3 comprises of the 10 members of the Association of South East Asian Nations and China, Japan and Korea. Australia, New Zealand and India add up to form the ASEAN+6 grouping).

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The ASEAN Economic Community (AEC) has made important gains towards trade and investments liberalization, and has chosen the route of trade and economic integration to create prosperity for its citizens. The Regional Comprehensive Economic Partnership (RCEP) is an outcome of East Asia’s continued commitment to trade and economic partnership among member countries. Despite external headwinds, and internal divergences, RCEP negotiators  are working towards early conclusion of the agreement.  The region has also learned to supplement its trade and economic growth with domestic policies which address social imbalances, income inequality, and development gaps.

Open trade policies and participation in global value chains have brought growth and prosperity in large parts of Asia, and also in other parts of the developing world. Most Asian economies have benefited from trade and investment rules underwritten by the WTO, enabling them to increase their participation in global trade, improve their incomes and productivity, and attain better health and education standards for society. Other improved social and economic outcomes are corollary to the trade induced prosperity and well-being in the developing economies of East Asia.

A trade led growth has allowed the East Asia region to eliminate dire poverty and raise incomes dramatically over the years. International trade is a cooperation model in this region and South-South Cooperation in trade for development is the running thread in the development strategy of ASEAN and East Asia region.

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There is a great commitment among the developing and emergent economies of Asia, especially in Southeast and East Asia, extending up to Oceania, and now increasingly in South Asia, to integrate their economies deeper into the global value chain of production and trade of goods and services. These economies aspire for greater participation in, and influence on multilateral governance related to trade, human development, connectivity and growth in the coming years.

 

Multilateral Systems have not Responded Sufficiently

Multilateral bodies, in particular the WTO, have not responded sufficiently to rising protectionism and current tensions in international trade. They have also not utilized enough the support to open trade coming from developing economies of Asia, especially the small ones.  Vietnam, Thailand, Cambodia, and even Singapore (which is a high income country, though the size of its economy is small) do not support the anti-trade and anti-globalization positions inside or outside multilateral platforms. This is the same group of countries that provided the tailwind to the global economy, when growth was low or stagnant in the developed economies. There are least developed and smaller economies such as CLMV (Cambodia, Laos, Myanmar, Vietnam) which have used trade and economic cooperation for their respective economic development and income growth. These countries are strong votaries of multilateralism, cooperation and open trade.

Similarly, sixteen major economies of East Asia continue to pursue negotiations for a free trade agreement – the previously mentioned Regional Comprehensive Economic Partnership (RCEP). Twelve of the sixteen countries in RCEP are developing or emergent economies, of which three are LDCs. These countries face strong political economy and socio-economic hurdles at home, but they are eager to invest their resources in a regional trading system that is open, rule based and transparent. The commitment of these countries in global governance systems must be used by multilateral bodies such as the WTO in their efforts to bring down protectionist practices among countries. The paralysis in WTO diffusing trade tensions and protectionism can be largely overcome if it amplifies the voices of developing countries, which have reposed their trust in global governance systems and are votaries of open and rule based international trade.

In the Hamburg Communique of 2017, the G20 Leaders also had called out the multilateral bodies to take greater note of voices from the developing economies, and to help in creating rules and norms for the global community to get more connected and inclusive in its quest for development. Multilateralism and global governance systems will be strengthened by the small, but true practitioners of multilateralism.

 

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