Accepting That the World Has Changed

One reason for the lack of resolute decisions is that the world is in a state of deep confusion triggered by the deep and fast-paced changes in the balance of power—undoubtedly the most profound power shift since the emergence of a world order based on sovereign nation states almost four centuries ago. Even if the impact on the WTO and other elements of the international system may not yet be fully clear, the rise of China and India has sent out shock waves that have not yet been adequately absorbed. And several other countries are flexing their muscles as well— Argentina, Brazil, Mexico, South Africa, and Viet Nam. In all likelihood the entry of Russia and most of the remaining former Soviet republics into the WTO will trigger further seismic changes, and it is far from clear how these changes can be handled, much less harnessed to sustainable development. The dominant position of the United States and the European Union, which have been substantially able to dictate trade rules, is fading and will never again be recovered.

The apparent redistribution of power among nation-states is happening in parallel with the emergence of a global public domain that demands governance for which organizations based on nation-states are proving inadequate. Indeed, the intergovernmental organizations of the United Nations, the World Bank Group, and others are organized around a postwar order that no longer adequately represents reality. This must give way to a new order focused on optimal stewardship of global public goods. Designing the right institutions for global economic governance will mean rethinking the role and primacy of the nation-state as traditionally understood. It will require reaching a geopolitical settlement no less significant than the order that emerged from the chaos of World War II, but one built on the central recognition of interdependence. And it will involve understanding and finding the right role for a series of new actors in global governance, most prominently corporations and civil society organizations and networks.

The challenge of global economic gover-

New Approaches to Trade Governance nance is that of managing multidimensional-ity. Climate change policy cannot be left to environment ministers, because getting it right involves energy policy, investment policy, foreign policy, and many other sectors. Similarly, trade policy cannot be left solely to trade ministers.

Perhaps the model in this respect is the European Union (EU). For all its faults, the EU has proved adept at advancing a model of governance capable of addressing multidimensional problems—at least those that are of central concern to its member states. It has yet to demonstrate that it can take a multidimensional approach to emerging trading powers or to the challenges of global economic governance. But it also represents a model in another important respect: the acceptance of devolved authority. One problem with the present paradigm is the ambiguity of most states in terms of the authority they have devolved. This is certainly true of the WTO, still stuck in the outdated national sovereignty model that characterized the world of GATT.

This is not only an issue with richer trading countries. The much-vaunted G-20 group of developing countries in the WTO, which has proved a powerful force in countering the traditional dominance of the rich nations, is also torn by issues relating to national sovereignty and domestic politics. And its members have yet to demonstrate that they can lead developing countries to overcome a tendency toward "Third Worldism"—an automatic resistance to change because the proposals come from richer countries. It will be critically important that the emerging powers demonstrate, along with a growing sense of confidence, a positive capacity to take the initiative, to be creative, and to help shape the new order. They have already demonstrated an interest in a system characterized by greater fairness. The question is whether they can take this further.23

Can they contribute to a system designed for citizens, not consumers? Can they help design a system that can mediate effectively among unequal powers or in a situation of enormous complexity and diversity? Can they help craft a system dedicated to the joint goals of promoting political stability and advancing justice? A great deal depends on how the issues are framed. The goal is to move from an economics framed in terms of efficiency to one framed in terms of justice—both procedural justice and outcome justice. Future progress in extending the trading system will depend on the ability to demonstrate that trade liberalization does indeed advance these wider objectives—social justice, human rights, equity, and a healthy environment.

Designing the right institutions for global economic governance will mean rethinking the role and primacy of the nation-state as traditionally understood.

In a very real way, a sustainable future depends not only on dealing with such eminently global issues as climate change (see Box 14-2) or the collapse of biodiversity. It depends on creating a society where nobody is excluded. The challenge is to design a trading system that will harness the power of trade to do good to a system that is characterized by a search for fairness, stability, mediation, the promotion of environmental values, and the imperative of inclusiveness. This requires a trading system that is accountable to the goals set for it and that is genuinely monitored to ensure it is proceeding optimally toward those goals. It requires a system that contributes as solidly as it can to the promotion of the public good, not simply to private interests, and that balances the power of the market with the need for a solid framework

New Approaches to Trade Governance

Box 14-2. Multidimensional Problems

There is no magic, single solution to the challenge of controlling greenhouse gases. It is a challenge of energy policy and of managing the transition to sustainable energy sources. This in turn has a great deal to do with the technological transition, access to invention, and intellectual property. It has to do with investment policy and the nature of investment agreements and the settlement of investment disputes. And it has to do with trade policy—the trade rules and how the trading system deals with issues at the frontier between trade policy and related policy areas. In short, the issue cannot be dealt with by treating each of the pieces separately from the overall picture of which they are but a part.

The same is true of what Paul Collier calls "the bottom billion"—those who are not benefiting from global growth, from trade liberalization, or even from much development assistance and who continue to survive on less than a dollar a day.The present economic approach offers them very little, and the new economic elites in the emerging countries often appear not to pay them much attention either. Yet a sustainable future depends on including them in national economies and societies and on lifting them out of their present misery.

Source: See endnote 24.

of public policy. In short, the world's trading system needs to go back to the goal set out in the Preamble to the WTO Agreements— the optimal use of the world's resources in accordance with the objective of sustainable development. Only this time it needs to be taken seriously.24

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