Category: Trade

Alicia Nicholls

The title of this week’s article is borrowed from the impromptu but impassioned appeal made by Prime Minister of Barbados, the Hon. Mia Amor Mottley, QC, MP, in her maiden address on September 28th during the General Debate of the 73^rd Session of the United Nations General Assembly (UNGA). With only one notable exception, support for multilateralism was a common thread linking the speeches given by world leaders during the General Debate.

Perhaps the most compelling case for multilateralism was that made by Foreign Minister of Singapore, Dr. Vivian Balakrishnan. While warning that multilateralism was at a crossroads and was facing a crisis of confidence, Foreign Minister Balakrishnan made an articulate case for the indispensability of multilateralism to the global community, especially to small states.

Indeed, multilateralism affords small states a microphone that they would otherwise lack on the international stage. Despite the successes of the rules-based multilateral system, there are widening cracks in the system. These require immediate remedial action to enhance the system’s structural integrity to withstand the threat of creeping unilateralism, and to more effectively serve the needs of the global community in a changing geopolitical and economic world.

What is multilateralism?

Multilateralism, in the most rudimentary sense, refers to cooperation among three or more nation states to achieve a common goal. In contrast to the current isolationist US government stance, previous US governments were central to the establishment of the present-day multilateral system, which bears their footprint.

The modern day multilateral system was fashioned in the wake of the Second World War (1939-1945) with the aim of promoting global peace and stability. It was based on the liberal theory of international relations which posited, inter alia, that states which cooperate would not resort to war. It was in that immediate post-war era that the United Nations, the progeny of the League of Nations (1920-1946), was formed in 1945. The Bretton Woods institutions (the International Monetary Fund and the World Bank), the watchdogs of the global economic order, were established at a conference held in Brettons Woods, New Hampshire, US in 1944.

Multilateralism recognizes that no one Government alone can handle the growing plethora of challenges confronting the global community, and that by pooling resources, wisdom and ideas through shared institutions, optimum solutions could be found. In the years that followed, a spaghetti bowl of multilateral organisations has flourished in areas as diverse as health, telecommunications, the environment, migration, international transportation, labour, among others.

With respect to trade governance, an attempt was made by a US-led group of countries to establish an International Trade Organisation (ITO) in the mid 1940s but failed after the US Congress repeatedly declined to approve the ITO Charter. As such, an informal organization known as the General Agreement on Tariffs and Trade (GATT) governed world trade from 1945 until January 1995 when the World Trade Organisation (WTO) came into being.

Why Multilateralism Matters to Small States

The majority of today’s developing countries were still colonies when many of these multilateral institutions were birthed. However, upon attaining independence, acceding to these institutions was viewed as a requisite rite of passage. This is particularly true for the world’s small states which have overwhelmingly been supporters of multilateralism.

But why is that? Small states, with their diminutive economies and populations, weak political leverage and inherent vulnerabilities, would be the “bullied kids” in an anarchic global system where “might is right”. The rules-based multilateral system provides a buffer of stability and predictability for small states. Its norms-based system, undergirded by international law, helps to constrain and contain great power aggression. In a general sense, multilateral institutions provide some semblance of accountability for those States which contravene global norms. I say in a general sense as history has proven that this has not always been the case with big countries. In the area of trade, the WTO’s dispute settlement system gives small states the opportunity, at least in theory, to hold hegemons to account.

Multilateral engagement gives small states, which would otherwise be Liliputians in the international system, a voice. Whereas by itself a small states’ voice is a little more than a squeak, by building coalitions small states have managed to achieve a roar on some issues. One of the most notable cases was the success of the Alliance of Small Island States (AOSIS) in the UNFCCC negotiations leading up to the signature of the Paris Climate Agreement during the COP21 in 2015. Though not perfect, that agreement is an important milestone in the fight against anthropogenic global warming.

Small states have also been able to benefit from capacity building and technical assistance from multilateral institutions. An example is the research done by multilateral financial institutions on the issue of de-risking which has led to the loss of correspondent banking relations, with implications for these states’ financial sectors and commercial relations. In the wake of the financial crisis, several Caribbean countries, and most recently Barbados, have had to enter IMF structural adjustment programmes.

Some small states have also played a key role in the establishment of multilateral institutions. Trinidad & Tobago was instrumental in pushing for the establishment of the International Criminal Court (ICC), and small states helped to push for the United Nations Convention on the Law of the Sea (UNCLOS). Moreover, small states have had some success in attaining high positions in international organisations.

Why is Multilateralism Under Threat?

Why is a system which has given the world relative peace and prosperity for some seventy years now facing what Singapore Foreign Minister Balakrishnan called a “crisis of confidence”? Questions about the efficacy and legitimacy of multilateral institutions have long been raised, but rising populism and anti-globalisation sentiment, in the wake of uneven recovery from the financial crisis has led to rising nationalism, xenophobia and unilateralism. Indeed, the recently published UNCTAD Trade and Development Report 2018 noted that trade tensions were a “symptom of a greater problem”, that is, failure to address rising global inequality and imbalances caused by “hyper-globalisation”.

But many of the problems are not the fault of multilateralism but due to inappropriate policy responses by Governments and by disruptive technologies which have replaced labour with machines. As such, as noted by Foreign Minister Balakrishnan in his UNGA speech, it is up to governments to address this through retooling workers and reformulating their education systems to equip the next generation with the tools to exploit these technologies.

Small states in their successive UNGA addresses have often expressed frustration at the slow pace of action on some fronts of concern to them, including financing for climate change. Antigua & Barbuda’s Prime Minister, Gaston Browne, voiced disappointment with his country’s inability to receive compensation from the US after the WTO dispute settlement body ruled in Antigua & Barbuda’s favour in the US Gambling dispute. Moreover, Caribbean leaders have frequently bemoaned the lack of support for discontinuing the use of GDP per capita as a basis against which to measure development status. This criterion has excluded middle and high income Caribbean countries from most concessional loans and official development assistance.

Making Multilateralism Work Better

The question is not whether multilateralism works, but how can it work better. There are legitimate concerns about whether today’s multilateral institutions, many of which were forged during different economic and geopolitical times, remain “fit for purpose” for today’s global realities and challenges. Former UN Secretary General, Kofi Annan recognised this when he asserted in 2002 that “the United Nations exists not as a static memorial to the aspirations of an earlier age but as a work in progress – imperfect as all human endeavours must be capable of adaptation and improvement.”

On the trade front, for example, there have been increased calls for reform of the WTO. Several members, including the US, Canada and the EU, have made proposals for reform. As it stands, the WTO’s negotiation function remains in a state of paralysis, while the US blocking of the appointment of judges to its Appellate Body over the US government’s dissatisfaction with the dispute settlement system risks creating a crisis in that body’s ability to be an arbiter of trade disputes between WTO members. The renewed appetite for WTO reform provides a window of opportunity for small states to redouble their advocacy efforts for their own reform proposals, while making sure they are not excluded from having a seat at the table.

There is the need to address democratic and transparency deficits within multilateral institutions. The configuration and operation of the UN Security Council, for example, stills reflects a geopolitical reality that no longer exists. Decisions made by the Paris-based Organisation for Economic Cooperation and Development (OECD), where developing states do not have a seat at the table, have had devastating consequences for the offshore financial services sectors of Caribbean states.

Institutional reform would require, where feasible, strengthening the secretariats of these organisations to better serve the needs of member states, especially the most vulnerable. In addition to fostering a greater space for civil society to be heard in multilateral organizations, there should also be greater emphasis on building the capacity of small states to effectively participate in meetings and the day-to-day operations of these organisations.

The challenges which face the world call for more multilateralism, not less. Multilateralism is important for achieving Agenda 2030, including the seventeen UN Sustainable Development Goals (SDGs). Multilateral institutions also have a pertinent role to play in developing rules to address emerging global issues. Singapore Foreign Minister Balakrishnan, for example, called for the UN to develop norms and rules for cybersecurity.

In the past week alone, several events have further reiterated why multilateralism is needed now more than ever. One of which is the IPCC Special Report on Global Warming of 1.5ºC which showed that the world was already experiencing the effects of warming of 1.0 degrees Celsius above pre-industrial levels. The devastation caused by Hurricane Michael to the Florida Panhandle in the US this week reiterates the urgency of the need for redoubled climate action. Rising global trade tensions, protectionism and unilateralism have made trade top of mind for global economic leaders. In their communique released following the Annual Meetings of the Boards of the IMF and World Bank, it was specifically noted that the IMF would facilitate multilateral solutions for global challenges.

Carrying on the multilateralism baton

Prime Minister Mottley concluded her UNGA speech by asking “Will we carry and hand over to future generations, the baton left us by those who dreamed of a world of united nations or will we drop it?” For small states, it is important that we do not allow this baton to be dropped.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.