Davies: An Inclusive, Cooperative and Equitable Multilateralism

Never has an inclusive, cooperative and equitable multilateralism been more necessary than it is now. Humanity stands on the cusp of catastrophic climate change that could within decades render large parts of the planet uninhabitable and force billions of people to become climate refugees. Even if the change is averted (a big if), the level of global warming already locked in will lead to more frequent extreme weather events, disproportionately impacting poor people in the developing world who have the least responsibility for causing them. 

The system of hyper-globalisation, financialisation and neoliberalism that arose from the crisis of the 1970s and the end of the Cold War has now taken us back to a world of stagflation, with record high fuel and food prices, at least partly attributable to war. For the past decade and a half, at least, this system has been enmeshed in multiple crises. None of these has, however, led to any kind of fundamental structural transformation. Instead, those whose rapacious quest for profit created speculative bubbles have been assisted with bailouts. While stronger developed countries have selectively opted out of neo-liberal rules and norms, they continue to insist that those rules must be implemented by poorer countries at the cost of provision of essential services and to the detriment of efforts to diversify their economies.

The result has been a system characterised by widening inequality and a growing sense of unfairness. Powerful transnational corporations and financial institutions have prospered, increasingly through monopoly conduct facilitated by global intellectual property, investment, and trade rules together with “light touch” financial sector regulation. According to UNCTAD, ‘surplus profits’ beyond those derivable from ‘typical’ business activities rose from 4 percent of total global profits in 1995–2000 to 23 per cent in 2009–2015. For the top 100 global companies, the share increased from 16 to 40 per cent.1 At the other end of the spectrum, “too many people in too many places [are] integrated into a world economy that delivers inequitable and unjust outcomes.”2 Among other things, years of wage suppression has led to a decline in the ratio of income from employment to GDP from the 61.5 percent recorded in 1980 to 54.5 percent in 2018 in the developed world, with a similar decline from 52.5 percent in 1990 to just over 50 percent in 2018 in the developing world.3 As Oxfam tells us, we live in a world where 2,153 dollar billionaires own as much wealth as the poorest 60% of the world’s population numbering 4.6 billion people.4

The Covid pandemic saw widespread hoarding in the rich world of medical equipment and vaccines, dubbed vaccine apartheid. This was followed by recovery “separate development”: the developed world mobilized a massive arsenal of monetary and fiscal measures to prop up their economies, estimated at between 20 and 25 percent of their GDP, while many of the poorest developing countries were able to mobilize just 1 percent of their much smaller output to mitigate the damage from a vicious cycle of capital flight, declining trade and investment flows, and collapsing output and tax revenues.5 Even before fully exiting from the Covid  induced socioeconomic crisis, the onset of the fuel and food price inflation has driven several poor countries into debt crises, with some already defaulting. Yet as a recent study showed, illicit outflows of capital from Africa now dwarf inflows of both Official Development Assistance and Foreign Direct Investment, with the cumulative estimated total of illicit assets held abroad (USD 2,4 trillion in 2018) being three times the continent’s stock of external debt.6

There can be no doubt that the global order that brought us all of this is now changing. The unipolar world with its single uncontested hegemon and superpower that emerged from the Cold War is giving way to an order that will definitely be more multipolar. But while the old is dying, the new is not yet born and could evolve in several possible directions. 

Strengthened multilateralism is but one potential outcome. There are already signs of bloc-formation and increasing contestation between powers, meaning that there are, in fact, several scenarios for the way multilateralism could fit into a more multipolar world. There could be a “strong” multilateralism, with rules and processes that shape the conduct of all. These may explicitly seek to promote greater inclusivity, reduce inequality, promote development, and lead to decisive action on global challenges, including the threat of climate change. But in equal likelihood, they could entrench the demands and claims of the rich and powerful forces to the detriment of the poorer and weaker, and decrease the ability of humanity to find inclusive solutions to massive challenges confronting it. There could also be a “weaker” form of multilateralism that effectively subordinates collective action to the will and conduct of contending major powers or blocs. 

Progressive forces everywhere, and peoples in the developing world in particular, have good reasons for wanting to see a strengthened multilateralism. Many of the mega-challenges facing humanity, including the threat of catastrophic climate change, can only be confronted by a common effort. But we need a multilateralism that is not just stronger but also fundamentally different from its current form – in its guiding ethos, way of operating, and outcomes it delivers. Creating greater inclusivity, reducing inequality and promoting equitable sustainable development will require both radically different global rules and greater recognition of a global commons. But while we aspire to a strengthening of a different kind of more inclusive, equitable and cooperative multilateralism, we  need to recognise that reconfiguring the multilateral system is contested space. Progressive ideas and proposals will have to contend with very different competing agendas, and processes and struggles underway now will have a significant impact on what emerges in the future.

Take what is going on in the World Trade Organisation (WTO) as an example. Against the backdrop of the long impasse in the Doha Round negotiations (ultimately due to the imbalance between what was offered by the rich world in reform of agricultural trade, and what was demanded in industrial tariffs) and faced with the onset of multiple crises,as well as the rise of China as a significant competitor, governments of the developed world and transnational corporations began to call for “reform” of the multilateral trading system. Specifically, these forces have sought both to constrain China (for which the narrative has shifted from a poster child of “market reform” to an image of a cheat and abuser of imprecise rules), and also to prevent any other developing country from potentially deploying similar policy tools to achieve economic diversification and industrialisation. Their push for reform can be recognised as proceeding along several pathways. One involves seeking to restrict the application of “Special and Differential Treatment” so that the obligations of developing countries are far less differentiated from those of developed countries. Another has sought to tighten up rules and notifications in relation to the deployment of an increasing range of “behind the border” regulatory and policy issues. A further pathway has been to seek recognition for ”plurilaterals”,  or so-called Joint Statement Initiatives. These are processes where selected groups of “like minded” countries make rules without adhering to the principle of consensus decision-making on subjects ranging from electronic commerce to domestic regulation in services. A final pathway involves limiting the powers of the Dispute Settlement system so that, say, departures from rules justified on “national security” or strategic withholding of supplies could not be subject to a judicial challenge.

The implementation of such “reforms” would clearly further limit the ability of the developing world to bring about structural transformation and move from their colonially determined role as producers and exporters of primary materials to higher value-added production. Often argued for in terms of “levelling the playing field” between the developed world and China, the emphasis on discipling “behind the border” regulation would further curtail the ability of developing countries to deploy key industrial policy tools that proved highly effective both in China’s and other successful industrial revolutions. Policy space to support and nurture nascent industries would also be  restricted in near full reciprocity trade deals by leaving little scope to exclude imports that would compete with nascent industries. 

The WTO Ministerial Conference, held in Geneva in June 2022 (MC 12), was notable for resulting in a severely watered down agreement on Covid vaccines. The moral case for the call spearheaded by India and South Africa for a TRIPS waiver to allow developing countries to build greater capacity to produce Covid-19 vaccines was overwhelming in the face of  vaccine apartheid. But this call faced strong pushback from developed countries hosting big pharma. MC 12’s decision on this matter included no real waiver or amendment to existing TRIPS rules. Instead, the “compromise”, apparently based on a proposal from the European Union, provided “clarifications” to flexibilities on TRIPS and Public Health adopted in 2003 (themselves representing a watering down of the ambitions in the original 2001 Doha Declaration on this subject). These clarifications, moreover, applied only to Covid-19 vaccines (not medical equipment or other vaccines), and the only real concession was a temporary exception to a restriction on quantities that can be exported limited in its operation for five years.7

Less noticed, but critically important, was that MC 12 also mandated “work towards necessary reform of the WTO.”8 Although the “Outcomes” declaration left the content of the “necessary reform” to be determined in future negotiating processes, it is certain that the governments of developed countries will want to see this advance several (if not all) of the long-identified objectives indicated above. 

Some developing countries (the Africa Group, India and Cuba) have tabled a proposal calling for a radical alternative. Entitled, “Strengthening the WTO to Promote Development and Inclusivity”,9 this submission argues that the existing Multilateral Trading System entrenches “many imbalances” and that these have become worse during Covid crisis. It cites World Bank data to show that the gap in per capita GDP between the developed and developing world has widened since establishment of the WTO, and uses this to call for the core principle of Special and Differential Treatment to be upheld and provided for in future agreements. It argues that “WTO reform does not mean either accepting inherited inequalities or new proposals that would worsen imbalances” and that reform  should therefore focus on addressing asymmetries and bringing greater balance to WTO rules. It cites the founding declaration asserting that trade is not an end in itself, but a means to “raising living standards and ensuring full employment” and calls for respect for the right of countries to adopt different economic models, pursue development and support diversification. Finally, it calls for the preservation of “core principles”, including consensus-based decision-making and for the addressing of loopholes in rules to defend developing countries against unilateral action by stronger economies.

What seems certain is that the WTO reform negotiations will see a clash of paradigms. It remains to be seen whether developing countries can achieve sufficient unity and resolve to withstand what will inevitably be an onslaught from powerful vested interests. What is also clear is that the outcome on this issue will have implications beyond the WTO. If, for example, the principle of Special and Differential Treatment is weakened in the WTO, it will embolden those seeking to weaken the principle of “common but differentiated responsibilities” in climate change negotiations. 

In the 1970s, developing countries – recognising that political independence had not of itself ended economic colonialism and dependency – called for a New International Economic Order (NIEO). This would include an “overhaul of the rules of international trade”, reform of the international financial system and recognition of the full sovereignty of each state over its natural resources. Critically, it also prioritised “industrialization […] essential for the diversification of economies, which during colonization focussed on a very restricted range of raw materials.”10 In 1974, many of these core principles were incorporated into a Declaration adopted at a Special Session of the United Nations General Assembly. However, as an indication of what is wrong with multilateralism as it currently exists, these principles were simply jettisoned within a few years by other multilateral bodies that instead foisted on developing countries one-size-fits-all neoliberal policy prescriptions and extreme trade liberalisation.  

With the system created by hyper-globalisation and neoliberalism not only engulfed in multiple crises, but also entrenching the dependence of much of the developing world on production and export of primary products, there is an urgent need to recover many of the core principles of the NIEO, while adapting and updating our vision to take account of subsequent developments and current realities. Many of the components of such an adaptation have already been identified. They include the call for a Global Green New Deal (GGND). While there several somewhat different iterations of this, there is surely common cause that a GGND must be rooted in at least the following principles:11

• Ending austerity through “using fiscal policy to manage demand conditions, and making full employment a central policy goal”: “monetary expansion should also be used differently, so as to finance public investments which add to inclusive and sustainable outcomes.”
• Enhancing public investment with a strong caring dimension: “This would include major public works programmes for mitigating and adapting to climate change.”
• Raising government revenue, with “a greater reliance on progressive taxes, including on property and other forms of rent income.”
• Establishing a new global financial register – to clamp down on tax havens and other forms of base-erosion and profit-shifting.
• Strengthening voices of organised labour – to ensure wages rise in line with productivity as a significant stimulus to demand.
• Taming financial capital – to make “financial institutions … serve the broader social good.”
• Significantly increasing multilateral financial resources.
• Reining in corporate rentierism, including through stronger regulation of restrictive business practices, the establishment of a global competition observatory and generally designing competition policy to promote distributional objectives.
• Respecting policy space – through removing restrictive provisions in trade and investment agreements to allow the development of appropriate industrial and other policies.

There have also been various proposals for principles to underpin a rewriting of rules of the multilateral institutions. One such is the “Geneva principles for a Global Green New Deal”,12 which called for the following:

• Global rules should be calibrated towards the overarching goals of social and economic stability, shared prosperity and environmental sustainability, and should be protected against capture by the most powerful players.
• States should share common but differentiated responsibilities in a multilateral system built to advance global public goods and protect the global commons.
• The right of states to policy space to pursue national development strategies should be enshrined in global rules.
• Global regulations should be designed both to strengthen a dynamic international division of labour and to prevent destructive unilateral economic actions that prevent other nations from realizing common goals.
• Global public institutions must be accountable to their full membership, open to a diversity of viewpoints, cognizant of new voices, and have balanced dispute resolution systems.

Finally, some have called for a fundamental reset of the institutions that emerged from the 1944 Bretton Woods conference (the IMF, World Bank and the predecessor of the WTO).13

Faced with the circumstances confronting us, the main task of progressive forces now must surely be to exert more influence on ongoing processes and debates, whilst campaigning more generally for an inclusive, cooperative and equitable multilateralism for a twenty first century version of a New International Economic Order. The Progressive International is well placed to play a leading role in this regard.

Rob Davies is an Honorary Professor at the University of Cape Town’s Nelson Mandela School of Public Governance and a member of the Advisory Council on Trade and Industrial Development appointed by the Secretary General of the African Continental Free Trade Area. Between 2009 and 2019 he served as South Africa’s Minister of Trade and Industry and was a Member of Parliament between 1994 and 2019.