• John Gray argues that the cataclysmic attacks on the United States on 11 September 2001 marked the end of the era of globalization.
• In response to the global terrorist threat, states have reasserted their power, and borders have been sealed, although imperfectly.
• Economic globalization stalled compared to the turn of the century, and sceptics view this as confirmation that globalization was exaggerated.
• Sceptics argue that globalization is a myth that concealed a world less interdependent than in the nineteenth century, still dominated by geopolitics.
• Globalists believe 9/11 and the insecurity it caused demonstrate a clash of globalizations, with a confrontation between Western modernity and reactions against it.
• One problem with the sceptical argument is its focus on economic trends, overlooking other forms of globalization, such as in culture, crime, education, and politics.
• Globalization is multidimensional, impacting all aspects of social life and not limited to economics. It is visible in daily life, including in the food we eat, the clothes we wear, and our collective sense of security.
• Universities are global institutions with international student recruitment and the dissemination of academic research, reflecting the broad reach of globalization.
• Understanding globalization requires mapping its patterns across all key sectors, from economic to political, military, cultural, and ecological domains.
• Economic globalization is more advanced than cultural or military globalization, making globalization highly uneven.
• The key question in understanding globalization is: the globalization of what? Patterns of economic and cultural globalization are not identical, so general conclusions based on one domain can be misleading.
• After 9/11, the slowdown in economic globalization was seen by sceptics as the end of globalization, but this ignored the acceleration of globalization in military, technological, and cultural domains.
• Contemporary globalization is distinctive because it involves the confluence of globalizing trends across multiple domains, which have proven resilient despite global instability and conflicts.
• Globalization is asymmetrical, with uneven experiences across regions, countries, and communities, resulting in clear winners and losers.
• The most affluent experience a shrinking world through jet travel, global television, and the Internet, while many feel disempowered.
• Inequality is a deep feature of globalization, leading to asymmetrical globalization rather than a global community or cooperative ethic.
• As globalization spreads, it often exacerbates divisions, generating conflict and insecurity, as seen in the aftermath of 9/11.
• Globalization involves contradictory tendencies toward global integration and fragmentation, cooperation and conflict, order and disorder.
• Violence has always been central to globalization, whether in imperialism or the current war on global terror.
• Contemporary globalization combines dense global interconnectedness with new infrastructures of control and communication, from the WTO to transnational corporations.
• Contemporary patterns of globalization surpass earlier epochs in terms of scale and quality, especially due to real-time global communication infrastructures.
• Modern globalization is described as a thick form of globalization, with powerful implications for state autonomy and economic policy.
• The scale of global financial flows ($1.88 trillion per day) imposes significant constraints on governments’ national economic policy.
• Thick globalization shapes the context in which states operate, defining the parameters of state power and significantly impacting world politics.

• A political map of the world is divided into over 190 territorial units, namely states.
• This division, emphasizing borders and boundaries, would be incomprehensible to a student of politics in the Middle Ages.
• Historically, borders are a relatively recent invention, as is the concept of sovereign, self-governing, territorially delimited political communities (states).
• The idea of states as sovereign, territorial units is now a convenient fiction but remains central to orthodox state-centric conceptions of world politics.
• Globalization challenges this state-centric view of world politics, as it questions the primacy of borders and sovereignty.
• To understand globalization, it is necessary to make a conceptual shift in how we think about world politics.

• The Peace Treaties of Westphalia and Osnabruck (1648) established the legal basis for modern statehood and the rules of world politics.
• Pope Innocent rejected the Westphalian settlement, calling it “null, reprobate, and devoid of meaning”, but over four centuries it became the normative structure of the modern world order.
• At the core of the Westphalian settlement was the recognition of each ruler’s right to rule their own territories free from outside interference, codified in the doctrine of sovereign statehood.
• In the twentieth century, as global empires collapsed, sovereign statehood and national self-determination became universal organizing principles of world order.
• The Westphalian Constitution provided the framework for modern world politics, establishing the legitimacy of sovereign rule and territoriality.
• Constitutions are crucial for determining the location of legitimate political authority and the rules governing the exercise and limits of political power.
• The Westphalian Constitution merged territoriality with sovereign rule, defining sovereignty as the right to exclusive, unqualified, and supreme rule within a delimited territory.
• Sovereignty is exclusive (no outside intervention), unqualified (complete authority within territories), and supreme (no higher legal authority).
• For many weak states, sovereignty hasn’t always equated to effective control within their territories, leading to “organized hypocrisy” (Krasner).
• Despite these challenges, the Westphalian system has shaped the trajectory of world politics and remains the founding covenant of world politics.
• The UN Charter and the Universal Declaration of Human Rights have modified aspects of the Westphalian Constitution, especially regarding sovereignty.
• Many argue that contemporary globalization presents a challenge to sovereign statehood and is transforming world order.

• Globalization over the past five decades has blurred the line between domestic and foreign policy, challenging the fiction of a separate domestic and international political sphere.
• Former President Clinton advocated for discussing issues like economic policy, security policy, and environmental policy rather than separating foreign and domestic policy.
• Anti-globalization protests and national courts enforcing World Trade Organization (WTO) rulings highlight the anachronistic nature of the Westphalian system.
• A post-Westphalian world order is emerging, with a focus on global politics, which includes rule-making, problem-solving, and maintaining global security and order.
• Global politics involves more than conflict and cooperation between states, emphasizing the need to recognize the importance of states, geopolitics, and global structures.
• Political globalization challenges the traditional one-dimensional view of world politics as solely a power struggle between states.
• Under political globalization, states are embedded in global systems with multilateral institutions, transnational networks, and global policy networks.
• Global governance complex includes states, international institutions, transnational networks, and public/private agencies, coordinating global affairs.
• Private global governance involves non-governmental agencies shaping global economic and social affairs, like the International Accounting Standards Board and credit-rating agencies.
• A growing transnational civil society of NGOs, advocacy networks, and citizens’ groups plays a significant role in global politics.
• At the 2006 WTO Ministerial in Hong Kong, environmental and corporate representatives outnumbered government representatives, signaling the rise of transnational civil society.
• Inequality in transnational civil society exists, with multinational corporations having more access to power than smaller advocacy groups.
• Global politics is marked by economic, social, cultural, and ecological concerns such as pollution, drugs, human rights, and terrorism, which require international cooperation.
• Traditional geopolitical logic is inadequate for addressing issues like resource depletion, environmental degradation, and chemical weapons proliferation, which transcend borders.
• Sovereign state power is being transformed but not eroded; states now assert sovereignty as a bargaining tool in transnational systems.
• The Westphalian view of sovereignty as indivisible and territorially exclusive is being replaced by a shared form of sovereignty in a post-Westphalian world order.
• Globalization doesn’t lead to the end of the state but creates a more activist state, requiring extensive multilateral collaboration to achieve domestic objectives.
• State autonomy is compromised by global governance frameworks, presenting a trade-off between effective governance and self-governance.
• The disaggregated state model replaces the idea of a monolithic state, with different government agencies interacting with international counterparts and NGOs.
• Global politics is no longer confined to territorial boundaries; it acknowledges that decisions made in one region impact distant regions, blurring the lines between domestic and international politics.
• Power in the global system is distributed unevenly among various actors, including states, corporations, and NGOs.
• Political authority is diffused upwards to supra-state bodies like the European Union, downwards to sub-state bodies, and beyond the state to private agencies.
• Sovereignty remains an important concept but is increasingly shared and divided between local, national, regional, and global authorities.
• The rise of global politics challenges traditional notions of closed national polities and recognizes that all politics occur in a global context.
• Inequality and exclusion remain prevalent in global politics due to power imbalances between states, the dominance of global capitalism, and technocratic decision-making.
• These factors contribute to distorted global politics, where states and groups with greater power resources dominate the global agenda and decision-making.
• Democracy in global politics is limited, as powerful states and organizations have disproportionate control over global issues.
• The possibility of a more democratic global politics is a key concern for normative theorists.

• Globalization is associated with a double democratic deficit:
  • It undermines the ability of democratic governments to manage transnational forces in line with citizens’ preferences, compromising self-governance.
  • It leads to distorted global politics, where power asymmetries benefit global elites at the expense of the broader global community.
• Many global civil society agencies are unrepresentative of the world’s peoples, weakening the democratic credentialsof global politics.
• Redressing the double democratic deficit and addressing global poverty are key challenges for the twenty-first century.
• Cosmopolitanism critiques distorted global politics for perpetuating global inequalities and injustices, advocating for a reformed global governance system that can regulate global markets and prevent harm to the most vulnerable.
• Cosmopolitan democracy combines the democratization of global governance with the pursuit of global social justice, aiming to institutionalize values like rule of law, political equality, social justice, and economic efficiencywithin global power systems.
• Cosmopolitan democracy seeks to extend democracy beyond national borders, addressing the double democratic deficit caused by globalization.
• It aims to bring transnational networks of power under effective democratic control, establishing conditions for a more humane and democratic global politics.
• Violence, division, and the dominance of might over right currently undermine the realization of cosmopolitan democracy, but its advocates argue it is rooted in existing global conditions.
• Cosmopolitanism builds on the idea that globalization is creating a post-Westphalian order, blending elements of democratic principles and realpolitik in global politics.
• The current world order includes self-determination, the rule of law, popular sovereignty, democratic legitimacy, and redistribution through aid, alongside might is right and national interest as dominant forces.
• Globalization has sparked major political reactions, with progressive movements calling for more democratic global governance and regulation in the public and global interest.
• The 2005 Make Poverty History campaign and increased pressure on G8 governments emphasize the need for more transparent, accountable, and legitimate global governance.
• A global consensus is emerging on the need for reform, supported by diverse constituencies from both the North and South, as well as transnational civil society.
• Distorted global politics expresses diverse democratic impulses, but powerful global forces resist the creation of a cosmopolitan or humane global politics.
• Distorted global politics embodies a struggle between the logic of power politics (statism) and the logic of cosmopolitanism, between power and paradise.
• The future trajectory of global politics remains speculative, raising both intellectual despair and relief: despair because current theories offer limited guidance, relief because the future is yet to be shaped.
• Globalization will continue to be a powerful force for global change, with uncertain outcomes that could either improve or worsen global conditions.

• This chapter explores the concept of globalization and its implications for the study of world politics.
• Globalization reconstructs the world as a shared social space, but it is highly uneven in its intensity, extensity, and asymmetry across different spheres.
• Globalization leads to a highly unequal geography of global inclusion and exclusion, contributing to both conflict and cooperation in world affairs.
• The chapter emphasizes a fundamental shift in world politics due to globalization: a move from geopolitics (inter-state politics) to global politics—the politics of both state and non-state actors within a shared global space.
• Global politics is marked by deep inequalities of power, and in its current form, it is more accurately described as distorted global politics—a politics of domination, contestations, and competition between powerful states and transnational social forces.
• Cosmopolitan theory argues that a more democratic global politics is both desirable and feasible.
• The trajectory of global politics will be shaped by the struggle between the forces of statism and cosmopolitanism—or the conflict between might is right versus right is might.
• The outcome of this contest will determine whether twenty-first-century global politics will be characterized by hopeor fear, and whether a more humane and democratic global politics can emerge from today’s distorted global politics.

Global Governance and Bretton Woods System

• The issue of global governance has gained more attention since the 1990s.

• This increased attention is due to several factors, including the end of the Cold War, which raised expectations for international organizations and the United Nations in particular.

• Globalization has accelerated discussions about the relationship between global economic trends and institutional frameworks that regulate the economy.

• There is a growing recognition that many global problems cannot be solved by individual states alone.

• Global governance is difficult to analyze and assess due to its position between a Westphalian world of sovereign states and the ideal of world government.

• The field of economic policy-making is where global governance has advanced the most.

• This development stems from the 1944 Bretton Woods agreement, which created key institutions like the IMF, World Bank, and GATT (later replaced by the World Trade Organization).

• The Bretton Woods system was designed to establish the postwar international economic order.

• Initially, the focus was on postwar reconstruction in Europe and later development in the Third World.

• Over time, the Bretton Woods system evolved to adopt a neoliberal agenda, which led to the promotion of economic liberalization.

• From the early 1970s, the system became linked to the forces of neoliberal globalization.

• The creation of the Bretton Woods system was driven by the need to rebuild Europe after WWII and to promote global economic stability.

• Over time, the system’s mission shifted towards promoting free-market principles and global trade.

• The Bretton Woods institutions have been both a force for good and for ill. Some view them as promoting global economic stability and development, while others criticize them for fostering inequality and reinforcing the power of wealthy nations.

Global Governance

• Global governance is described as a collection of governance-related activities, rules, and mechanisms, both formal and informal, that exist at various levels worldwide.

• It refers to a variety of cooperative problem-solving arrangements that facilitate the coordination of social life, as opposed to government, which involves ordered rule through enforceable decisions.

• Global governance has become increasingly important in global politics since the end of the Cold War, particularly in response to, and to some extent in an attempt to shape, globalization.

• Global governance is a complex phenomenon that resists simple definitions or explanations.

• It is often confused with international organization, to the point where global governance is sometimes used as a collective term for all international organizations.

• Although global governance and international organizations are related, they are not synonyms.

• One key aspect of global governance is the growth in the number and importance of international organizations.

• Global governance represents a set of processes through which states cooperate without completely abandoning sovereignty.

• Distinguishing global governance from other models of world politics is challenging due to its multifaceted nature and the blurred boundaries with other political models.

What Global Governance is, and is not

• Global governance can be understood as a broad, dynamic, and complex process of interactive decision-making at the global level.

• To understand global governance, it is helpful to compare it with alternative configurations of world politics, including international anarchy, global hegemony, and world government.

• International anarchy refers to a situation where there is no central authority or overarching governing body, and states act independently.

• Global hegemony involves the dominance of one state or a group of states that influence or control global political and economic systems.

• World government refers to a centralized, global governing authority with the power to enforce laws and make binding decisions across the entire world.

• Global governance is distinct from these models because it involves cooperation and coordination between states and other actors without a single, central authority enforcing decisions.

International Anarchy

• International anarchy has been the conventional model for understanding international politics, originating with the emergence of the Westphalian state-system in the 17th century.

• It is a core assumption of realist theory, which emphasizes the absence of a supranational authority capable of regulating state behavior.

• In this system, states are sovereign entities and must rely on self-help for survival and security.

• The international system is dynamic and prone to conflict, especially due to the security dilemma, where states’ actions to ensure security can create fear and uncertainty in other states.

• However, international anarchy is not always marked by chaos; periods of peace and relative order can emerge, particularly when a balance of power discourages states from pursuing aggressive ambitions.

• The prospect of war diminishes when states focus on maximizing security (avoiding war) rather than maximizing power (through conquest and expansion).

• Since 1945, countries have demonstrated a capacity for sustainable cooperative behavior through international organizations, based on norms and rules that foster trust and reciprocity.

• The cooperation achieved by organizations like the European Union challenges realist theory, which assumes that states operate in a system of anarchy.

• It is argued that the international system has evolved into an international society, where international anarchy has transformed into an “anarchical society” (Bull, 1977).

• However, self-help and power politics have not been entirely eliminated; for example, relations in much of the Middle East are still best understood in balance-of-power terms.

• The events of 9/11 are interpreted as marking a return to traditional geopolitics, emphasizing the continued relevance of power politics.

• Realist theorists challenge the idea that an international order can permanently transcend the logic of power politics.

Global Hegemony

• Realists acknowledge that some measure of organization exists in the state system due to the hierarchy of states.

• While states are formally equal in terms of their sovereign jurisdiction, they are highly unequal in terms of their resources and capacities.

• Powerful states impose their will on weaker states, often through imperialism.

• The idea of global hegemony extends this concept, where a hegemonic power possesses pre-eminent military, economic, and ideological resources.

• A hegemonic power can impose its will within a region (as a regional hegemon) or globally (as a global hegemon).

• This asymmetrical distribution of power may cause hostility and resentment but also encourage weaker states to bandwagon in hopes of gaining security and rewards.

• Global hegemony can be consistent with international order if the hegemon provides collective goods, such as a stable financial system, a dependable international currency, and resolving regional conflicts as the ‘world’s police officer’.

• Some argue that hegemony is key to understanding modern global politics, with the USA becoming the global hegemon after 1945, following the end of the Cold War and the demise of the Soviet Union.

• The rise of international organizations since 1945 is often seen not as a greater willingness to cooperate but as a reflection of the USA’s ability to accumulate structural power.

• The USA played a pivotal role in constructing key global governance institutions, such as the UN, World Bank, IMF, and WTO.

• While the USA has encouraged European integration, it is simplistic to view international institutions merely as mechanisms for pursuing US national interests.

• The USA’s global dominance and leadership over global governance institutions may be fading, especially with the emergence of a multipolar world order.

World Government

• World government corresponds least well to the structures and processes of the modern global system.

• Global governance can be described as international cooperation in the absence of world government.

• The idea of world government has become unfashionable, although it was a significant feature in the history of international relations thought, dating back to Zeno and Marcus Aurelius in ancient Greece and Rome.

• Hugo Grotius advocated for a binding system of law for all peoples and nations, while Immanuel Kant suggested perpetual peace through a federation of free states bound by universal hospitality.

• The founding visions of both the League of Nations (1919–46) and the UN were based on the ideal of world government.

• Support for federal world government was expressed by figures such as Albert Einstein, Winston Churchill, Bertrand Russell, and Mahatma Gandhi.

• The logic behind world government is rooted in social contract theory, similar to the justification for the state – ensuring order and stability among self-interested individuals or states.

• World government is now widely considered unrealistic and undesirable.

• It is unrealistic because there are no indications that states or peoples are willing to give up their sovereignty to a global state or federation.

• Even within regions like Europe, transnational political identities lag behind transnational institution-building, indicating that world government would likely resemble a world empire, like the Roman Empire, an extreme form of global hegemony.

• World government is deemed undesirable for four reasons:

  • It could lead to unchecked power, degenerating into global despotism.

  • Cultural, language, religious, and other differences mean local or regional political allegiances are likely to remain stronger than global ones.

  • It is unclear how democratic accountability could function within a world government.

  • Many liberal theorists believe that global governance and the spread of moral cosmopolitanism can address issues like war, global poverty, and environmental degradation without needing a world state.

• While world government is rarely considered a meaningful political project, the principle of supranationalism has grown in significance.

• Examples of supranational authority include the UN Security Council, International Court of Justice, International Criminal Court, and certain EU institutions, which contain features of world government.

Contours of Global Governance

• World government is increasingly seen as an outdated and unattractive idea, leading to the rise of global governance as a more relevant concept.

• Global governance is more a field than an object of study; it is essentially a process or complex of processes rather than a static entity.

• Global governance is the management of global policies in the absence of a central government.

• It differs from international anarchy as it involves sustained cooperation and collective action, which is impossible in a self-help system.

• States cooperate voluntarily within global governance, recognizing that their interests are better served through cooperation rather than individual action.

• Global governance emerged from the recognition by states that problems in various policy areas cannot be effectively addressed by individual states alone.

• It differs from global hegemony and world government, as the latter presupposes a supranational authority, while global governance does not.

• Global governance is often described as cooperation under anarchy (Oye 1986), implying that international anarchy can be overcome without a world government or a hegemonic order.

• Key features of global governance include:

  • Polycentrism: Despite the UN’s central role, global governance is multiple with different institutional frameworks and decision-making mechanisms in various issue areas.

  • Intergovernmentalism: States and national governments retain significant influence, reflecting the consensual decision-making and weak enforcement powers of international organizations.

  • Mixed actor involvement: In addition to states and international organizations, NGOs, TNCs, and other institutions of global civil society are involved in global governance, with the public/private divide being blurred.

  • Multilevel processes: Global governance operates through interactions between groups and institutions at various levels (municipal, provincial, national, regional, and global), with no single level having dominance.

  • Deformalization: It operates through norm-based and informal international regimes rather than formal and legally constituted bodies.

Global Governance: Myth or Reality?

• Liberal theorists argue that there is a clear, and perhaps inevitable, trend towards global governance.

• The growth of international organizations serves as evidence of greater willingness among states to cooperate and engage in collective action, which further fosters cooperation by strengthening trust and promoting rule-governed behavior.

• Global governance is closely linked to globalization and, although its importance may fluctuate, it is expected to grow over time due to the interdependence and interconnectedness that are difficult to reverse once established.

• This trend is demonstrated by issues such as international migration, global terrorism, transnational criminal organizations, and global pandemics.

• The world as a whole has not fully become orderly or norm-governed, and it is more accurate to describe the process as emerging global governance rather than an established system.

• The norms and rules of global governance are more firmly established in some regions than others.

• Europe has been described as the heart of the ‘postmodern’ world due to the EU’s success in pooling sovereignty and moving away from balance-of-power politics.

• However, Europe is an exception, and many parts of the world are still largely unaffected by international norms and rules, as seen in the existence of rogue states and pariah states.

Global Economic Governance: The Evolution of the Bretton Woods System

• The trend towards global governance has been especially visible in economic policy-making.

• Economics is the most evident area of interdependence among states, and where the failure of international cooperation can cause significant damage.

• Since 1945, a system of global economic governance has emerged through a web of multilateral agreements, formal institutions, and informal networks.

• The most important institutions in global economic governance were established by the Bretton Woods agreement, negotiated before the end of World War II.

• The major motivation behind the agreement was to avoid returning to the economic instability and chaos of the interwar period.

• Unemployment and economic insecurity were recognized as contributing factors to the rise of fascism and the events leading to WWII.

• The chief lesson of the Great Depression of the 1930s was that ‘beggar-thy-neighbour’ policies of protectionism were both economically self-defeating and politically dangerous.

• These dangerous tendencies could only be countered by establishing a framework of norms, rules, and understandings that enabled states to cooperate on economic matters and avoid the ‘welfare dilemma’.

Making of the Bretton Woods System

• In August 1944, the USA, the UK, and 42 other states met at the UN Monetary and Financial Conference in Bretton Woods, New Hampshire, to formulate the postwar international financial and monetary system.

• The Bretton Woods process led to the establishment of three major bodies, collectively known as the ‘Bretton Woods system’:

  • International Monetary Fund (IMF), which began operation in March 1947.

  • International Bank for Reconstruction and Development (IBRD), better known as the World Bank, which began in June 1946.

  • General Agreement on Tariffs and Trade (GATT), replaced by the World Trade Organization (WTO) in 1995 (GATT began in January 1948).

• The Bretton Woods agreement is a key example of multilateralism in the post-1945 period.

• However, it is essential to recognize the dominance of the USA, which played a crucial role in initiating and leading the conference, and dictating key outcomes.

• The USA’s priorities in relation to Bretton Woods were:

  • To ensure domestic growth by creating an open and stable international economic system to maintain full employment, which Roosevelt’s New Deal had failed to achieve.

  • To counter the Soviet Union and contain the spread of communism, promoting reconstruction and recovery in war-ravaged Europe and eventually in Germany and Japan.

• The IMF was central to the Bretton Woods system, overseeing a new monetary order aimed at maintaining stable exchange rates.

• Currencies were fixed to the value of the US dollar, which acted as a ‘currency anchor’, convertible to gold at $35 per ounce.

• The World Bank and GATT complemented the new international monetary order:

  • The World Bank provided loans for reconstruction and development.

  • GATT sought to promote free trade by reducing tariffs.

• These institutions created a form of proto-global economic governance, establishing norms and rules to guide future international economic relationships.

• The Bretton Woods system was underpinned by a faith in liberal economic theories, particularly the benefits of an open and competitive international economy.

• However, the need for institutional arrangements to ‘police’ the international economy reflected doubts about classical political economy and laissez-faire principles.

• Classical political economy believes that unregulated market competition tends toward long-term equilibrium, but the Bretton Woods system was based on the fear that an unregulated international economy is inherently unstable.

• The system was influenced by the ideas of J.M. Keynes, who argued that markets need to be managed.

• The postwar period saw the adoption of Keynesian economic management, using fiscal policy to ensure growth and low unemployment.

• Bretton Woods was seen as an attempt to establish a Keynesian-style regulative framework for the international economy.

• This approach has been described as embedded liberalism, recognizing the limited benefits of market competition, in contrast to ‘pure’ liberalism.

• The exact form of the institutional framework at Bretton Woods was heavily influenced by the USA’s priorities and concerns.

• This influence was evident in the defeat of Keynes’ proposals, as head of the UK negotiating team at Bretton Woods, for a radical change in international monetary and financial arrangements.

• Keynes, often called the ‘intellectual godfather of the IMF’, proposed the creation of a global bank called the International Clearing Union, which would issue its own currency, the bancor.

• The radical aspect of Keynes’ proposal was that the Clearing Union would have the power to permanently alter the terms of trade between creditor and debtor countries.

• The Clearing Union would have imposed conditions on creditor countries, requiring those with trade surpluses to increase the value of their currencies, boosting imports and making exports less competitive.

• Keynes also proposed that capital should flow into, but not out of, countries with a trade deficit, to stimulate growth and increase export value.

• These proposals for a more egalitarian international economic order were rejected by the USA, the world’s leading creditor country.

• The USA’s rejection meant that no limits were placed on the surpluses of successful exporters, and the entire burden for addressing balance-of-payments deficits was placed on debtor countries.

• Critics of global economic governance argue that this rejection introduced structural inequalities and imbalances into the management of the world economy.

Fate of the Bretton Woods System

• For at least two decades, the Bretton Woods system appeared to be a remarkable success, contributing to the ‘long boom’ of the postwar period, the longest period of sustained economic growth in world history.

• During the ‘golden age’ of the 1950s and 1960s, OECD member states achieved consistent growth rates of four to five percent per year, which many attributed to the stability brought by Bretton Woods and its mixture of free trade, free capital movement, and stable currencies.

• The exact contribution of Bretton Woods to the economic boom is debated. Some argue that ‘national’ Keynesianism, where governments stimulated domestic growth through budget deficits, had a greater impact than ‘international’ Keynesianism.

• Radical theorists linked the boom to the establishment of a ‘permanent arms economy’, or military Keynesianism, where military expenditure fueled growth, legitimized by the Cold War.

• Alternatively, some argue that the economic stability was due to the USA’s economic dominance, with the USA holding 60% of all capital stock and 60% of industrial output in 1950, managing the world economy in its own interests.

• The Bretton Woods system has been seen as an expression of US hegemony during the postwar period.

• The postwar boom started to decline in the late 1960s, leading to the stagflation of the 1970s, marked by economic stagnation, rising unemployment, and high inflation.

• The US economy faced difficulties due to increasing spending and rising foreign competition, prompting the USA to abandon the system of fixed exchange rates in 1971, signaling the end of the Bretton Woods system in its original form.

• Despite this, the Bretton Woods institutions survived, although their role and future policy focus initially remained unclear.

• By 1975, the G-7 was formed, bringing together leaders and finance ministers of major industrialized countries to discuss monetary issues and world economy matters.

• The 1970s economic slowdown also weakened GATT’s progress in reducing trade barriers, with industrialized countries raising non-tariff barriers.

• The resentment this generated among developing countries, combined with the recession, led to support for a ‘New International Economic Order’ (NIEO), although attempts to establish a NIEO made little headway, reflecting the balance of power in the world economy.

• During the 1980s, global economic governance shifted towards the ‘Washington Consensus’, marking a transition from a system based on embedded liberalism to one based on neoliberalism.

Evaluating Global Economic Governance

The International Monetary Fund

• The IMF was established to oversee the new monetary order created by the Bretton Woods agreement, with the main purpose of encouraging international cooperation in monetary matters by removing foreign exchange restrictions, stabilizing exchange rates, and facilitating a multilateral payment system.

• Member countries committed to a system of fixed exchange rates, with the IMF acting as a ‘currency buffer’, providing loans to countries facing temporary balance-of-payments deficits.

• The system of fixed exchange rates was based on the gold exchange standard, with the US dollar acting as the anchor. This system was designed to provide stability, preventing currency fluctuations from affecting international business, imports, and exports.

• The exchange rates were adaptable, with currencies allowed to deviate from the fixed rate by 1 per cent in relation to the US dollar and 2 per cent in relation to other countries. Severe balance-of-payments instability could lead to currency devaluation, but this was considered a last resort.

• The transition from fixed to floating exchange rates in the early 1970s altered the IMF’s role, shifting its focus from being a currency buffer to lending to developing countries and, later, post-communist states.

• The IMF became concerned with preventing financial crises from spreading, such as those in Mexico (1982), Brazil (1987), East Asia (1997–98), and Russia (1998).

• The loans provided by the IMF were often conditional, with ‘conditionalities’ attached, requiring countries to implement ‘structural adjustment programmes’ based on the Washington consensus. These conditions emphasized market fundamentalism, focusing on inflation control, trade liberalization, capital flow, banking system liberalization, reduced government spending, and privatization of assets.

• While structural adjustment programmes sometimes brought benefits, like in South Korea, they often caused harm by destabilizing economies through ‘shock therapy’, which increased poverty, unemployment, and exposed fragile economies to foreign competition.

• The IMF’s response, according to Joseph Stiglitz, often reflected the interests and ideology of the Western financial community, leading to criticism that the IMF is biased towards Northern economies, particularly TNCs and international banking conglomerates, and against the interests of the developing world.

• The IMF’s close relationship with the US government is evident in its Washington DC location, the fact that the deputy head is always an American, and the voting rights system that gives the USA an effective veto, as most decisions require an 85 per cent majority.

• The IMF has been slower to respond to criticism than its partner, the World Bank, but in 2006, it reformed its governance to give developing countries a greater role in its decision-making process, further enhanced in 2008 following the global financial crisis.

• The 2007–09 global financial crisis led to a reformulation of the IMF’s mission, shifting it from being an enforcer of fiscal and macroeconomic rectitude in the developing world to a global financial surveillance tool, focused on preventing rather than just containing crises.

• To effectively perform this new role, the IMF would need significant reform.

The World Bank

• The World Bank is a partner organization of the IMF, created by the Bretton Woods agreement, sharing a building in Washington DC, and having similar weighted voting systems that reflect countries’ strength in the global economy.

• Both the IMF and the World Bank were influenced by a common neoliberal ideological orientation, shaped by the Washington consensus, particularly in the 1980s and 1990s.

• While the IMF and GATT/WTO focused on establishing a regulative framework for international economic relations, the World Bank has a more redistributive function.

• Initially, the World Bank focused on postwar recovery in Europe, but from the 1960s onwards, its focus shifted towards the developing world and later transition countries.

• The World Bank provides low-interest loans to support major investment projects and offers technical assistance.

• Early on, the World Bank supported large infrastructure projects in areas such as energy, telecommunications, and transport during its phase of ‘modernization without worry’.

• After Robert McNamara became president of the World Bank in 1968, the Bank’s focus shifted towards addressing basic needs and the underlying causes of poverty, leading to projects in areas like population control, education, and human rights.

• In 1980, after McNamara was replaced by A. W. Clausen and Ann Krueger became the Bank’s chief economist, the focus shifted towards market-oriented thinking and IMF-style structural adjustment policies.

• The emphasis on deregulation, privatization, and export-led growth led to an increase in poverty in Latin America, Asia, and sub-Saharan Africa instead of reducing it.

• The World Bank’s adjustment programs were more comprehensive than those of the IMF, with a long-term development focus, but they promoted trade expansion through cash crops, maintaining dependency and poverty.

• Development disparities became entrenched and, in the 1990s, widened due to a structural imbalance in trade, where developed countries sold high-price, capital-intensive goods, and developing countries sold low-price, labor-intensive goods.

• The World Bank, together with the IMF, contributed to a transfer of wealth from peripheral regions of the world economy to its industrialized core, as seen by Thurow (1996).

• Despite maintaining a neoliberal paradigm, the World Bank responded to criticism and accepted the need for reform since the early 1990s.

• The World Bank became more aware of the environmental costs of industrialization, urbanization, and major infrastructure projects, and adopted the idea of sustainable development.

• A growing emphasis on good governance and anti-corruption policies reflected a shift away from the minimal government ideology, recognizing the state’s essential role in social protection and maintaining civil order.

• Since 2002, poverty reduction programs have been formulated through negotiations with recipient countries, emphasizing local control, accountability, and tailoring projects to local needs, increasing focus on ‘partnership’.

• In 2010, in response to the 2007–09 global crisis, the World Bank increased its capital by $86 billion, the first increase in 20 years, and allocated an additional seat on its Board of Directors to sub-Saharan Africa.

• The voting power of developing countries was increased to 47 per cent, with the goal of reaching 50 per cent over time.

The World Trade Organization

• The World Trade Organization (WTO) was formed in 1995 as a replacement for GATT (General Agreement on Tariffs and Trade), which was established in 1947.

• GATT emerged as the basis for the postwar international trading order after the failure to establish the International Trade Organization (ITO), proposed in 1945 by the UN Economic and Social Council.

• The ITO would have been a fully-fledged international organization similar to the IMF and the World Bank, with powers like the later WTO, but its implementation was abandoned when President Truman failed to submit the Havana Charter (1948) to the US Senate.

• GATT was essentially an agreement among member countries to apply the principles of non-discrimination and reciprocity to trade, requiring most favoured nation status for all trading partners.

• Under GATT, no trading partner could be treated more favourably than another.

• GATT had several limitations, including the fact that it existed only as a set of norms and rules, acquiring institutional character with the GATT Council in 1960.

• Its focus was mainly on reducing tariff barriers against manufactured goods, excluding agriculture and the growing service sector from its agenda.

• GATT also had limited capacity to address the growth of non-tariff barriers and weak procedures for settling trade disputes.

• Despite these limitations, GATT was successful, with tariffs on manufactured goods being reduced substantially, from 40 per cent in 1947 to about 3 per cent by 2000.

• The Kennedy Round, Tokyo Round, and Uruguay Round made progress in tackling non-tariff barriers like dumping and expanded GATT’s focus to include services, intellectual property, textiles, and agriculture.

• The Uruguay Round concluded in 1993, proposing the establishment of the WTO.

• The emergence of the WTO was a response to the changing imperatives of the international trading system in the 1980s, linked to the rise of neoliberalism and the acceleration of globalization.

• The WTO incorporated a renegotiated GATT 1994 and expanded its responsibilities to include trade in services (GATS) and the protection of intellectual property (TRIPS).

• The WTO also addressed non-tariff barriers, which had been problematic in international trade since the 1970s.

• The WTO is stronger than GATT, especially in dispute settlement, where settlements can only be rejected if opposed by all members of the Dispute Settlement Body.

• Under GATT, disputes required agreement from all members of a dispute panel, including members of the GATT Council and the parties involved.

• The WTO has become the primary instrument of international law in the area of trade.

• The decision to include agriculture and textiles in the WTO’s responsibilities was a concession to developing countries, which also campaigned for non-tariff barriers to be included.

• Developed countries pushed for the inclusion of services in the WTO regime, as their economies were becoming more service-oriented.

• While agriculture was included, the agreement on agriculture was weak and allowed continued agricultural protection, a concern for the USA and European Union.

• The WTO is more democratic than the IMF or World Bank, with decisions made on a ‘one country, one vote’ basis and requiring only a simple majority.

• This system theoretically gives considerable weight to the views of developing countries, which constitute more than two-thirds of the WTO’s members.

• Despite this, the WTO is highly controversial and has been the target of anti-globalization protests, such as the 1999 Battle of Seattle.

• Critics argue that subtle biases within the WTO favor developed countries, including the emphasis on consensus-based decision-making, which disadvantages developing countries with smaller or no permanent representation.

• Developed countries are more likely to bring issues before the dispute settlement panel, and to serve as third parties, influencing the process, whereas allegations of unfair practices are often made against developing countries.

• The WTO is criticized for being a ‘rich man’s club, due to its lack of transparency and accountability in decision-making processes.

• The economic rise of China (joining the WTO in 2001) and the growing influence of emerging economies like India, Brazil, Egypt, and South Africa have altered the balance within the WTO.

• This shift was evident in the Doha Round of negotiations, which began in 2001 but was suspended in 2009 due to disagreements over agriculture and textiles, with the USA and EU unwilling to abandon protectionism.

• The main ideological debate about the WTO revolves around the benefits or drawbacks of free trade.

• Some argue that free trade brings prosperity to all and reduces the likelihood of war, while others view fair trade as inherently unfair and a cause of structural inequality.

Reforming the Bretton Woods System

Global Economic Governance and the 2007–09 Crisis

• There have been regular financial and economic crises since the 1960s, increasing in frequency and severity since the 1980s.

• Criticisms of global economic governance systems grew after the Asian financial crisis (1997-98) and the dot.com crisis (2000), highlighting their inability to predict or prevent such crises.

• IMF intervention in the Asian crisis was seen by some as exacerbating the crisis rather than mitigating it.

• Susan Strange warned about ‘casino capitalism’ and the dangers of unregulated global capital flows, creating unsustainable ‘bubbles’ and crises.

• Critics like Joseph Stiglitz, Paul Krugman, and George Soros pointed to the flaws of market fundamentalism that underpinned neoliberal globalization and the Washington consensus.

• These warnings largely went unheeded, as crises typically affected emerging economies, not core economies.

• The global financial crisis of 2007-09 was deeper and more challenging, causing the first decline in global GDP since the 1930s, with a 1.7% fall in 2009.

• This crisis was truly global, affecting almost every country, and originated in the USA, the core of finance capitalism.

• Following the crisis, there were calls for the reform of global economic governance, with many advocating for a new Bretton Woods.

• A new Bretton Woods would involve several models, but none proposed a full return to the dollar-based gold exchange standard or fixed exchange rates, considered unfeasible in modern globalization.

• Market fundamentalists argue for no intervention, viewing crises as a small price for decades of economic growth.

• Regulatory liberals, drawing from Keynesian insights, advocate for specific reforms of the global financial architecture, focusing on curbing the excesses of neoliberalism.

• Proposals for reforming the IMF and World Bank include changing voting allocations, increasing political influence for developing countries, and strengthening crisis prevention mechanisms.

• Cosmopolitan liberals propose a completely new global governance system, replacing flawed institutions like the IMF, World Bank, and WTO, focusing on cosmopolitan democracy and inclusivity.

• Anti-capitalists see the crisis as a reflection of deeper imbalances and inequalities within the global economy, calling for redistribution of wealth and power both nationally and globally.

• Despite the rise of the G-20 and the decline of the G-7/8, institutional responses to the crisis have been modest.

• The main development has been the establishment of the Financial Stability Board (FSB) in 2009 as the successor to the Financial Stability Forum, coordinating global financial regulation.

• The FSB acknowledges that even a reformed IMF may not effectively prevent future crises and aims to promote effective regulatory policies.

• The FSB includes all major economies but provides no representation for the majority of developing countries.

Obstacles to Reform

• It is difficult to judge how the architecture of global economic governance has responded to the 2007–09 global crisis.

• The Great Depression of the 1930s and the stagflation crisis of the 1970s saw delayed institutional responses (e.g., Bretton Woods and the Washington consensus).

• The predominant response to the 2007–09 crisis so far has been ‘business as usual’.

• The initial management of the crisis by the G-20 was seen as effective, coordinating swift action to salvage the banking system and implement Keynesian-style reflationary policies.

• G-20 actions helped counter the pressure for national protectionism, leading to optimism that the global downturn would be shorter than expected.

• A crucial factor has been the changing balance of power in the world economy.

• Key moments in the development of global economic governance, such as the creation of Bretton Woods in 1944 and the transition to the Washington consensus in the mid-1980s, reflected the USA’s hegemonic power.

• Although the USA, under Obama, led the G-20’s response to the crisis and promoted domestic reflation, the USA no longer has the power to easily reformulate global economic governance.

• Future developments in global economic governance will be influenced by the views and interests of new powers, especially China, India, Russia, and Brazil, often referred to as the BRICs.

• Emerging economic multipolarity ensures that any changes to global economic governance will be gradual and incremental.

• The absence of a global hegemon rules out the possibility of a comprehensive and radical restructuring of global economic governance.

North-South Dialogue

The term North-South Dialogue refers to the ongoing discussions, negotiations, and tensions between the developed countries of the Global North and the developing countries of the Global South. This dialogue is not just about geography but rather denotes an economic and political divide between industrialized nations—mainly located in the Northern Hemisphere—and less developed or developing nations, primarily situated in the Southern Hemisphere. The North-South divide has its roots in the historical processes of colonialism, imperialism, and unequal development, which created structural imbalances in global wealth, trade, and power. These imbalances continue to shape contemporary international relations, making the North-South Dialogue an essential aspect of global governance, economic development, and diplomacy.

The emergence of the North-South Dialogue can be traced back to the post-World War II era, particularly after the decolonization movement in Asia, Africa, and Latin America. As newly independent states entered the international arena, they demanded a more equitable world order that would address the economic disparities left by colonial rule. The dialogue gained significant momentum in the 1970s, when the Non-Aligned Movement (NAM) and the Group of 77 (G-77)—a coalition of developing nations—began to collectively voice their concerns at international forums such as the United Nations (UN). The oil crisis of 1973, followed by the economic downturn in the West, created an opening for the Global South to demand reforms in the international economic system. This led to the formulation of the New International Economic Order (NIEO) in 1974, adopted by the UN General Assembly through Resolution 3201 (S-VI).

The NIEO became the cornerstone of the North-South Dialogue. It sought to restructure the global economic system to promote justice, equity, and mutual benefit. The key demands of the South included better terms of trade, increased development assistance, technology transfer, regulation of transnational corporations, and greater participation of developing countries in international economic decision-making institutions like the World Bank, International Monetary Fund (IMF), and the World Trade Organization (WTO). The South also advocated for sovereignty over natural resources, which was recognized in various UN declarations such as the Charter of Economic Rights and Duties of States (1974).

However, the North’s response to these demands was largely resistant and cautious. Developed countries were reluctant to concede to systemic changes that would alter the balance of power in international institutions. While some efforts were made—such as the Brandt Commission Report (1980) which acknowledged the urgency of bridging the gap between North and South—the actual implementation of NIEO principles remained limited. The Brandt Report called for redistribution of wealth, global economic cooperation, and increased aid to the South. But these recommendations were overshadowed by the onset of neoliberal economic policies in the 1980s, especially under the leadership of Ronald Reagan in the US and Margaret Thatcher in the UK.

The 1980s and 1990s witnessed a decline in the momentum of the North-South Dialogue, largely due to the global debt crisis, structural adjustment programs (SAPs) imposed by the IMF and World Bank, and the collapse of the Soviet Union which led to a unipolar world dominated by the United States. Developing countries, under pressure, had to implement market-oriented reforms, reduce public spending, and privatize state enterprises, often at the cost of social welfare. This period is marked by a shift from collective bargaining by the South to bilateral arrangements and increased dependence on the North. Many scholars argue that SAPs deepened poverty and inequality, thus widening the North-South divide rather than reducing it.

The turn of the 21st century brought new dimensions to the North-South Dialogue. Issues such as climate change, global health, terrorism, digital inequality, and intellectual property rights became focal points of contention. Developing countries highlighted the principle of common but differentiated responsibilities (CBDR) in climate negotiations, insisting that the developed world, which had historically contributed the most to greenhouse gas emissions, should bear the greater burden of mitigation. This principle was incorporated in the Kyoto Protocol (1997) and later reaffirmed in the Paris Agreement (2015). Nonetheless, developed countries often failed to fulfill their financial and technological commitments, which continues to be a source of distrust in climate diplomacy.

Trade negotiations within the World Trade Organization (WTO) have also reflected the tensions in North-South relations. The Doha Development Round, launched in 2001, aimed to address the concerns of developing countries, particularly in the areas of agriculture, subsidies, and market access. However, the round has largely stalled due to disagreements between developed and developing countries, notably over agricultural subsidies given by the US and EU to their farmers. The South has also been critical of intellectual property regimes under the TRIPS Agreement, arguing that they hinder access to affordable medicines and technology.

In recent years, the rise of emerging economies like China, India, Brazil, and South Africa has somewhat altered the dynamics of the North-South Dialogue. These countries, sometimes referred to as part of the Global South, now hold substantial influence in international forums such as the G20, BRICS, and Shanghai Cooperation Organization (SCO). While they advocate for Southern solidarity, they are also accused of creating new hierarchies within the South, particularly in their relationships with least developed countries (LDCs). This has led to the use of terms like South-South Cooperation as a complementary framework to North-South Dialogue.

Furthermore, the COVID-19 pandemic exposed and exacerbated the inequities between North and South. The vaccine apartheid—where developed countries secured the majority of vaccine supplies while many in the Global South remained unvaccinated—sparked global outrage. Calls for waiving intellectual property rights on vaccines under the TRIPS waiver proposal led by India and South Africa met with resistance from several developed nations, again illustrating the persistent divide.

Despite numerous efforts over decades, the North-South Dialogue remains largely asymmetrical. Global governance structures, financial institutions, and multilateral agencies continue to reflect the interests and priorities of the North, though there have been some incremental changes. The 2030 Agenda for Sustainable Development, adopted by the UN in 2015, emphasizes partnership between North and South to achieve sustainable and inclusive development, yet critics argue that much of the implementation remains donor-driven and lacks real ownership by the South.

In conclusion, the North-South Dialogue is a central theme in contemporary international relations, encompassing debates on equity, justice, sovereignty, and global cooperation. It reflects the historical legacies of colonialism and the structural inequalities of the modern international system. While there have been periodic breakthroughs, including the NIEO proposal, Brandt Report, and Paris Agreement, the core concerns of the Global South—namely fair trade, adequate development finance, technology access, and institutional representation—remain unresolved. The dialogue continues, shaped by new global challenges, changing power dynamics, and the enduring quest for a more balanced and inclusive international order.

WTO

The World Trade Organisation (WTO) is an intergovernmental organization that regulates and supports international trade. Governments use the organization to create, update, and enforce international trade rules. 

Background

• The World Trade Organisation (WTO) is the sole international organization that deals with international trade rules.
• The WTO agreements, negotiated and signed by the majority of the world’s trading nations and recognized by their parliaments, are at its heart.
• The World Trade Organisation is headquartered in Geneva, Switzerland.
• The Ministerial Conference, which is made up of all member states and meets twice a year, is the highest decision-making body of the organization.
• The World Trade Organisation (WTO) has 164 countries (160 UN countries, EU, Hong Kong, Macau, and Taiwan).

History

• From the start of the Silk Road through the founding of the General Agreement on Tariffs and Trade (GATT) and the birth of the World Trade Organisation (WTO), trade has played an important role in encouraging economic development and harmonious relations between states.
• The General Agreement on Tariffs and Trade (GATT) dates back to the 1944 Bretton Woods Conference, which established the International Monetary Fund (IMF) and the World Bank, as well as laid the groundwork for the post-World War II financial system.
• The conference delegates also proposed the creation of a complementary institution known as the International Trade Organisation (ITO), which they saw as the system’s third leg.
• The UN Conference on Trade and Employment in Havana, Cuba, in 1948 completed a draft charter for the ITO, known as the Havana Charter, that would have established broad laws covering trade, investment, services, and business and employment practices.
• The Havana Charter was never ratified by the United States Senate, and as a result, it never came into law. As a result, the ITO never got off the ground.
• Meanwhile, the GATT, signed by 23 countries in Geneva in 1947, entered into force on January 1, 1948, with the following goals: to phase out the use of import quotas and reduce tariffs on merchandise trade. From 1948 to 1995, the GATT was the only multilateral instrument (not an institution) governing international trade.
• Despite its structural flaws, the GATT served as a de facto international organization, sponsoring eight rounds of negotiations.
• As a result, from 1948 until the WTO was founded in 1995, the GATT was the only multilateral instrument governing international commerce.
• From 1987 to 1994, the Uruguay Round resulted in the Marrakesh Agreement, which founded the World Trade Organisation (WTO).
• The WTO includes the GATT’s principles and provides a more long-term institutional structure for implementing and expanding them.
• The GATT was signed in 1947, and it is now known as the GATT 1947. In 1996, the GATT 1947 came to an end, and the WTO incorporated its rules into the GATT 1994.
• The GATT of 1994 is an international pact that all WTO members are bound by. It is solely concerned with goods commerce.

Primary Goal

The World Commerce Organisation (WTO) is an international organization whose main goal is to open up trade for the benefit of everyone.

Objectives

The WTO has six main objectives:

1. to establish and enforce international trade rules,
2. to provide a forum for negotiating and monitoring further trade liberalization,
3. to resolve trade disputes,
4. to improve decision-making transparency,
5. to collaborate with other major international economic institutions involved in global economic management, and
6. to assist developing countries in fully benefiting from the global trading system.

Although the GATT shares these principles, the WTO has followed them more completely in practice.

Structure

• The Ministerial Conference, which must meet at least every two years, is the WTO’s highest authority.
• The daily work is handled between Ministerial Conferences by three bodies whose membership is the same; the only difference is the terms of reference under which each body is created.
  • The General Council
  • The Dispute Settlement Body
  • The Trade Policy Review Body
• The General Council is the highest governing body of the United Nations.

Agreements Under WTO

• Goods, services, and intellectual property are all covered by WTO agreements.
• They lay forth the liberalization principles as well as the authorized exceptions.
• Individual country obligations to cut customs duties and other trade obstacles, as well as to open and maintain free services markets, are among them.
• They provide methods for resolving disputes.
• They recommend that developing countries receive preferential consideration.
• They compel states to make their trade policies open by alerting the WTO about laws in place and actions enacted, as well as reporting on nations’ trade policies on a regular basis by the secretariat.

Functioning of WTO

• The WTO’s main function is to make trade flow more smoothly, freely, and reliably. It accomplishes this by the following
  • Administers trade agreements
  • Acts as a forum for trade negotiations
  • Settles trade disputes
  • Reviews national trade policies
  • Builds the trade capacity of developing economies
  • Cooperation with other international organizations

Dispute Settlement under WTO

• One of the WTO’s main responsibilities is to settle trade disputes.
• A dispute occurs when one member nation adopts a trade policy measure or takes some action that one or more other countries consider to be a violation of WTO agreements or a failure to meet responsibilities.
• By joining the WTO, member countries have agreed to use the multilateral system of settling disputes rather than taking unilateral action if they believe fellow members are violating trade rules.
• This entails adhering to agreed-upon procedures—the Dispute Settlement Understanding—and respecting judgments, particularly those of the Dispute Settlement Board (DSB), the WTO organ responsible for dispute adjudication.
• The World Trade Organization (WTO) has one of the most active international dispute-resolution processes in the world.
• Since 1995, the World Trade Organization (WTO) has heard 610 disputes and delivered over 350 judgments.

Doha Development Agenda

• In 2001, a ministerial-level conference in Doha, Qatar launched the Doha Agenda.
• The goal was to prioritize the needs of developing countries.
• The summit was primarily convened to address the problems of emerging countries.
• Trade facilitation, services, rules of origin, and dispute resolution are among the primary topics explored.
• The issue of differentiated and special treatment for developing countries was also raised as a serious concern.
• It is the most recent round of trade negotiations among WTO members.

WTO Ministerial Conference

• The WTO’s Ministerial Conference is the organization’s top decision-making body.
• Trade ministers and other top officials from the organization’s 164 members attend this meeting.
• The WTO’s founding agreement, the Marrakesh Agreement, mandates that the meeting be held every two years.
• In 1996, Singapore hosted the first Ministerial Conference (MC1).

WTO and India

• India was a founding member of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organisation (WTO) in 1947.
• India’s participation in a more rule-based system of international trade regulation will assure greater stability and predictability, which will lead to increased commerce and prosperity.
• Services exports account for 40% of India’s overall commodities and services exports. The services sector accounts for more than 55 percent of India’s GDP.
• Around 142 million people are employed in the sector (domestic and exports), accounting for 28 percent of the country’s workforce.
• IT and IT-enabled services, travel and transportation, and financial services account for the majority of India’s exports.
• The United States (33 percent), the European Union (15 percent), and other rich countries are the most popular destinations.
• India has a clear interest in the liberalization of services trade and wants industrialized countries to grant commercially meaningful access.
• India has liberalized its services trade system across the board since the Uruguay Round.
• It’s vital to ensure food and livelihood security, especially in a big agrarian economy like India.
• India has been lobbying the WTO for a long-term solution to public stockholding subsidies.
• An interim agreement (a peace clause) on “public stockholding” continued exceptions that allow developing countries to stockpile agricultural products to protect against food shortages at the 2013 Ministerial Conference (MC9) in Bali.
• India is a big supporter of giving geographical indicators for products like Basmati rice, Darjeeling tea, and Alphonso mangoes the same level of protection as wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS) accord.
• Non-trade topics such as labor standards, environmental protection, human rights, investment laws, and competition policy have been pushed into WTO agreements by developed countries.
• India opposes any inclusion of non-trade issues that are aimed at enforcing protectionist measures in the long run (based on non-trade issues, developed countries such as the United States and the European Union are attempting to ban the imports of certain goods such as textiles, processed foods, and so on), particularly against developing countries.

Significance

• In a nutshell, the World Trade Agency (WTO) is the only international organization responsible for enforcing global trade regulations.
• It keeps trade flowing as smoothly, predictably, and freely as possible.

Conclusion

Today, the world is seeing protectionism, trade wars (such as between the United States and China), and Brexit, all of which are putting pressure on the global economy. The WTO’s future role is critical in preserving the global liberalized economic system that has evolved after the end of World War II. At a time when countries are threatening to leave the WTO, causing it to become dysfunctional, India and other growing economies such as Brazil, South Africa, and others can provide a strong foundation for a successful WTO while safeguarding the interests of developing countries.

G-20

The G20, or Group of Twenty, is an intergovernmental forum made up of 19 countries and the European Union. It focuses on major global economic issues such as international financial stability, climate change mitigation, and sustainable development. The G20 presidency for the year 2022 lies with Indonesia.

What is G20?

• The G20 is an informal organization comprising 19 countries and the European Union, as well as officials from the World Bank and the International Monetary Fund.
• The G20 membership is made up of a mix of industrialized and emerging economies, representing over two-thirds of the worldwide population, 85% of global GDP, 80% of global investment, and over 75% of global commerce.

Origin

• ASIAN Financial Crisis, 1997-1999: This was a ministerial-level conference that arose when the G7 asked both rich and developing economies to participate.
• The first conference of finance ministers and central bank governors took place in 1999.
• During the 2008 financial crisis, the world recognized the need for a new level of political agreement. It was determined that the G20 leaders will meet once a year from now on.
• The G20 finance ministers and central bank governors continue to meet on their own twice a year to help prepare for these summits.
• They meet at the same time as the World Bank and the International Monetary Fund.

Members

• The G20 nations comprise Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
• The economic collapse of 2008 caused chaos in the Spanish economy, driving the country into a six-year financial crisis. Since then, Spain participates in leader summits as a permanent non-member invitee.

Works of G20

• The G20’s work is split into two tracks:
  • All talks involving G20 finance ministers and central bank governors and their deputies are part of the finance track. They meet numerous times a year to discuss monetary and fiscal concerns, as well as financial rules.
  • The Sherpa track focuses on broader topics like political engagement, anti-corruption, development, and energy, among others.
• Each G20 country is represented by a Sherpa, who plans, guides, implements, and so on behalf of the country’s leader. (Shaktikanta Das, an Indian Sherpa, represented India at the G20 in Argentina in 2018.)

Structure and Functioning

• The G20 Presidency is cycled every year in accordance with a structure that ensures regional balance over time.
• The 19 countries are divided into five groups, each with no more than four countries, to select the president. Each faction takes turns holding the presidency.
• Every year, the G20 elects a president from a different group.
• In Group 2, India is joined by Russia, South Africa, and Turkey. There is no fixed secretariat or headquarters for the G20.
• Instead, the G20 president is in charge of bringing the G20 agenda together in conjunction with other members and reacting to global economic events.
• TROIKA: Every year, when a new country becomes the president (in this case, Argentina in 2018), it collaborates with the previous presidency (Germany in 2017) and the following presidency (Japan in 2019) to form TROIKA. This maintains the group’s agenda’s continuity and coherence.

G20 Summit

• The countries that represent and contribute more than 80% of global GDP gathered at the Premier Forum for International Economic Cooperation, which was approved by leaders at the Pittsburgh Summit in September 2009, to promote robust global economic growth.
• The “Summit on Financial Markets and the World Economy,” as it was then named, brought these countries together to discuss what is now known as the G20 Summit.
• Since globalization progressed and numerous concerns grew more closely interconnected, G20 summits began to focus not only on macroeconomics and trade but also on a wide variety of global challenges that have a huge impact on the global economy.
• Overall development, climate change, energy, health, counter-terrorism, migration, and refugees were among the topics discussed.
• Through its contributions to tackling these global concerns, the G20 has aimed to create a more inclusive and sustainable world.

G20 Cooperation Areas

• Leaders declared Toronto to be the primary venue for global economic cooperation in 2010.
• Several international organizations that give policy advice support the activities of G20 members. These are some of the organizations:

1. The Financial Stability Board is a body that oversees financial stability (FSB). Following the commencement of the global financial crisis, G20 leaders established the Financial Stability Board (FSB).
2. The International Labour Organisation (ILO).
3. The International Monetary Fund (IMF).
4. The Organisation for Economic Co-operation and Development (OECD)
5. United Nations (UN)
6. World Bank
7. The World Trade Organisation (WTO)

• The G20 meets with non-governmental organizations on a regular basis.
• Throughout the year, engagement groups from business (B20), civil society (C20), labor (L20), think tanks (T20), and youth (Y20) will organize important events, the findings of which will inform G20 leaders’ deliberations.

Issues Addressed by G20

• The G20 focuses on a broad agenda of global issues; while issues related to the global economy dominate the agenda, other items have become more prominent in recent years, such as:

1. Financial market
2. Tax and fiscal policy
3. Trade
4. Agriculture
5. Employment
6. Energy
7. Fight against corruption
8. Women’s advancement in the workplace
9. Sustainable Development Agenda 2030
10. Climate Change
11. Global Health
12. Anti-terrorism
13. Inclusive entrepreneurship

India’s Priorities in G20 Summits

• Investigating tax evasion to fight corruption.
• Choking terror funds.
• Cutting the Remittances Cost.
• Market access for key drugs.
• Reforms in the World Trade Organisation to enhance its functioning.
• The Paris Agreement’s “full implementation”.

Achievements

• Flexible: With only 20 members, the G20 is flexible enough to make quick choices and adapt to changing circumstances.
• Inclusive: Every year, invited countries, international organizations, and civil society organizations are included in participation groups, allowing for a larger and more thorough viewpoint when examining global concerns and creating consensus to address them.
• Coordinated action: The G-20 has also played a key role in bolstering the worldwide financial regulatory framework, including improved cross-country cooperation.
• Assisted in a US$235 billion surge in loans from multilateral development banks at a time when private-sector sources of finance were dwindling.
• During the global financial crisis of 2008, one of the G20’s major accomplishments was the rapid deployment of emergency money.
• It also strives to improve the monitoring of national financial institutions in order to promote reforms in international financial institutions.
• Reforms to the international tax system driven by the G20/OECD Base Erosion and Profit Shifting (BEPS) project, as well as the implementation of tax transparency standards, are examples.
• The G20 was instrumental in the passage of the Trade Facilitation Agreement, which the World Trade Organisation estimates may contribute between 5.4 and 8.7% of global GDP by 2030 if fully implemented.
• Better Communication: The G20 brings together the world’s most industrialized and developing countries to debate how to bring consensus and rationale into decision-making.

Challenges

• No Enforcement Mechanism: The G20’s toolkit includes everything from simple information exchanges and best practices to setting clear, measurable goals and taking coordinated action.
• Except for the incentive of peer review and public responsibility, none of this is possible without consensus, and none of it is enforceable.
• No Legal Bind: The judgments are not legally binding because they are based on debates and consensus that result in declarations.
• These statements are not legally enforceable. It’s only a 20-person advisory or consultative group.

Significance

• They bring together the world’s most powerful economies, both developed and developing, to discuss international economic and financial stability.
• The G20 plays a crucial role in fostering an environment conducive to global growth and development that is inclusive.
• Its efforts to provide financial stability, promote growth, and avoid and manage crises are crucial in assisting LIDCs in pursuing opportunities and overcoming problems.

Conclusion

The G20 will not be able to solve all of the world’s problems. The G20, on the other hand, has been an important venue for international cooperation for the previous ten years. As growing powers seek ways to influence and contribute to the global order, effective global governance, such as the G20, is critical.

BRICS

BRICS is an informal group made up of the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China, and the Republic of South Africa. On the initiative of Russian President Vladimir Putin, the first BRICS Ministerial Meeting was held on the margins of a UN General Assembly session in New York on September 20, 2006.

What is BRICS?

• The acronym BRICS stands for Brazil, Russia, India, China, and South Africa, a grouping of the world’s emerging economies.
• Jim O’Neill, then-chairman of Goldman Sachs Asset Management, is thought to have originated the word “BRIC” in his 2001 publication Building Better Global Economic BRICs. Roopa Purushothaman, a Research Assistant in the original paper, was the one who created the phrase.
• BRICS does not exist as an organization. Rather it is an annual summit between the leaders of the included countries.
• In 2009, the Russian Federation hosted the first BRIC Summit, which focused on themes such as global financial architecture reform.

Members

• In December 2010, South Africa was asked to join BRIC, and the group’s acronym was changed to BRICS. In March 2011, South Africa attended the Third BRICS Summit in Sanya, China.
• According to the formula B-R-I-C-S, the chairmanship of the forum is rotated annually among the members.
• The significance of the BRICS is self-evident: they account for 42% of the global population, 30% of land area, 24% of global GDP, and 16% of international trade.
• The G-20 includes the five BRICS countries.

Objectives

• For more sustainable, equitable, and mutually beneficial development, the BRICS aspire to deepen, broaden, and accelerate collaboration within the grouping and among individual nations.
• To guarantee that interactions are established on the respective country’s economic strengths and to prevent rivalry whenever possible, BRICS takes into account each member’s growth, development, and poverty objectives.
• BRICS is establishing itself as a new and promising political-diplomatic body with a wide range of goals that extend far beyond the basic goal of overhauling global financial institutions.

BRICS’ Major Accomplishments

Johannesburg Declaration

• The BRICS presidents met in Johannesburg in 2018 to discuss a variety of international and regional issues of shared concern, and the ‘Johannesburg Declaration’ was unanimously accepted.
• Mutual respect, sovereign equality, democracy, inclusion, and greater partnership were all reiterated by the leaders.

New Development Bank (NDB) projects

• The prospect of establishing a new Development Bank was discussed at the Fourth BRICS Summit in New Delhi(2012) to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing nations.
• Its headquarters is located in Shanghai.
• The presidents signed the Agreement establishing the New Development Bank during the Sixth BRICS Summit in Fortaleza, Brazil, in 2014.

Local Currency Bond Fund

• The BRICS nations are planning to establish a Local Currency Bond Fund after a successful Contingent Reserve Arrangement.

Business Promotion

• The BRICS Business Council held a meaningful discussion to promote collaboration in areas such as infrastructure and energy, as well as financial services, regional aviation, and the digital economy.
• A BRICS Women Business Alliance was also established, both as a measure of women empowerment and as a mechanism to convey “a unique perspective on problems of concern to the business community.”

Relevance of BRICS for India

• India may benefit from the BRICS combined strength by consulting and cooperating on economic matters of mutual concern, as well as current global issues like international terrorism, climate change, food and energy security, global governance reforms and so on.
• The NDB will assist India in raising and obtaining money for infrastructure and long-term development initiatives.
• The NDB has authorised its first series of loans, including a $250 million credit to India under the Multitranche Financing Facility for Renewable Energy Financing Scheme.

Challenges

• The BRICS have a hurdle as it moves forward because of the dominance of the big three countries of Russia, China, and India. BRICS must become pan-continental in order to truly represent huge emerging markets around the world. Its membership should include more countries from different continents and areas.
• For the BRICS to become more relevant in the global system, they will need to broaden their agenda. Climate change and infrastructure development finance are currently at the top of the agenda.
• As the five-member countries pursue their own national agendas, BRICS’ core ideals, such as respect for sovereign equality and pluralism in global governance, are likely to be put to the test.
• The military standoff between India and China on the Doklam plateau has effectively put an end to the foolish concept that a peaceful political relationship between the BRICS countries is always feasible.
• China’s aspirations to integrate nation-states, which are central to its Belt and Road Initiative, into a bigger political system could lead to tension among BRICS members, particularly between China and India.

13th BRICS Summit: An Overview

• A new anti-terrorism and vaccination capability is determined by leaders from Brazil, Russia, India, China and South Africa.
• The BRICS Summit is an international relations summit attended by the leaders of Brazil, India, Russia, China, and South Africa. After this year, it will be China’s turn in 2022.
• BRICS @15: Intra-BRICS Cooperation For Continuity, Consolidation, and Consensus
• This meeting was led by Indian Prime Minister Narendra Modi and included Presidents Bolsonaro of Brazil, Ramaphosa of South Africa, Putin of Russia, and Xi Jinping of China.
• Indian PM, then announced the BRICS Counter-Terrorism Action Plan, which focused on Afghanistan.

BRICS CTI

• The BRICS decision to jointly establish a BRICS Counter-Intelligence Initiative was the main highlight of a predictable collection of talks.
• While China, India, and Russia are members of the Shanghai Cooperation Organisation (SCO), they do not share intelligence or give military aid.
• The SCO gains access to African intelligence, including the role of activist groups like Al-Qaeda and ISIL in Africa, with South African assistance.

BRICS Vaccine R&D Centre

• This is important since future pandemics are expected to occur in areas like Brazil or Africa and will rely on Chinese and Russian vaccine development capabilities, as well as India’s massive production capacities.
• This centre will serve as a global early warning and response faculty.

World Reform

• The leaders signed the “Declaration of New Delhi” and vowed to strengthen and modernise the multilateral system, including the UN and WTO, to make global governance more receptive and effective. View the New Delhi Declaration.

Conclusion

In its first decade, BRICS did a good job of identifying issues of shared interest and creating channels to address them. In order for BRICS to remain relevant over the next decade, each of its members must examine the initiative’s opportunities and constraints realistically.