5 The policy agenda
Effective collective action for the twenty-first century should make careful use of the limited political capital available for multilateral endeavours. It can rely neither on an outdated and disputed global governance model nor on non-committal intentions and the involvement of a multitude of stakeholders. The range of solutions available without recourse to hard international law is however significant. What is needed is to make best use of necessarily limited legal, institutional and financial resources. Collective action can rest on a series of principles that command universal support, such as national treatment for trade or the no-beggar-thy-neighbour principle in international finance. Such principles should be buttressed by a set of nimble institutions able to provide support to international cooperation, and their implementation should be based on precise matching procedures that assign adequate resources, institutions and mechanisms to clearly identified problems.
A way to control the risk of fragmentation involved in the reliance on clubs or groupings of countries would be to require them be rooted in common universal principles (‘minilateralism’). This is actually the case with regional or sectoral trade agreements: they are subject to WTO scrutiny, must respect fundamental principles such as national treatment and unless they meet certain conditions, they should uphold the most-favoured nation principle. Compliance with such principles has ensured some coherence in the evolution of the international trading system. Similar issues arise in a series of fields, from investment to regulation to climate to financial safety nets.
Existing institutions – which can be regarded as globalisation’s social capital – should be requested to serve collective action beyond the confines of their sectoral remits. Global institutions were once regarded as the masters of sectoral fiefdoms within the multilateral system. But nowadays the fiefdoms hardly cover globalisation’s territory. With the principles, procedures and governance they are equipped with, institutions should rather be regarded as wells of social and informational capital that international collective action can draw from. The evolution of the Bank for International Settlements (from the collector of German war reparations to the architect of global banking regulation), the IMF (from the coordinator of a financially autarkic world to that of a financially integrated one), the World Bank (from an infrastructure bank for Europe to, among other things, the promoter girls’ education in Africa) and especially the OECD (from the administrator of the European payments union to, among other things, the assessor of worldwide education systems) shows that institutions – some of them at least – can be nimble. A key priority for international collective action is to make the most of this social capital. This implies tasking institutions with responsibilities for ex-ante assessment, ex-post monitoring, evaluation and support for negotiation in fields that extend beyond their usual remits.
For universal institutions to be effective, it is essential to preserve their legitimacy. As far as rules are concerned, this requires distinguishing essential principles that command general recognition from more specific provisions that reflect the preferences of advanced economies, or a subset of them. The re-examination of the IMF doctrine on financial account liberalisation was a case in point, as the institution departed from its initial stance to take on board the concerns of emerging countries facing repeated sudden stops. As far as governance is concerned, legitimacy necessarily requires adjusting representation and voting rights to the new realities of demographic, economic and political development on a global scale. Institutions whose policy doctrines or modus operandi are perceived as being excessively dominated by incumbent powers are bound to lose legitimacy and to be partially substituted by alternative sectoral or regional groupings. Europe in this respect should wake-up to the trade-off it faces: either to preserve its power in existing multilateral institutions, with the risk of accelerating their obsolescence, or to concede a reduction of its role and direct influence, with the risk of not gaining much in exchange.
The involvement of knowledge networks, civil society and subnational governments (‘polylateralism’) can add to the effectiveness of otherwise feeble mechanisms. Shared knowledge is essential to identify issues and overcome obstacles to cooperation arising from divergent representations of the same problem. This is why the creation of the Intergovernmental Panel on Climate Change was a major step towards a shared awareness of problems and solutions (and the absence of a shared knowledge base is also a reason why international agreement is so difficult in the field of migration). In domains that speak to public opinion like the preservation of the environment, public health or the fight against tax evasion, pressure from below might also help counter the incentives to free-ride that governments are subject to, and could help overcome obstacles to collective action. But polylateralism risks being too weak to overcome obstacles to collective action in critical fields such as climate change.
In the absence of compulsory universal agreements, some collective-action problems can only be tackled by having recourse to sanctions, pecuniary levies and international transfers. Whereas it is wrong to assume that all international collective-action problems can be represented by a prisoners’ dilemma game, it is equally incorrect to assume that all can be solved without mechanisms that contain free-riding. Without universally enforceable rules, such mechanisms can be provided by strict rules agreed to by countries entering into a club arrangement. This is most evident in the climate field: should a group of countries decide to implement significant carbon taxes while their trade partners abstain from introducing them, a border tax would serve both as a way to limit the risks of endogenous breakdown of the climate coalition, and as a way to ensure its members do not lose out in international trade. The critical question in the years to come will be whether the US joins the climate club (in which case it will most certainly introduce border taxes) or whether the EU and other climate-conscious players introduce border taxes in an effort to discipline the US and other free-riders.
Democratic legitimacy is harder to ensure in a world of ad-hoc arrangements. Whereas it is a concern in a rules-based order, at least rules must be ratified and institutions can be subject to parliamentary oversight. A world that relies on a proliferation of clubs, institutions that operate beyond their mandates, private-sector participation and soft arrangements is superficially less constraining, but substantially more alien to democratic principles. At the very least, it requires close scrutiny by civil-society organisations.
Europe should equip itself to be an effective player in this new game. It cannot rely anymore on a global regime and on the US willingness to uphold it. External influence and leadership are European public goods that should be given priority and be buttressed by adequate internal governance.