challenges to the international order

Mike Moore, the Director-General of the World Trade Organization (WTO) visited Frankfurt earlier this year at the invitation of the Konrad Adenauer Foundation. He was asked to discuss Challenges to the International Economic Order: Nation States, Private Enterprises, and Nongovernment Organizations in the Age of Globalization, but elected instead to speak on globalization and the social market economy. Even then, however, his speech veered from the new subject to present arguments in defense of the WTO. Most stressed the point that globalization, like European integration, offers fantastic opportunities. "Volkwagen makes cars in Mexico", "Mannesmann has been taken over by Britain's Vodafone Airtouch", and "Daimler Benz has snapped up America's Chrysler". Other arguments promised that freer trade helps to pay for the things we value most, such as jobs, health, education, and a cleaner environment. The remainder aimed to correct the WTO's image as an impersonal and dogmatic bureaucracy pursuing globalization without regard to negative or difficult impacts on its constituents. To my mind, the presentation underscored the difficulties facing the organization after the collapse of the third WTO Ministerial Conference in Seattle. Internationalism. At first, the problems besetting the WTO seem strange. Ten years ago, when communism collapsed, it looked as though the world community had entered a new era in which borders would not mean much. Corporations would become global and trade would become free. In that perspective, the creation of the WTO represented an important event in history: for the first time, an international organization would exist to manage an increasingly integrated and global economy. Many issues have paralyzed the organization since. It deals, for example, with a range of very complex agricultural concerns.1/ It is also tasked with addressing labor, health, education, and environment concerns, among others. Regionalism. However, there is a more serious feature to lower expectations: that is, the WTO is prey to the deepening desynchronization of the global economy. In late 1997, the collapse of financial and stock markets in Asia represented a significant shift in the fundamentals of that region. The collapse was not accidental but rooted in public policies and economic processes. If the growth of international trade had really promoted interdependence, the Asian crisis would have affected the United States and Europe severely. Yet, it sparked a massive shift of financial resources out of Asia and into the United States which increased capital formation in that country and, in point of fact, fuelled growth there. Investors did not perceive a global economy but, rather, a series of linked regional markets that could behave both differently and in opposite ways. As the Asian crisis showed, they could even cannibalize one another. Thus, the very liberalization of capital flows has created processes that could weaken one region and strengthen another. And, if one considers that South Korea's economy is quite different from that of Japan, one can observe desynchronization within regions too. Every step taken by one region can now affect others substantially. Because the international trade and financial policies that benefit one region can harm others, politics will in all probability take precedence over economics in the foreseeable future. In light of this, the inability to develop an agenda for the third WTO Ministerial Conference in Seattle was not surprising: WTO meetings may have become a no-win proposition. Tribalism. Internationalism and regionalism confront the nation-state from the outside. But, tribalism challenges from within. In the United States, it manifests itself in the ever greater weight attached to diversity rather than unity. In Europe, it tore Yugoslavia apart. In Asia, it is stretching the fabric of Indonesia and Pakistan. One explanation of why tribalism as a phenomenon has become worldwide is that size confers few advantages now that nuclear capabilities proliferate. And, it is also true that the economic success stories of the last forty years are those of small countries or territories such as Hong Kong, Singapore, and Taiwan. But, the main reason for tribalism is neither political nor economic. It is that, in a confusing transnational world, people feel increasingly the need for roots in a local community. So, the more integrated and global the world becomes and the closer its regions cooperate, the more tribalism will raise its head. Coevolving internationalism, regionalism, and tribalism are shaping a world without precedent. Each force pulls in a different direction. There is no unique solution. To meet both external and internal challenges to the international order in this decade, the world will need great imagination, courage, and leadership from its intellectual, business, and political leaders. (November 2000) Copyright ©2002 Olivier Serrat 1/ Typically, the United States want European countries to cut subsidies of farm products so that they may sell more farm products in Europe. European countries do not agree since freer trade with the United States would probably overwhelm European farmers. In parallel, developing countries prefer to refrain from further liberalization of their trade policies since they still have not recovered from the benefits of the last round of cuts. Implementing a strict free trade regime on agriculture would put countless farmers out of business in Europe and Asia, leading to protests that governments in those two regions would not survive.