No matter where you look, the global polycrisis envelops us, throwing together climate change, pandemic threats, food insecurity, technological competition, trade conflict and hot wars. Confidence has faltered in open trade, globalisation and multilateral cooperation as a foundation for eliminating poverty and driving global economic growth.
In their place, global leaders are turning inward. They are bringing into favour industrial policies, protectionism in the form of both tariffs and subsidies, anti-foreigner sentiment and an obsession with fending off national security threats that seem to lurk under every stone.
Headlines declare the “end of globalisation” or the need to deglobalise. Think pieces discuss the need to “de-risk”, “reshore” and erect high tariff walls to protect local companies and jobs. Much of this is nonsense, but such headlines have attracted sympathetic attention in a year packed with general elections, with political combatants only too willing to blame the world’s ills on pesky foreigners.
In reality, reports of the collapse of trade and globalisation are at this point an exaggeration. Global trade did indeed stumble during the Covid-19 pandemic, but it has since recovered to pre-pandemic levels.
While China’s trade with the United States has contracted since former US president Donald Trump’s declaration of trade war, China’s trade surplus with the US remains large. Researchers from the Peterson Institute for International Economics note a pullback from the hyper-globalisation that marked the period from 1992 to 2008 but caution against extrapolating too much from the current trend of deglobalisation.
01:52
US proposes new round of tariffs on China in latest trade war escalation
US proposes new round of tariffs on China in latest trade war escalation
Any of the factors that make up the current polycrisis would constitute a massive potential threat to the global economy, but the one that perturbs me the most is the collapse of multilateralism. It is a threat in its own right, of course, but in its absence, virtually none of the other grave challenges can be addressed.
In this, the US is a particular worry. This is not just because it was the founding inspiration of so many of the multilateral institutions that have maintained peace over the past seven decades, driving economic development and reducing poverty, but because of Trump’s passionate preference for unilateral power-broker dealing.
A world of bilateral deals might work fine for giant economies such as the US, the European Union or China, which have the heft to impose demands that serve their key political, strategic and economic interests. For the rest of the world, the challenge of trying to negotiate international agreements on a bilateral basis with a global power is intimidating, to say the least.
Even for middle powers such as Indonesia, Brazil, South Korea or India, going head to head negotiating a deal with global heavyweights is likely to be fraught. For smaller actors, the challenge is impossible. Can you imagine Fiji sitting across the table from the US with any prospect of success in demanding financial compensation for damage being done by global warming, or Sri Lanka demanding funds for pandemic protection?
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Cop28 climate summit closes with agreement to ‘transition’ from fossil fuels
Cop28 climate summit closes with agreement to ‘transition’ from fossil fuels
Multilateral institutions are indispensable for us to ensure the world’s smaller economies can expect equitable outcomes for much of the polycrisis that haunts us today.
Academics at a forum organised by Singapore’s Lee Kuan Yew School of Public Policy elaborated on the situation at a seminar in January. Danny Quah, dean of the school, noted that multilateralism is “an idea about how nations can engage with each other on an equal footing” which provides “a level playing field for how trade must occur” so that “big nations don’t bully smaller nations”. It also involves a commitment to “peaceful resolution of disputes” and openness to giving up something for the greater good.
It is obvious that no global climate deal – which involve the billions of dollars needed to address climate change’s effects and underwrite investments to mitigate dangers from floods, fires and crop failures – could be secured without that self-sacrifice for the good of the global community. It is equally obvious that no such self-sacrifice is likely to be forthcoming when global heavyweights are calling the shots in bilateral negotiations.
In short, the spirit of collaboration and compromise that sits at the heart of the multilateral process and a willingness to use multilateral channels are indispensable to resolving the gravest challenges threatening the world today. A preference for unilateralism might suit the self-serving interests of the biggest players, but for the rest of the world it is nothing short of catastrophic.
Kristalina Georgieva, managing director of the International Monetary Fund (left), and Ajay Banga, president of World Bank Group, at a press conference during the annual meetings of the IMF and the World Bank, in Marrakesh on October 12, 2023. In recent years, there have been calls for the reform of Bretton Woods institutions. Photo: AFP
Adam Posen, president of the Peterson Institute for International Economics, wrote earlier this month in a blog post for the International Monetary Fund that “the ongoing corrosion of globalisation – reinforcing and being reinforced by geopolitical fragmentation – increases the vulnerability of all but the largest economies to foreign economic shocks”. He called on the IMF to serve its membership by acting as “a bulwark of technocratic multilateralism against politicised bullying in financial and other market access”.
The same must be said for most of the Bretton Woods institutions that have underpinned international cooperation for the past seven decades, even where reforms are needed to update their relevance to a world that has changed dramatically in that time. More recent multilateral creations should be encouraged and developed to reinforce in nations a habitual preference for multilateral cooperation.
From my vantage point, of all the urgent priorities facing our governments amid the global polycrisis, one stands above all the others. The need to recommit to multilateral engagement remains the single highest priority.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades
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