Global Governance Reforms: Implications of Multipolar World and G20 Dynamics

1. International Politics Week 12:Which country should lead the world – Thinking big about governance reform Instructor: James Raymond Vreeland, Professor 2.0

2. “New World Order” To “America First” What happened? Has American leadership hit rock bottom or is this the new normal?

4. 2008 Financial Crisis • Origin: The United States of America • Previous crises: • 1982 Latin American Debt Crisis • 1995 Tequila Crisis • 1997 East Asian Financial Crisis • 2008: Clear signal: The don is slippin’ • The Financial World is *MULTIPOLAR*

5. What are the implications of this change for global cooperation?

6. 2008 Global Financial Crisis • Beginning: United States • Multi-polar World? • Shift: • G7  G20

7. Why should we care about the G20? • Does NOT do anything! • Not important for what it does • Important for what it represents • The Arrival of the Emerging Markets • More representative? • Calls for new IMF/World Bank representation • Who is the G20?

8. Who is the G20? G7 + BRIC + EU + MAKTISAS 11 down, 9 to go? NO! Only 8 to go. Only 19 countries in the G20.

9. Who’s missing?

10. Wrong guesses • EU • Spain, Poland, Netherlands • Europe • Switzerland, Norway • The bad guy • Iran • Large populations • Pakistan, Bangladesh, Nigeria • Big economies • Thailand, Malaysia, Venzuela, Egypt,

11. G-zero? • Too many people around the table • Who is really necessary? • US & China • Eurozone • UK & Japan? • BRIC? • MAKTISAS???

12. Seats around the G20 table

13. Seats around the IMF Table 2011

14. Vote shares around the IMF table 2012

15. Discussion Questions: • Who should lead the world? • What is the best way to build broad and deep levels of global cooperation? • What will be the role of China in multilateral institutions? • What can we learn from the examples of the United Nations and the European Union?

17. Regional trade agreements

18. RTAs • Free Trade Area (e.g., NAFTA) • Eliminate tariffs amongst members • Members maintain independent trade policies with non-members • Customs union (e.g., EU) • Eliminate tariffs amongst members • Common tariff policy with non-members • Discriminatory? • Allowed under GATT Article XXIV – as long as tariffs are no higher than the level applied by (ALL***) countries prior to the arrangement • (MERCOSUR led Argentina to raise tariffs on non-members – but not above the level of the highest MERCOSUR member) • Currently 190-250 RTAs in operation (up to 400 on the horizon for 2010) • More than half are bilateral (e.g., KORUS) • Most are free trade agreements

19. Customs Unions • Central American Common Market (CACM) • Andean Community (CAN) • Caribbean Community (CARICOM) • Economic and Monetary Community of Central Africa (CEMAC) • East African Community (EAC) • Eurasian Economic Community (EAEC) • European Economic Area (EEA) (plus EC – Andorra, EC – Turkey) • Gulf Cooperation Council (GCC) • Southern Common Market (MERCOSUR) • Southern African Customs Union (SACU) • West African Economic and Monetary Union (WAEMU)

21. Why RTAs not the WTO? • Sign with particularly important markets • New “forums”  Forum shopping! (Busch)

22. Will bilateral cooperation hurt global cooperation? • Consider the Richardson Hypothesis

23. Why would you go to NAFTA?

24. Why would you go to NAFTA?

25. Without NAFTA • Perhaps you don’t go to the WTO at all • Status quo prevails

26. With NAFTA? This round: the “losers” from trade are weakened Next round: government cares less about their preferences The “ideal point” of the government shifts

27. With NAFTA?

28. Choose the forum that best suits you! • NB: • In the absence of the regional option, you may prefer no litigation at all! • By moving a li’l bit toward free trade under NAFTA • Anti-trade interest groups may weaken • Eventually get to WTO position? • (Richardson Hypothesis)

29. Thank you