Multilateral Approach and the Shaping of Global Economic Governance

Introduction

The research study will explore the primary forces responsible for shaping the governance of the global economy. The developed argument, in this context, is reflective of a specific notion. This notion is that the current influence in the global political economy is firmly posited on the multilateral approach. Through this approach, global economic policy decisions could be formulated so as to actuate a fundamental shift in the measure of economic growth. The imperatives of such growth have become influential in the collaborative structure of policy considerations amongst nations with diverging political and economic interests.

To this effect, the research study will analyse different international economic policies, organisations and agreements formed to achieve dynamic progress of global economic structures. Particular research in the existing political economic theoretical constructs and the published literatures will be undertaken as well. In this context, the research essay will be formulated on the basis of a sequential structure which will involve the analysis and evaluation of a multiplicity of determinants of the global political economic structures. The emphasis of the research process has been on international economic policies formulated by organisations such as the IMF, WTO and World Bank and specific agreements such as the Basel Agreement and Paris Agreement of climatic changes. The process will further explore existing adjudications amongst the competing claims so that bridging the competing explanations to form a definite synthesis can be performed. In conclusion, the implications of the analysis will be enumerated.

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Literature Review

Damro (2012) has observed that the factors of global economic governance have been constituted through three different developments in the international sphere. These could be understood as the increased proliferation of global networked markets, the expansion of the revolution in digitized global communications and the strengthening of involvement of non-state actors within global economic decision formulation structures. In this context, the former Secretary General of the United Nations, Kofi Annan acknowledged that it is beyond the scope of any individual nation, regardless of the measure of political/economic capacity involved, to ensure self-protection since the current global challenges as well as threats are interconnected (un.org, 2005). Drezner (2014) has determined this particular observation to be the rationale of the broad strands of competitive as well as co-operative interdependencies which have become prevalent within the Transnational Corporations (TNCs) and the sovereign nations which further include civil societies also.

The global governance phenomenon

Drahos (2003) has captured this current phenomenon through overview of the global environmental governing initiatives in the format of The Paris Agreement. This agreement has been formulated as a component of the United Nations Framework Convention on Climate Change (UNFCCC) with the goal of mitigation of emissions of greenhouse gases through adaptation and finance initiatives on part of the 196 signatory countries as determined through consensus on 12 December 2015. The objective of this agreement has been stabilisation of the average global temperature to below 20C, and preferably to the level of 1.5 °C, for the purpose of substantial reduction of the impacts and associated risks regarding climate change. Gruber (2001) has specified such developments to be reflective of three factors. These are first the emergence of new international agencies in addition to the influential governments, secondly the development of new global governance based institutions and mechanisms which could transcend the traditional formats of agreement based global governance initiatives and thirdly the incremental dissemination of the global governance mechanisms into sub-segments and regional fragments across the entire functional spheres of such transnational governance structures.

Climate change governance based perspectives

Kahler (2013) has drawn parallels between the Paris Accord and the Kyoto Protocol concerning the extension of the UNFCCC initiatives to foster commitment between the signatory states for the reduction of emission of greenhouse gases. The basis of such an attempt has been the scientific consensus that emission of CO2 has been, mostly, responsible for such problems. Drezner (2008) has outlined that the overarchingprinciples of common yet differentiated responsibilities and capabilities concerning the management of climate change have to become the focus of such efforts. To this extent, the conflict between the roles of national states and international institutions has been focused on by Gruber (2005) to explore the components of the functionalities and responses of individual states which could be the factors which influence the global economic discourse. The initial one of these is the necessity to monitor the transboundary movement of prohibited pollutants so as to restrict the same through regulation of trade. The second of these factors is the fact that only national governments can be capable of funding such major policy transformations and technology transfer based initiatives through which the policies of both of these climate change accords could be implemented. Unsurprisingly, such developments have culminated in the establishment of the Intergovernmental Panel on Climate Change (IPCC) with the objective of promoting international scientific knowledge concerning climate change. Stuenkel (2013) has further elaborated these perspectives from the frame of reference of ‘complementarity’ which is incumbent upon the framework of multilateral reinforcement. Such a framework involves institutional arrangements such as the Paris Agreement and Kyoto Protocol. This observation primarily contextualizes the opposing factors of state powers and international entities within the complementary framework of international governance, under which each component, through legitimacy of existence, could permit and facilitate the existence of the other.

,h3 Non-state actors

G20

Bach and Newman (2007) have suggested that, as a non-state actor, three specific economic governance capacities are exhibited by the G20. The initial one has been developing a crisis management process in which the forging of agreements on the future activities of the participants of the group is undertaken both at the individual and the collective levels. The orientation is towards withstanding and minimizing the effect of any economic crisis. The second one has been that of orchestrating the governance of global economic structures and policies. This has been elaborated by Barnett and Duvall (2004) to be the capability to provide the settings through which major economies and the leading international regulatory institutions such as the World Bank, the IMF, the UN and the World Trade Organisation (WTO) could come together to have definitive dialogues and to formulate global economic policies with coordinated responses towards emerging economic challenges. This process has been determined by Foot, MacFarlane and Mastanduno (2003) to be the enabling factor for the relevant policy formulators, belonging to the participant countries as well as the international organisations, to articulate effective understandings pertaining to specific economic and governance policy related issues. Finally, according to Acharya (2011), the G20 also acts as the global communicator of the existing and prospective financial challenges of ?????. The emphasis is always on the member and participant countries to be proactive in terms of development of effective responses to such identified complications. In this context, Gruber (2000) has researched the outcomes of non-compliance involving the G20 members and various other stakeholders and has outlined that a multiplicity of such consequences exists through which the participant states could be persuaded to comply with the decisions of the organisation. The initial one involves generating adverse impacts on the credibility of non-compliant parties, which could jeopardise the inter-state relationships amongst the G20 members. The second one is the adverse implication on growth finance acquisition opportunities by such defaulting nations. The third is associated with the non-associative states of G20 under which non-compliance to the formulated financial transparency regulatory criteria could culminate in jeopardising of the scope of capital borrowings. This would further endanger the attractiveness of such economies to the international institutional lenders and investors. According to Narlikar (2010), analogous adverse consequences could be suffered by the financial institutions associated with such non-compliant countries, though, separately.

The World Trade Organisation (WTO)

Narlikar (2013) has highlighted the negotiation and implementation policies of WTO in terms of the establishment of a rule based regulatory system of trading with an equality of representation to be the crux of global economic governance initiatives. Posner (2009) has elaborated on such observations through outlining that the dispute settlement regime of the WTO pertains to three specific procedures through which the exertion of power could be enforced on non-compliant members. The initial one is the legally binding contract through which enforceability of contracts and agreements finalized under the purview of the WTO could be ensured. This aspect differentiates the organisation from that of the UN. Next is the extensive effectiveness of the dispute settlement procedures in terms of implementation in specifically challenging cases. Finally there is the institutionalization of the non-discriminatory policies through principles of agreements identifiable as the statuses such as the 'Most Favoured Nation'. Through this principle, no nation is permitted by the WTO to discriminate against the imports from legal signatories of agreements, such as other countries, on the basis of process of production. In case of a tariff war between different member nations, such as that between the USA and the PRC (Peoples Republic of China), WTO could play the role of the interlocutor and regulator as well. WThis power has been prominently displayed in the recent stipulation where the WTO appellate body has ruled some of the tariffs imposed on the Chinese goods by USA to be in contravention of the rules of the organisation (ft.com, 2019). The Committee on Trade and Environment of WTO assumes the most significant responsibility in this context.

IMF and implications on domestic policies

The implications of governance related influences exerted by the IMF are related to the attempts to formulate commitment and willingness on the part of the national authorities of concerned countries regarding specific issues of contention. According to Schneider (2005), regarding instances of non-compliance of the national authorities in actively addressing the issues of governance which could be relevant to the IMF, the staff representing the IMF are obliged to point out the financial consequences of not addressing such aspects. Thus, Singh (2000) has suggested that such discretionary aspects are reflective of the integration of the governance issues pertaining to external viability, macroeconomic stability and economic growth prospects, such as aspects of good governance including the prevention of corrupt practices through the issuance of advisories. Steinberg (2002) has observed that there are two particular spheres of operation which highlight the interventionist perspectives of the IMF in processes of domestic policy formulation . The initial one includes public resource management policies covering reforms of public sector organisations of the associated countries such as central banks, treasury, the civil service, financial policies, administrative procedures, budget formulation, expenditure control and revenue/tariff policies. According to Subacchi (2008), the next one involves interventionist approaches in terms of price systems, trade and exchange regimes and the banking systems as well as the associated regulations. Tallberg (2010) has averred that such prerogatives are reflective of the interests of the IMF to develop a supportive, transparent and stable regulatory environment to efficiently promote private sector based activities. Thus, the formulation of domestic policies by sovereign states could, in theory, be considered to be likely to come into contention with the policy advice of the IMF concerning the economic sphere of operations. Such aspects could define the global economic realities which might shape the domestic economic policies of individual countries. However, Vezirgiannidou (2013) has brought into focus the comparative disadvantage of the IMF, as a non-state actor, in influencing national policy formulations in various other spheres of action such as civil service reform, the legalities associated with property rights, domestic legal structures involving the enforcement of contractual agreements and procurement practices etc. Accepting conditions for accessing financial support from the IMF could be considered to be incumbent upon compliance with such previously stated measures.

Cohesion of differential arguments

According to Gruber (2005), differential argument could be defined as the cover term when similar logical arguments, involving the same subject or object, could be presented from diverging perspectives.

Wilkinson (2009) has further organized such existing explanations in the form of a cohesive argument in favour of the multilateral governance mechanisms which have become prevalent in global economic and political governance . This argument is representative of the notion that such a measure of path dependency leads directly to the variability of convergence aspects concerning the economic strength of different nation states. Such I think this means ‘divergence’ is associated with the uniqueness of valued international institutions in shaping national policies of different states so as to sustain the diversities of such nation states in spite of the hyper competitive scenario in the current globalised economic and social contexts. This paradigm has been further explained by Manners (2002) as an inherently interdisciplinary approach with a vast scope. This observation could bring forth the fundamental realisation that there are risks of simplistic explanations within the academic efforts directed towards determining and study of the forces of global financial governance. Furthermore, another propensity is toward advancing forceful hypothetical observations concerning such a research subject. Thus, the attempt to capture the entire measure of complications associated with the topic under consideration could be interpreted as an eclectic endeavour.

According to Meunier and Nicolaïdis (1999), the role of non-state actors in the process of global governance could be perceived through the antithetical relationships which persist between differing strands of researches pertaining to organisational and institutional theories. Falkner (2007) has explained such observations as defining influences on the theoretical orientations of the researchers which have influenced their identification of particular nation states or international institutions/non-state actors as fundamental forces which shape the global economy. Institutional perspectives on international financial governance are preferred by researchers who study countries in particular and, on the other hand, those researchers who are more interested in individual organisations emphasise the roles of international institutions such as the WTO and IMF as determinants of current global financial policies. This paradigm, Narlikar and Tussie (2004) have observed, could divide global economic governance, at the Meso level, into two broad segmentsof production versus finance

Theoretical constructs

According to Singh (2006), both of these approaches concentrate their focus on the structure of governance of the global economy in comparable measures, though the content and scope of the objectives of governance could differ extensively. The synthesis of these approaches shows that the most explicit influence of international institutions on economic policies is also formulated by nation states, especially the advanced industrial economies. To this effect, Alexandroff and Cooper (2010) have opined that the predominant perspectives of political economy in the current global conditions pertain to two different theoretical perspectives, namely, the Dependency theory, the World-Systems theory. According to Finnemore and Goldstein (2013), the mutual influence of the Dependency and World-Systems theories are palpable in the form of the core constituent factors of both the theories. This mutual influence concerns the explanations developed by these theories about the international economic structures. For instance, the Dependency theory establishes, according to Zangl et al (2016) that the discrepancy between economically advanced and underdeveloped states emanates from the manner through which the underdeveloped states are integrated into the global economic structure. Within such a structure, resources generally flow from the peripheral regions (impoverished states) to the core regions (wealthy states). On the other hand, Ren (2017) has affirmed that the World-Systems theory sees the source of influence and power in the global economic governance as the transnational and inter-regional division of labour. Such division could be comprehended as the dissemination of labour and economic resources. Such dissemination is based on three different segments such as the peripheral (labour intensive production and raw material extraction based economic structures), semi-peripheral (low skill based economic structure) and core countries (high skill and capital investment intensive economic production structure). Da Conceição-Heldt and Meunier (2014) have perceived such structure of economic capability to show the differential abilities of individual nation states and the non-state actors in terms of exerting influence on the economic disciplines.

Summative assessments

Hoekman (2014) thinks that the concept of global governance causes intensely contested globalization. This could be condensed to the process of intensive and efficient process of collective problem solving initiatives undertaken through or within the international institutions such as WTO, OPEC, IMF, World Bank and others for the purpose of exerting effective global governance. Huotari and Hanemann (2014) have referred to the propositions promoted by the institutions of international financial governance that such procedures are associated with the empirical processes of financial governance and are not comparable to normative actions. In such contexts, individual nation states mostly act as the agents of the principal values espoused by such previously mentioned international institutions. However, Heldt and Mahrenbach (2019) have argued that extensive normative consequences and implications are associated with the exertion of influence by the international institutions on the global economic governance processes. Such consequences emanate from the requirement to address legitimacy and accountability issues by such institutions. Deficits in legitimacy generally jeopardize the roles and influences of such international institutions by making their interventionist approaches overshadow the promotion of efficient governance requirements.

In this context, Falkner (2007) has brought forth the arguments that the roles of international organisations have been overestimated since such roles are formulated mostly at the expense of the existing non-state actors and emerging states when the implementation of regulatory contexts could be considered to conform to the modus operandi of industrialised and advanced countries.

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Conclusion

In conclusion, the previously stated arguments could be re-examined to understand the extensive influence of multilateral and collaborative approaches currently exercised by states, non-state actors and international institutions in terms of performing global economic governance. The focal point of all of the evaluated arguments could be understood as the structure of collaboration on which policy considerations are based amongst stakeholders of the governance structure.

The conclusive assessment of the entire study could attest to the incremental constraining of the influences of nation states in the global economic policy formulation and regulation structures, from a vertical normative perspective. This constraint has been an outcome of the expanding presence of multiple non-state and supra-state actors such as MNCs, markets, banking organisations, international institutions and regulatory networks. On the other hand, from a horizontal perspective, it could be observed that the elements of effective power to influence economic policy regulations are completely dependent upon the process of diffusion of power to influence the formulation of international economic policy from erstwhile influential states to currently emerging economic blocks. Within a consistently altering global power equation and reform of global relationship structures, especially involving the United States and China, the current dynamics of economic power could axiomatically lead to the sources influencing the nature of global economic influence sources becoming increasingly multi-polar. This study has brought the substantive yet opposing dynamics of analytical and empirical arguments into the cohesive context of an institutional financial perspective to better explore the research topic.

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