The regionalization of global economic governance

The calls for the reform of the global governance construct are mounting and in the course of this year the world witnessed a number of crucial steps in this direction. One of such landmark events this year has been the creation of a platform for cooperation among the multilateral development banks (MDBs) under the auspices of the World bank. Another important step has been the admission of the African Union (AU) as a permanent member of the G20. These recent developments point to the increasing role of regional blocs and their development institutions in what is hopefully going to be a more equitable and inclusive system of global governance. If we are to peer into the future and extrapolate some of the regionalization trends witnessed in recent years, what would the resulting regionalized global governance system look like?

As regards the Bretton Woods institutions such as the IMF and the World bank a lot of the work in promoting greater coordination with regional development institutions has already been undertaken. In particular, the IMF holds regular discussions with the main regional financing arrangements (RFAs), with the coordination effort being also supported by the G20. During the most recent high-level meeting between the IMF and the RFAs in October 2023, “the discussion focused on how crisis fighters can contribute to macroeconomic and financial stability in a more shock-prone world and the role of IMF-RFA collaboration therein”[1].

With respect to the regional development banks, it was the World bank that led the formation of the respective cooperative platform. In October 2023 an agreement has been signed between the World bank and some of the leading multilateral and regional development banks, including the African Development Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, the Inter-American Development Bank, AIIB, BRICS NDB and others. The agreement creates the basis for stepped up operations in co-financing projects in the global economy[2].

And then there are the regional integration blocs or the regional trade arrangements (RTAs) that are yet to form a platform – currently there is still no arrangement for a horizontal coordination among the main regional integration blocs. Admittedly, there are some mechanisms already in place within the WTO that do provide for some coordination between this international organization and the main RTAs – as stated in the official website of the WTO, “the Committee on Regional Trade Agreements (CRTA) implements the Transparency Mechanism for regional trade agreements (RTAs) falling under Article XXIV of the General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS). RTAs falling under the Enabling Clause (covering trade agreements between developing countries) are consider by the Committee on Trade and Development. The CRTA’s other functions include considering how the required reporting on the operation of agreements should be carried out and developing procedures to facilitate and improve the examination process. The CRTA is also mandated to consider the systemic implications of RTAs for the multilateral trading system and the relationship between them”[3].

Going forward, as argued in a recent paper co-authored by Jeffrey Sachs[4], the WTO may lead the creation of an expanded mechanism of coordination with the main regional integration blocs that would provide scope for exchanges in best practices and discussions of potential anti-crisis measures along the lines of how such platforms are designed by the IMF and the World bank with the respective regional development institutions. Furthermore, there may also be the possibility to allow for full membership in the WTO of some of the customs unions such as MERCOSUR – currently the only regional bloc with full WTO membership is the EU.

Another dimension to the regionalization of global governance may be the creation of a platform for regional integration arrangements and organizations within the G20. Such a platform may be denoted as R20 (regional 20) and serve as an engagement group for the G20 forum. The benefits of launching such a platform could include not only greater coordination among the regional arrangements in discussing key global issues addressed by the G20, but also an expanded anti-crisis arsenal of the regional development institutions, whose cumulative resources exceed those of the Bretton Woods organizations. The membership of the African Union (AU) in the G20 approved in 2023 may be one of the steps in this direction; as argued in the paper by Jeffrey Sachs et all (2023) produced for the G20, the WTO could play a coordinating role within such an R20 platform[5].  

One of the latest proposals to create more scope for regional institutions in global governance also came from the former head of the International Monetary Fund (IMF) Michel Camdessus. In his recent report written together with Anoop Singh and Bernard Snoy Mr. Camdessus argues in favour of including regional constituencies into the operation of the G20, pointing to some of the progress attained during India’s G20 presidency with the admission of the African Union as a full-fledged G20 member: “Given that re-orienting global financial institutions is now effectively viewed as a G20 mandate, it’s desirable to review the G20’s composition for truly universal and equitable representation of all countries in the design and implementation of global strategies. This can be done via a system of regional constituencies that has served the Bretton Woods institutions well, and steps were taken in this direction under India’s G20 presidency”[6].

What emerges then from the above sequence of regional platforms is a regional layer of global governance that extends to the key areas of the global economy’s operation:

  • a platform for regional integration blocs in the trade sphere (coordinated by the WTO)
  • a platform for regional financing arrangements in the sphere of macroeconomic stabilization and surveillance (coordinated by the IMF)
  • a platform for regional development banks to undertake development financing (coordinated by the World bank)
  • a platform for regional blocs and organizations/”regional 20” (R20) as part of the G20 forum
  • creation of new regional currencies to complement the likes of the euro as discussions advance on the creation of a new BRICS reserve currency and regional currencies in Africa and South America

In the end, there is a sense that at some point in the post-World War period the process of globalization may have taken a wrong turn. The zeal to reach out to the top level of global governance formed by global institutions has overtaken the need to buttress the globalization process from below. The top-down globalization paradigm overshadowed the importance of a bottom-up globalization process driven by regional blocs and other plurilateral/multilateral stakeholders. The resulting pattern of globalization veered too far in the direction of over-dependency on a limited number of development models, payment systems and institutions, creating bottle-necks for modernization efforts, particularly in the developing world. As I have argued consistently throughout the past 6-7 years[7], the crystallization of a regional layer of global governance (that may be seen as an intermediate level of governance between global institutions at the top and the layer of national economies) would serve to address the vulnerabilities of the unipolar governance paradigm, providing more resources for anti-crisis efforts and new communication lines for international economic diplomacy[8].









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