Last year was a memorable one for the global economy. Not only was overall performance disappointing, but profound changes — both for better and for worse — occurred in the global economic system.
Most notable was the Paris climate agreement reached last month. By itself, the agreement is far from enough to limit the increase in global warming to the target of 2°C above pre-industrial levels. However, it did put everyone on notice — the world is moving, inexorably, toward a green economy.
One day, not too far off, fossil fuels will be largely a thing of the past. So anyone who invests in coal now does so at his or her peril. With more green investments coming to the fore, those financing them would, we should hope, counterbalance powerful lobbying by the coal industry, which is willing to put the world at risk to advance its shortsighted interests.
Indeed, the move away from a high-carbon economy — in which coal, gas and oil interests often dominate, is just one of several major changes in the global geo-economic order. Many others are inevitable, given China’s soaring share of global output and demand.
The New Development Bank, established by the BRICS nations — Brazil, Russia, India, China, and South Africa — was launched last year, becoming the first major international financial institution led by emerging nations. In addition, despite US President Barack Obama’s resistance, the China-led Asian Infrastructure Investment Bank was also established and is to start operations this month.
The US did act with greater wisdom where the yuan was concerned. It did not obstruct the currency’s admission to the basket of currencies that constitute the IMF’s reserve asset — the Special Drawing Rights. In addition, five years after Obama’s administration agreed to modest changes in the voting rights of China and other emerging markets at the IMF — a small nod to the new economic realities — the US Congress finally approved the reforms.
The most controversial geo-economic decisions last year concerned trade. Almost unnoticed after years of desultory talks, the WTO’s Doha Development Round — initiated to redress imbalances in previous trade agreements that favored developed nations — was given a quiet burial. The US’ hypocrisy — advocating free trade, but refusing to abandon subsidies on cotton and other agricultural commodities — had posed an insurmountable obstacle to the Doha negotiations. In place of global trade talks, the US and Europe have mounted a divide-and-conquer strategy, based on overlapping trade blocs and agreements.
As a result, what was intended to be a global free-trade regime has given way to a discordant managed-trade regime. Trade for much of the Pacific and Atlantic regions is to be governed by agreements, thousands of pages in length and replete with complex rules of origin that contradict basic principles of efficiency and the free flow of goods.
The US concluded secret negotiations on what might turn out to be the worst trade agreement in decades, the Trans-Pacific Partnership (TPP) — which now faces an uphill battle for ratification, as all the leading Democratic presidential hopefuls and many of the Republican presidential hopefuls have weighed in against it.
The problem is not so much with the agreement’s trade provisions, but with the “investment” chapter, which severely constrains environmental, health and safety regulation, and even financial regulations with significant macroeconomic impacts.
In particular, the chapter gives foreign investors the right to sue governments in private international tribunals when they believe government regulations contravene the TPP’s terms — inscribed on more than 6,000 pages. In the past, such tribunals have interpreted the requirement that foreign investors receive “fair and equitable treatment” as grounds for striking down new government regulations — even if they are non-discriminatory and are adopted simply to protect citizens from newly discovered egregious harms.
While the language is complex — inviting costly lawsuits pitting powerful corporations against poorly financed governments — even regulations protecting the planet from greenhouse-gas emissions are vulnerable. The only regulations that appear safe are those involving cigarettes — lawsuits filed against Uruguay and Australia for requiring modest labeling about health hazards had drawn too much negative attention. However, there remain a host of questions about the possibility of lawsuits in myriad other areas.
Furthermore, a most-favored nation provision ensures that corporations can claim the best treatment offered in any of a host nation’s treaties. That sets up a race to the bottom — exactly the opposite of what Obama promised.
Even the way Obama argued for the new trade agreement showed how out of touch with the emerging global economy his administration is. He repeatedly said that the TPP would determine who — the US or China — would write the 21st century’s trade rules. The correct approach is to arrive at such rules collectively, with all voices heard and in a transparent way.
Obama has sought to perpetuate business as usual, whereby the rules governing global trade and investment are written by US corporations for US corporations.
This should be unacceptable to anyone committed to democratic principles.
Those seeking closer economic integration have a special responsibility to be strong advocates of global governance reforms — if authority over domestic policies is ceded to supranational bodies, then the drafting, implementation and enforcement of the rules and regulations has to be particularly sensitive to democratic concerns. Unfortunately, that was not always the case last year.
This year, we should hope for the TPP’s defeat and the beginning of a new era of trade agreements that do not reward the powerful and punish the weak. The Paris climate agreement might be a harbinger of the spirit and mindset needed to sustain genuine global cooperation.
Joseph Stiglitz, a Nobel laureate in economics and a professor at Columbia University, was chairman of former US president Bill Clinton’s Council of Economic Advisers and served as senior vice president and chief economist of the World Bank.
Copyright: Project Syndicate
Late last month, Beijing introduced changes to school curricula in the Inner Mongolia Autonomous Region, requiring certain subjects to be taught in Mandarin rather than Mongolian. What is Chinese President Xi Jinping (習近平) seeking to gain from sending this message of pernicious intent? It is possible that he is attempting cultural genocide in Inner Mongolia, but does Xi also have the same plan for the democratic, independent nation of Mongolia? The controversy emerged with the announcement by the Inner Mongolia Education Bureau on Aug. 26 that first-grade elementary-school and junior-high students would in certain subjects start learning with Chinese-language textbooks, as
There are worrying signs that China is on the brink of a major food shortage, which might trigger a strategic contest over food security and push Chinese President Xi Jinping (習近平), already under intense pressure, toward drastic measures, potentially spelling trouble for Taiwan and the rest of the world. China has encountered a perfect storm of disasters this year. On top of disruption due to the COVID-19 pandemic, torrential rains have caused catastrophic flooding in the Yangtze River basin, China’s largest agricultural region. Floodwaters are estimated to have already destroyed the crops on 6 million hectares of farmland. The situation has been
In 1955, US general Benjamin Davis Jr, then-commander of the US’ 13th Air Force, drew a maritime demarcation line in the middle of the Taiwan Strait, known as the median line. Under pressure from the US, Taiwan and China entered into a tacit agreement not to cross the line. On July 9, 1999, then-president Lee Teng-hui (李登輝) described cross-strait relations as a “special state-to-state” relationship. In response, Beijing dispatched People’s Liberation Army (PLA) aircraft into the Taiwan Strait, crossing the median line for the first time since 1955. The PLA has begun to regularly traverse the line. On Sept. 18 and 19, it
Midday in Manhattan on Wednesday, September 16, was sunny and mild. Even with the pandemic’s “social distancing” it was a perfect day for “al fresco” dining with linen tablecloths and sidewalk potted palms outside one of New York City’s elegant restaurants. Two members of the press, outfitted with digital SLR cameras and voice recorders, were dispatched by The Associated Press to cover a rare outdoor diplomatic meeting on one of these New York streets. American diplomat Kelly Craft, Chief of the United States Mission to the United Nations, lunched in the open air with Taiwan’s ambassador-ranked representative in New York, James