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Reforms in Global Institutions

Context: 

  • The Indian Prime Minister recently expressed concerns regarding the crisis and failure of global governance in multilateral institutions.

More about the news: 

  • India recently emphasized the crucial role of the G20 in the reform of multilateral institutions(MI) with a particular focus on the United Nations.
  • The climate vulnerable 20 group (V20) emphasized the need for reforms to the world’s international financial architecture to prevent the escalating climate crisis.
  • The recently concluded meeting of the G20 working group on trade and investment focused on the important issue of WTO reform. 
  • The G20 New Delhi Leaders’ Declaration endorsed the G20 Independent Review of multilateral development banks MDBs Capital Adequacy Frameworks (CAFs).
What is a multilateral institution(MI)?

  • A multilateral institution (such as the United Nations (UN), International Monetary Fund (IMF), World Bank Group etc) is formed by three or more nations to work on issues of common interest.

Need of the Multilateral Institutions:

  • Challenges of global nature: Most of the challenges nations face today are global in nature and require global solutions. 
    • Pressing global issues such as conflicts, climate change, migration, macroeconomic instability, and cybersecurity can be solved collectively. 
  • Pandemic disruptions: Disruptions such as the COVID-19 pandemic have reversed the social and economic progress that the global society made in the past couple of decades.
    • In 2020, the pandemic resulted in an additional 97 million people falling into poverty.

Emergence of multilateralism:

  • The conclusion of the Cold War in the early 1990s set the stage for a flourishing era of multilateralism. 
    • European Union: In Europe, there was a swift progression toward extensive regional economic integration and growth, witnessed by the formation of the European Union. 
    • ASEAN: In Asia, the Association of Southeast Asian Nations played a pivotal role in enhancing regional economic and political collaboration. 

Fading Multilateral Order:

  • Crisis of multilateralism: The recent East Asia Summit in Jakarta and the G20 summit display the irreversible crises within the established multilateral order. 
    • It is exemplified by the absence of the Russian President and Chinese President at these summits as well as their escalating conflicts with the rest of the world. 
  • Rise in Global conflicts: Russia is entangled in a conflict with Western nations regarding Ukraine, while China faces disputes with several Asian countries, including India, Japan, the Philippines, Vietnam, and the United States.
  • China angle: China represents a lasting challenge to multilateralism. 
    • China’s increasing economic strength and military capabilities, to its expansionist actions, steadfast backing of Russia has created significant challenges in Asia and Europe.

Challenges with multilateral institutions(MI): 

  • Western Dominated : Most international institutions are primarily led and managed by Western countries. 
    • All presidents in the World Bank Group, from its inception in 1946 to 2023 have been U.S. citizens nominated or selected by the U.S. 
    • Traditionally, the United States has been a major contributor to the annual budgets of the international or regional organizations. 
    • Thus, the leadership of these institutions often aligns with the preferences of the US and its Atlantic allies.
  • Failure to uphold principles of multilateralism: Developed nations sidestep or even boycott multilateral institutions in which they are either founding members or active participants.
    • Thus, multilateralism has not failed, rather it is the governments of nation-states that have fallen short in upholding the principles of multilateral cooperation.
  • Non merit based selection of the president of the World Bank: There is no open merit-based transparent selection process to appoint the president.
    • The United States selects one of its citizens as the President of the World Bank, while Europe chooses a European to head the International Monetary Fund (IMF).
  • Non democratic representation: The United States is the largest single shareholder in the World Bank/IMF, holding 16.5% of voting power. In contrast, India holds a 3.01% share, and China has 5.61%.
    • This raises questions about the democratic representation of the Global South in these MDBs, which India claims to represent. 
    • Nations with greater voting powers are given more weightage in deciding loan amount, grants, policies, projects and direction of the institutions.
  • Rise of Protectionist policies: The rise of protectionist policies such as America First, Brexit, etc underscore the threat and crisis of multilateral institutions.
Challenges faced by other MI: 

  • World Trade Organization(WTO):
    • Staffing Crisis: The Appellate Body suffers from blockage of new appointments by certain member countries, specifically the US. This has rendered the body unable to hear new cases.
    • Procedural Delays: The Dispute settlement system(DSS) often takes longer than the mandated 90-day period to resolve disputes, affecting timely trade justice.
    • Overreaching Mandate: The DSS has been accused of overstepping its mandate by interpreting WTO agreements in a manner not envisioned by the member states, leading to friction.
  • UnitedNations Security Council(UNSC):
    • UNSC membership not reflecting today’s world: Developing countries are underrepresented and there are no permanent members from either Africa or LatinAmerica.
    • Condemning reforms using Veto power: It requires just one negative vote from any permanent member to nullify a resolution, regardless of broad support among the Council. 
      • Five permanent members enjoy veto power and frequently abuse their privileges.
      • A draft resolution condemning Russia’s attempt to annex four regions of Ukraine was struck down by Moscow’s veto.
    • Lack of transparency and efficiency in the UNSC decision-making process: Although the Security Council has improved its decision-making, transparency, and efficiency over the past decade, there has been no progress on the enlargement of the Security Council.

Challenges in reforming  multilateral institutions: 

  • Change in current distribution of power: Any effort to reform multilateral institutions and systems inherently involves a shift in the existing power structure. 
  • Changing the distribution of global power is a complex and sensitive process that can have significant consequences if not approached carefully.
  • Multilateralism against emerging multiplex global order: Multilateralism appears to be in contrast with the emerging multipolar and decentralised global order.
    • This environment facilitates the creation of new groups, alliances, and coalitions among like-minded nations, complicating efforts to reform older institutions.

Way Forward: 

  • Establishment of a clear narrative for multilateral reform: To promote this narrative on the global stage, G-20 should create a dedicated engagement group.
    • Current global challenges demand collaborative solutions, but it’s essential to recognize the limitations of traditional multilateral cooperation. 
    • Multilateral platforms often contend with conflicting interests and the dominance of powerful nations.
  • Promotion of minilateral groupings: The G-20 should also promote minilateral groupings as a new approach to multilateralism and work on transforming them into multi-stakeholder partnerships. 
  • Establishing networks of issue-specific minilaterals, especially concerning the governance of global shared resources, can help prevent the emergence of competitive coalitions leading to a fragmented world order. 
  • Taking Cue from G-20: To overcome the trust, legitimacy and utility crises of multilateralism, the world requires a model, and the G-20 can be one. 
Concerns raised by India against MI:

  • Raising the Kashmir issue frequently at the UN General Assembly
  • Addressing human rights violations at the UN Human Rights Council with limited success. 
  • Obstacles in listing terrorists and terrorist organizations in the UN Security Council.
  • China’s obstruction of ADB projects and programs in Arunachal Pradesh
  • Instances of India feeling marginalized on the global stage regarding multilateralism.
    • The G-20 became a world model for inclusivity and trust by providing membership to the African Union as a permanent member
  • Decentralised Globalisation/Reformed multilateralism: More diversified and democratic global order with multiple centers of production.
    • The trend of vaccine nationalism, trend of supply chain disruptions with food and other resources moving towards wealthier nations exposes the threats from globalization.
  • Developing a multilateral governance framework for plurilateral agreements: It should include key principles of non-discrimination, transparency, and inclusivity in incorporating the results of plurilateral negotiations in the WTO rulebook.

News Source: DTE

 

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