After 2020 and the outbreak of the pandemic, 2021 seemed a promising year, thanks not only to economic recovery but also to a (partial) “revival” of multilateralism. This year Russia’s invasion of Ukraine sounded like a “wake-up call” triggering geopolitical and economic turmoil on the global scale and casting doubts on the prospects for multilateral cooperation. However, even at a time when States focus on short-term priorities (such as economic slowdown and skyrocketing energy and commodity prices), long-term challenges (from climate change to global health and international trade) remain. How to address them in such an uncertain scenario? Is the G20 still fit for purpose given the increasing political and economic fragmentation among its members? As G20 leaders are about to gather in Bali, we argue that low-hanging fruits of key multilateral issues can still be reaped, provided that G20 members adopt a down-to-earth approach.
Fragmentation: the new global buzzword
After the pandemic, 2021 looked like a promising year for a “double” recovery, with respect to both the global economy and multilateralism., an impressive rebound if compared to the global recession (–3.5%) that occurred in 2020. Moreover, last year time seemed ripe to revive multilateralism, thanks to some tangible results achieved on the occasion of key international summits: the G20 in Rome, with the political agreement on a global minimum tax and the promised boost of Covid vaccination campaigns in lower-income countries; and COP26 in Glasgow, with the acknowledgement of 1.5° C as the ceiling target to contain global warming by the turn of the century.
February 24 turned out to be a wake-up call. Russia’s invasion of Ukraine started a conflict which has had a limited geographic scale, but far-reaching consequences from the geopolitical and economic point of view. As a result, the war produced a considerable “setback” to the global recovery, with growth forecasts for 2022 revised downwards from 4.4% in January to 3.2% in October, and even more gloomy for 2023 (+2.7% at global level, but with advanced economies growing only by 1.1%). The impact of the war is proving to be different from the one suffered in 2020: if the pandemic brought about a cross-cutting shock to the global economy with almost no country able to escape, the effects of the war are producing many “losers” (in particular net commodity importers), but also a few “winners” (major producers and exporters of raw materials). Moreover, the very fact that the impressive rounds of economic sanctions imposed to Russia by Western countries have not been matched by similar measures by other countries is likely to increase economic fragmentation as well as political divisions.
The war in Ukraine is likely to accelerate a longstanding process out of which an increasing division of the world into blocs is emerging, casting doubts on the future of globalization. The increasing economic frictions between the US and China, following Washington’s introduction of a set of export restrictions of semiconductors to Beijing, is just an anticipation of that will mark the coming years. However, a “Cold War-style” distribution of power does not seem around the corner as political and economic ties are still binding regional blocs strongly together. The growing number of Regional and Preferential Trade Agreements (now amounting to around 350 -Facchini, da Silva, Willmann, 2021) provide a clear-cut example.
Against this background, progress on the multilateral agenda seems anything but easy in the short term. Nevertheless, urgent global issues remain on the table and no concrete result will be available without joint efforts. Is it still possible to find a common denominator and make at least a few concrete steps ahead despite today’s international turmoil?
Carrying the multilateral agenda forward
Despite today’s fragmented global landscape and geopolitical tensions, the case for multilateral cooperation remains stronger than ever. The world is, in fact, facing a wide set of challenges that threaten our future. They can only be addressed by involving all major economic and political players. Global issues call for global solutions, and unilateral or uncoordinated actions, even when taken in good faith, risk being ineffective if not followed-up by most actors. The Covid-19 pandemic, which has ravaged across the world for more than two years, has shown beyond any doubt that no nation can shield itself completely from external threats and proceed on its own path.
Cooperation is key also to tackle another challenge, the one that is key the very future of our planet: climate change. Just like infectious diseases, pollution and global warming ignore borders and create spill-over effects that affect countries on the other side of the world. Nations have to come together to face threats caused by higher temperatures, advancing desertification, and rising sea levels. Uncontrolled changes spurred by global warming would radically impact global economy and alter long-standing dynamics, a scenario that no country can face – let alone counter – on its own.
Climate is undoubtedly the domain where there is the greatest urgency for effective multilateral cooperation.
Despite its short history, climate diplomacy has already achieved a lot, starting from the Montreal Protocol – so far the only climate treaty ratified by all countries – signed in 1987. Although some of the recent rounds of COP have been largely deemed unsatisfactory, COP26 brought back a glimmer of hope and reinforced the case for multilateral action in the climate domain. However, if in Glasgow it was possible to show that the international rivalry between the US and China may be (temporarily) put in the “backstage”, the energy crisis experienced in particular by Europe over the past year, combined with ongoing geopolitical tensions, will likely undermine the attempt of COP27 in Egypt to provide a new opportunity for climate-focused multilateralism. More concretely, COP27 was expected to bring about greater financial commitments to developing countries in the areas of mitigation and adaptation, bridging a gap that often leaves the most vulnerable without adequate resources to face the consequences of global warming. But major steps forward are quite unlikely this time around, also in light of the difficulties faced by the Glasgow Financial Alliance for Net Zero (GFANZ): the mechanism – launched at COP26 - was supposed to gather around $130tn of assets devoted to “green finance” projects, but it has been losing key members and has been accused of largely adopting “greenwashing” practices.
Climate-focused multilateralism is only one of several dimensions where the world as a whole would benefit from renewed cooperation among States. International trade is by its own nature an area where countries are supposed to coordinate, shape policies and agree on a common set of rules. However, recent years had been marked by a sharp turn towards unilateral measures and protectionist policies: even before the Covid-19 pandemic, for a slowdown in global economic growth. The pandemic outbreak had an immediate impact on trade measures, given the high number of export restrictions for medical goods that many States implemented in 2020, but also on trade governance itself: the WTO 12th Ministerial Conference, initially planned for 2020, had been postponed for several times until June 2022. The international gathering, although falling short of achieving a major (and long needed) reform of the Geneva-based organization, managed to reach some important results and, most importantly, showed that the WTO is “still alive” and it is hence pretty clear that globalization is not doomed to end; it is rather going to take a different shape through the definition of new economic partnerships along supply chains (either global or regional). Such redefinition process cannot be carried forward through unilateral initiatives – that would eventually lead to higher fragmentation - but only through multilateral engagements in further rounds of negotiations aimed at completing the reform of the WTO and making it fit to address the new challenges to international trade.
Nothing has shown the damages of unilateral trade actions as much as the Covid-19 pandemic when countries have hoarded medical supplies for themselves, blocked the export of crucial pharmaceutical products or shut down their borders without coordinating even with their neighbours. This behaviour has resulted in significant harm both to people’s health and economies and has been most evident in what GAVI Chair José Manuel Barroso described as “vaccine nationalism”. Advanced economies developed and administered Covid-19 vaccines at an unprecedented pace in medical history and, while this would remain a huge scientific achievement, the rest of the world had to wait, favouring the birth and spread of new variants. This pandemic demonstrated the dire need for greater cooperation on health issues and made it clear how pandemics are systemic risks for the whole global community and that it is imperative to boost global preparedness for future infectious diseases.
Vaccine nationalism and the unequal distribution of Covid-19 treatments highlighted and exacerbated another area where multilateral cooperation is needed: the gap between the world’s rich and poor. In fact, the inability to obtain vaccines severely affected the ability of low-income and emerging economies to recover effectively from the pandemic downturn, paving the way to increased global divergence. Such a divergence creates significant economic risks and hampers, especially in the current context of rising interest rates, financial stability in countries lacking adequate fiscal resources, triggering fears of new debt crises. In the midst of the pandemic, the G20 Finance Track already tried to tackle the financial difficulties of emerging countries with the Debt Service Suspension Initiative, alleviating, albeit partially, the budgetary distress of vulnerable countries and paving the way for debt restructuring . Yet, the monetary tightening that followed the war in Ukraine and the inflationary pressures coming from record-high energy and food prices require renewed commitment by major economic players and multilateral institutions to prevent new shocks.
Time for realistic ambitions
If 2021 was promising and somehow successful for multilateralism, 2022 has been a very troubled year. Geopolitical tensions, economic slowdown, skyrocketing energy and commodity prices reduce the room for common action. This will inevitably affect the outcome of the G20 Summit in Bali, with growing obstacles to ambitious and far-reaching deliverables. It would be better to prioritize low-hanging fruits in a number of areas – climate change, trade policy, global health – capitalizing and building on results obtained in other fora and institutions, such as the COP26 last year (although progress at COP27 will be very limited) and at the WTO MC12 this year.