Last year brought about new, unforeseen challenges for the global community. The Covid-19 pandemic came as an unexpected “black swan” and put abruptly under discussion our life styles, our working practices, the ways we used to do business. In a nutshell, the whole globalization paradigm, which had reached its peak, was under threat by an invisible and microscopical enemy. Today, as we are finally getting out of the most acute phase of the emergency – at least from the health point of view – we are called to a possibly even daunting challenge: how can we build back our societies better? How should we reform global governance so that it is equipped to cope with future, similar challenges?
Identifying future global issues
To shape future global efforts, we need first of all to be able to identify what kind of challenges will materialize in the coming years. The pandemic showed us that health has definitely become the most urgent priority to deal with at multilateral level. Ensuring health care services to all is a basic requirement for a sound economic system, for a well-functioning education sector, and for lively and cohesive societies where no one is left behind. This means that free-riding or beggar-thy-neighbor practices are not a viable option; on the contrary, international cooperation is key. We must be all aware of the fact that everyone can benefit from solidarity, since it will not be possible to leave Covid-19 completely behind until most of the world population will have obtained a vaccine. But what does “true solidarity” mean, beyond empty rhetoric and catchy slogans?
Over the last few months, scarcity of vaccines has been used as a leverage to pursue political purposes. Distribution of vaccines against Covid-19 has often been used for political purposes, thus mirroring the uneven distribution of global political and economic power. For instance, the US has minimized the quantity of doses to be exported through the implementation of the Defense Production Act. That puts domestic consumers first for national security reasons. Russia, on the other hand, adopted the opposite strategy, by exporting most of the “Sputnik V” doses that were initially available. The European Union adopted an intermediate position, having exported more than 200m vaccines in more than 90 countries. In such a fragmented framework, where production of such crucial good is held by a small number of firms (and countries), but pharmaceutical supply chains are so globalized and fragmented, how can market distortions be avoided? How can vaccines be considered as truly “global public goods”, so that no one is prevented from getting access to them? Clearly, in such a situation market forces are not able by themselves to find a stable solution. Regulatory mechanisms – an effective system of licenses – should be put in place, alongside with international cooperation, which should ensure in the short run that the highest possible number of vaccines is given to those countries that simply do not have the production assets nor the technology needed to develop massive production overnight. In other words, the COVAX platform – in parallel with new initiatives undertaken by Italy’s G20 Presidency, such as the High Level Independent Panel on financing the global commons for pandemic preparedness and response – should be further supported and enhanced so as to ultimately remove bottlenecks on the supply side.
Once we will have finally come out of the woods of the pandemic, the second key priority will be to preserve and strengthen macroeconomic and financial stability. In other words, after the Covid-19 induced economic crisis, we will need to be able to avoid a new financial crisis triggered by skyrocketing public debt (which reached globally an average of 98% of GDP in 2020), to which we should also add the risk of inflation. As we know, G20 countries and other major economies have put in place an unprecedented fiscal effort of almost 15tn dollars. The booming of debt-to-GDP ratios due to the combined effect of sharp recessions and short-term fiscal responses led to massive fiscal deficits that were made possible only through increased borrowing (raising taxes was not an option, at least not in this emergency phase). This resulted into a significant increase of public debt, both in advanced economies, and in middle and lower income countries.
So, what could be done to avert the risk of new financial crises? Also in this case, international cooperation and coordination will be key. Nonetheless, we have to admit that little has been done so far in order to anticipate and mitigate the adverse effects that might materialize in the coming years (think, for instance, of a scenario where interest rates start rising again). In 2020, the G20 under the Saudi Presidency already took prompt action by launching the Debt Service Suspension Initiative (DSSI), of which more than 45 countries have benefitted so far. The DDSI has been recently extended by the Italian G20 Presidency, which is also striving to engage private creditors. Moreover, another positive note comes from the G20’s full support to the proposal of the $650 billion Special Drawing Rights allocation by the IMF. Yet, more should be done in order to reach out and support poorer countries. Middle income countries might be facing a debt crisis too if innovative strategies for debt repayment are not identified through a forward-looking approach based on shared priorities.
In parallel with these burning issues, we should not forget – nor underestimate – already existing challenges that are crucial for the resilience of the global economic system and for our planet. Digital transformation and climate change are two different and unrelated phenomena, which have something in common: they have the potential to completely reshape global economy and societies. We can definitely see the benefits that such transitions might generate: increased productivity, better access to goods and services, cleaner ways of production. But, at the same time, we will need to carefully design policies that can preserve fairness, reduce inequality, generate new job opportunities for the younger generations without displacing workers in “traditional” sectors. In order to do this, we will also need a framework based on a set of clear and agreed rules, the so-called “level playing field”, so as to ensure that free trade does not come at the expenses of unfair competition and investment practices.
Towards a truly global effort: protecting our planet
It is hard to think of more urgent priorities for the entire world than the threat of climate change. Global warming is the greatest challenge of our times. In a way, it is even more important than the Covid-19 pandemic because it has the potential to leave irreparable scars on our planet. So, in order to fight climate change there are no other ways than working together and join efforts towards the same goal. The public opinion is highly supportive to this challenge; the fact that people are increasingly aware and informed of the damaging consequences that global warming might have on our daily lives should be welcomed as a further incentive for governments, international organizations and multilateral fora to take immediate and concerted action. The United States’ return to the Paris Agreement (with the ongoing discussion about the adoption of firm medium term commitments for the country’s decarbonization) has marked a huge step ahead along a winding and road. This means that all the world’s biggest (and polluting) economies – including China and the EU - have now committed to undertaking a clearly defined path to decarbonise their production systems, thus trying to avert the increase of global temperature and achieve carbon neutrality. This is going to be a crucial year thanks to international events that could help the global community take additional, bold steps. There are high expectations in view of COP26, that will take place in Glasgow in November, with Italy bearing the responsibility of chairing the G20 and co-chairing the COP26 with the UK. It seems like there are appropriate conditions to facilitate the adoption of new commitments. All the more so since also the business sector looks increasingly eager to benefit from the opportunities that the “green economy” is about to disclose. From electric vehicles to smart grids, from renewable energy sources to a potential revolution brought about by the “green hydrogen”, manufacturers and investors are aware of the fact that new production paradigms will change the way we produce goods and services, and how we collect and channel financial resources towards new types of investments. To make a long story short: facilitating the energy transition should no longer be seen as a constraint to growth, but on the contrary as a way to embark in rewarding business opportunities.
A crucial moment for the future of global governance
Rivalry seems an inescapable dimension of the international system: there are obviously many ways to reduce it, but it cannot be completely eliminated. We are witnessing an increase of this dimension in today’s international relations, for a number of reasons that entail geopolitical tensions, trade disputes, different views on the respect of human rights. Multilateralism is no longer perceived as an effective tool to tackle global challenges, because of the absence of an effective global governance system and the failure of the existing mechanisms. These are exactly the reasons why joint efforts to make international relations work better are more needed than ever.
Multilateral institutions should be reformed in a way that they can become appropriate fora where different interests, priorities and sensitivities towards global issues can be turned into effective common denominators. But multilateral institutions walk on their member states’ legs. For instance, some countries are content with the preservation of the “status quo”, as this allows them to continue enjoying the benefits of their membership in international organizations by keeping their level of engagement and commitment relatively limited. Other countries can take advantage of the existing distribution of power and would oppose any reform proposals that would lead to a reshuffle of power or changing decision-making processes that would deprive incumbent key players from vetoing proposals that might harm their interests.
Although sometimes striking a balance between different interests can prove too difficult, multilateral efforts remain key to address global challenges. Therefore, a new paradigm should be promoted, particularly gathering those actors who are more willing to cooperate. I am referring to “actors” and not only to states because I am convinced that these efforts should involve all relevant international stakeholders, including civil society, companies, big cities and local entities. This means building shared interests in cross-cutting issues and highlighting reciprocal convenience and the perception of the mutual value being added. It also means to not be afraid of rethinking the existing institutions also through a bottom-up approach. The United Nations, the International Monetary Fund, and the World Trade Organization are all cases in point of this dynamics as they represent the backbone of multilateral governance; at the same time, they would need to be reformed in order to overcome standstill or sub-optimal functioning.
Furthermore, it would be important to curb ongoing regionalization trends, that might lead to excessive fragmentation of the international system, both from a political and economic point of view. For instance, initiatives to secure key supply chains cannot be blocked as they represent legitimate attempts from States and other regional actors to pursue strategic interests. The EU, China and the US put in place practices aimed at protecting their industrial “champions” and such practices should not be criticized per se. By the same token, the proliferation of such initiatives should be managed within a framework aimed at highlighting complementarities rather than differences and hostilities, in order to grasp the benefit of industrial specialization and cooperation. Of course, this should be done in a context of fair and transparent market access policies and state aids. Ultimately, it should be in everyone’s interests to promote a multilateralism based on key principles, including the respect of human rights, and shared responsibilities so as to defuse the temptation of “free-riding” practices.
China and Europe: how to cooperate in tomorrow’s world?
Undoubtedly, China and the European Union have different political, economic and strategic interests. However, their international relevance and their interconnectedness put them in an appropriate position to highlight avenues for bilateral cooperation and to avoid – or at least reduce – antagonistic behaviors and practices. Here, “reciprocity” appears to be the key word.
Bilateral economic ties have continued to strengthen, up to the point that in 2020 China has surpassed the US as the EU’s first trading partner: if we consider trade in goods, bilateral exchanges were worth €571bn last year, but the EU’s trade deficit is widening. It is therefore also in Europe’s interest to increase its exports towards China by gaining increased market access. This implies a clearer focus on the need to promote a “level playing field” approach to trade and investment. In this vein, the Comprehensive Agreement on Investment (CAI) signed in December 2020 looked like a step forward in the process of economic harmonization between the EU and China. It should be welcomed as a step to forge a framework aimed at narrowing the distance between the two parties in terms of technical standards and regulations. As a matter of fact, international tensions have led the ratification process of the CAI treaty to a standstill. An effort of self-restraint in international issues should be brought forward if we want meaningful developments in our relations to take place.
But there are also other ways for the EU and China to work together. For instance, on the common fight against climate change and global warming, the two actors could increasingly collaborate within a framework consisting of shared objectives as promising business opportunities in the new “green economy” will also arise. Italy’s G20 Presidency and the parallel COP26 represent two great opportunities to relaunch multilateral governance and coordination around such crucial issues. But it also takes true leadership and the willingness to bear global responsibilities to make sure that cooperation is effective and delivers concrete, measurable results. In other words, both the EU and China would need to lead by example on some key global challenges (not only the energy transition, but also the relaunch of the multilateral trade system based on reciprocity or cooperation on global health issues) so that other international actors would follow.
Clearly, this is not going to be an easy task. In a post-pandemic world where building back better will be possible only through genuine international cooperation, global powers will need to work together in order to provide for global commons, in particular in the area of health care so as to prevent future health crises: this means much more than simply producing more vaccines, as it is entails a complete rethinking of our welfare systems. Redesigning our social policies involves other policy areas such as the labour market, education and environment protection. Global health, energy and technology transition, access to schooling and training, women’s and youth’s empowerment: these are the main challenges that the world community will face in the coming years. We need a better global governance to make this work, in the interest of all of us.