#101 The G|O Briefing, June 16, 2022

This is an onsite, slightly edited republication of the complete G|O Briefing newsletter

Philippe is off this week. Between the WTO Ministerial Conference (MC12) and the 50^th session of the Human Rights Council (HRC), both coming hot on the heels of the International Labour Organization’s annual conference (ILC), this is a busy week for International Geneva.

Today in The Geneva Observer, we focus on a disquieting trend that sees international organizations turning increasingly inward and defensive, often restricting access to NGOs, civil society, and the press. We report specifically on the World Trade Organization (WTO) but the same is happening elsewhere in town—a worrisome development. “Democracy dies in darkness,” reads the official slogan of the Washington Post. At The G|O, we believe that also applies to multilateralism.

Multilateralism is impossible without China, argues Paola Subacchi, Professor of International Economics at The University of London’s Queen Mary Global Policy Institute. “How can the global institutional architecture survive if countries limit open engagement only to those who view the world the same way they do? If the West excludes a power like China from its multilateral arrangements, what can China do other than spearhead alternatives?” she wonders, in an op-ed that certainly flies against the current narrative but raises very fundamental questions.

As the map of the month from the Konrad Adenauer Foundation–Multilateral Dialogue Geneva so clearly illustrates, with its focus on the latest joint statement on China at the Human Rights Council, Western values are being defended. However, that defense is not synonymous with wanting to exclude China from the system.

It’s all below. As usual, thank you for reading us.

- JC

MC12 RESTRICTIONS EXACERBATE A LACK OF TRANSPARENCY AT THE WTO

By Jamil Chade

Thursday, June 9, 6:03pm: An email from the secretariat of the WTO exploded into the inboxes of NGOs planning to attend the 12^th Ministerial Conference (MC12), expected to begin three days later. In it, civil society was informed that, for “unexpected security related reasons”, they would not be permitted at the opening day of the meeting. That was a first.

These “reasons” were never shared, much less explained. During one of the first press conferences of the week, The G|O asked the WTO what these “unexpected security reasons” were, only to receive an answer relating to the limited “capacity” of the venue to receive all those who had been accredited—accredited by the WTO itself, of course.

The email ignited a strong reaction from civil society. According to them, “repressive tactics” had been used and, more generally, the lack of access had “never been seen” since the 90s.

In fact, the email was considered by many to be a reflection of a wider issue: the de-democratization of the organization, its lack of transparency towards smaller economies, and its tendency to distance itself from civil society groups. This, precisely at a moment when trust is in deficit, and when the institution needs to position itself as a stronghold of multilateralism and openness.

The very first speech by Ngozi Okonjo-Iweala, the seventh Director-General of the WTO, at the ministerial did not help either. While acknowledging that the institution was dealing with issues of trust dating back to the breakdown of the Doha Round, she pointed out that the negative media coverage of those failures had contaminated the place.

But she did not stop there. “Permit me to be blunt and say that Geneva has internalized many of these negative messages. The negativism is compounded by the negative advocacy of some think tanks and civil society groups here in Geneva and elsewhere who believe the WTO is not working for people,” she said. “This is of course not true, although we have not been able to clearly demonstrate it, but it worsens the trust deficit that I have noticed in these past 15 months,” Ngozi claimed.

Her thin skin was also demonstrated on Sunday when, questioned by a journalist during a press conference, she adopted an ironic tone to question his coverage. In fact, having covered many of the trade ministerials since 2003, this one is certainly one of the most restricted for journalists; the media is placed in a separate building and with no access to information on which ministers attended the meeting or whether they actually came to Geneva.

The deficit of transparency was not only an issue for civil society and the press. Contrary to promises made during her campaign, Ngozi intensified the use of small group meetings—called ‘Green Room’ meetings—in order to negotiate the texts. If this has been a tradition at the WTO for decades, experienced negotiators agree it was overused during the week.

For many, such a model of negotiations deepened the lack of transparency and trust, perpetuating the broader crisis in multilateralism. While some were always invited to the room—such as the US, EU, China, Brazil or India—dozens were permanently kept out.

Diplomats claim such an approach also favors the “inequality of power” amongst members, especially during the negotiations on vaccine patents. While over 100 countries were pushing for a waiver and the possibility to produce generic versions of the immunizations, the Green Room format brought in only 8 countries: four of them favoring the solution proposed by developing countries, and four blocking any attempt to create more flexible rules on intellectual property.

Bolivia, the only country that attempted to use the flexibilities of the TRIPS agreement on vaccines, was never invited into the room. Even India was at one point kept out of the room, while negotiations on fishery were held.

Questioned by NGOs in a rare meeting with civil society, Ngozi explained that the format of small groups allowed governments to feel comfortable in revealing their positions on different aspects. But, at least for democracies around the world, the question to many activists was simple: why would it be a problem to state where you are in issues of public interest?

Another surprise was the decision by the WTO to keep the same rules adopted in Geneva, when COVID-19 was at its height: It had imposed a so-called ‘floating badges’ system to restrict the number of attendees per organization due to local COVID restrictions. Despite those restrictions now being removed, the WTO decided to uphold the cap on numbers. This model was strongly questioned by those entities attempting to lobby or influence the process: in practice, each group received only one accreditation, which had to be shared by all members of the institution.

For Olisias Gulthom, from the civil society organization Indonesia for Global Justice, there is a shrinking policy space for certain groups at the WTO. Richard Hill, from Association for Proper Internet Governance (based in Switzerland), stated that the restrictions are “particularly surprising” for a meeting held in Switzerland, which has a long and robust tradition of consulting and listening to all concerned parties. According to them, Geneva has hosted the WTO Ministerial Conference multiple times before but has never before imposed such restricted access to the premises.

When delegates leave Geneva, many questions on the future of world exports will still be on the table. But one of them will echo beyond the trade world: what kind of multilateralism is emerging from closed-door meetings, with such a lack of transparency and such limited access for civil society?

- JC

HOW TO ENGAGE WITH CHINA

By Paola Subacchi*

The world order is at risk of a lasting split, with the United States and its allies on one side, and China and its partners on the other. As US Treasury Secretary Janet Yellen noted at an Atlantic Council event last month, this outcome is far from desirable, and the US must work with China to prevent it. But, practically in her next breath, Yellen advocated actions that could thwart such an effort.

In Yellen’s view, the US should be deepening ties with countries that have “strong adherence to a set of norms and values about how to operate in the global economy and about how to run the global economic system.” In her view, picking partners that are “committed to a set of core values and principles” is the key to effective cooperation on important issues.

But where does that leave countries with different values and principles? How can the global institutional architecture survive if countries limit open engagement only to those who view the world the same way they do? If the West excludes a power like China from its multilateral arrangements, what can China do other than spearhead alternatives?

A better approach to China would be based on three key considerations. The first is that multilateralism is impossible without China. Not only is China the world’s second-largest economy; it also has one of the world’s largest financial systems, with assets amounting to nearly 470% of its GDP. China’s gross national savings—equivalent to about 45% of GDP—are similarly massive.

Moreover, China is the world’s largest bilateral lender, and it contributes substantially to multilateral financial institutions—and not only those built and led by the West. In fact—and this is the second consideration—China has assumed an important role in the international financial architecture, as both a member and builder of institutions.

In recent years, China has pioneered the creation of two new regional multilateral development banks. Both the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) are designed to complement the international financial architecture, proving that China can lead institutions, act as a major provider of development finance, and be a “responsible stakeholder” in a system created by the US and its allies.

But, in a sense, that system is failing China. At the International Monetary Fund, China’s voting share is 6.1%, slightly lower than Japan’s 6.2% and well below the 16.5% US share. Their shares at the World Bank are 5.4%, 7.28%, and 15.5%, respectively. Though this is clearly out of line with China’s economic weight, the pace of reform has been slow, not least because of American obstruction—a point Yellen brushed aside when discussing the need to modernize the IMF and the World Bank.

This gives China’s leaders good reasons to consider other options, including decoupling the institutions it leads from the existing multilateral system and creating new ones. The result would be a fragmentation of the global financial safety net, which would become less responsive, predictable, and inclusive, inevitably leaving some countries exposed to systemic risks.

The third consideration that must shape the West’s approach to China is the thorniest: China’s economic and political systems—and thus China’s objectives and incentives—differ sharply from those of the G7 countries. This is a major source of tensions between the West and China, and a key reason why officials like Yellen advocate the easier engagement that is possible with “likeminded” countries.

To be sure, navigating conflicting perspectives, ideologies, and interests is challenging. This has been apparent during Russia’s war against Ukraine, which China has refused to join the G7 in condemning. But, as frustrating as China’s reticence is, confronting the country’s leaders will not help matters. Nor will excluding China from multilateral arrangements.

Instead, the G7 countries should focus on identifying areas of common interest where the risk of misunderstanding and disagreement is low, and seize whatever opportunities for cooperation there may be. Climate change—and, in particular, climate finance—is an obvious example, but it is hardly the only one. While Western media have often presented China’s leaders as intransigent or even deceitful, China has continued to engage constructively with the West on a variety of economic and financial issues.

One example is debt management. Late last month, China joined Zambia’s creditor committee and committed to the G20’s Common Framework debt-restructuring process. It is a good sign not only for Zambia—whose debt burden currently amounts to nearly $32 billion, or around 120% of GDP—but also for other heavily indebted African countries.

Even with regard to Russia’s war in Ukraine, there is some convergence between Western and Chinese positions, albeit for very different reasons. In early March, the AIIB, citing the financial risks, froze all business with Russia and Belarus, and the NDB announced that it had “put new transactions in Russia on hold.”

This shows that appealing to shared values is far from the only way to convince countries to advance shared goals; practical considerations are also very powerful. In dealing with China, the West should attempt to build international dialogue and policy cooperation on a foundation of concrete common interests.

Contrary to the prevailing narrative in the West, cooperation with China has been the norm for decades. But if G7 leaders decide to make “core values” the basis of international cooperation, this could well change. A global economy in which China and the G7 follow separate, non-converging paths will leave both sides worse off.

*Paola Subacchi, Professor of International Economics at the University of London’s Queen Mary Global Policy Institute, is the author of the recent report, China and the Global Financial Architecture: Keeping Two Tracks on One Path.
© Project Syndicate

Today's Briefing: Jamil Chade

Guest Contributor: Paola Subacchi

Editorial Assistance: Ciara O'Donoghue

Edited by: Dan Wheeler