Leading figures from the development and financial communities have slammed a lack of joined-up thinking on world affairs and called for a fresh approach to multilateralism, which they warned was in unprecedented danger.
Werner Hoyer, president of the European Investment Bank, the EU’s not-for-profit development lender, warned that multilateralism was “more under threat” than ever before. “I would never say I’m a fundamentalist, but on this issue I am, as we are cutting our own legs out from underneath us if we don’t combat” a drift toward isolationism and protectionism, he told GlobalMarkets.
The key figure in the push for less global co-ordination on issues ranging from infrastructure to tackling climate change is of course Donald Trump, and Hoyer alluded to the impact of the most isolationist US president for 85 years.
“The reasons why multilateralism is under threat is more and more [obvious]. And while we must give credit to those who criticise it, each multilateral institution is working well, and we need to work together to ensure we do not return to a unilateral or bilateral world, which would be a lose-lose for everyone.”
He added that better communication between development institutions, governments, the private sector and the wider public was paramount, noting:
“We must tell our story better — there is no doubt about that”.
SHIFTING POWER DYNAMICS
It was a message echoed by Diwa Guinigundo, deputy governor of the Philippines' central bank, who noted that while multilateralism was still “at the heart” of the international trading system, international financial institutions had not always been good at extolling that message. “They have to be more forthright in raising the issue that multilateralism continues to make sense in maximising the benefits of trade. It is something that [governments] can help them with.”
Raghuram Rajan, a former governor of the Reserve Bank of India and now professor at Chicago Booth University, said multilateralism had suffered a setback and needed to be rethought, to adapt to shifting global power dynamics. “Of course, the European Union will be part of that discussion, China will be too and eventually India will be a part of the discussion, alongside the US,” he said.
“But my sense is that we are reaching a point where the US will say it is no longer responsible for the system. In that environment others have to step up — not to tilt the power gap but to create a [new] system that acknowledges the reality of a multi-polar world.”
However, Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, warned that the global system was “not ready for a new multilateralism system. The discussions now are more about patting the burnt area, but nobody is ready to rethink it. Europe is not ready to align to China, and China has never agreed on the type of multilateralism they would like to pursue. A new multilateralism will only happen after a massive problem forces countries to get out of their own comfort zones.”