Multilateralism

This paper briefly describes how international trade has been transformed in recent years and what has determined its increasing politicisation. It argues that the two main pillars of the global trading system—international trade regulation and the dispute settlement mechanism—are being put under strain due to various developments.

The whole system is being challenged by opposing tendencies: on the one hand, the multiplication of global risks and opportunities demands common action and multilateral rule-making; on the other, we are witnessing increasing fragmentation and regionalisation. The realistic objective that can now be set for the future development of world trade is the preservation of as much as possible of the present system and its improvement in specific areas.

The great Asian paradox is that a region steadily becoming more economically integrated is filled with distrust, competing nationalisms, and territorial disputes in the security realm. This is epitomized by Northeast Asia and the North Pacific: the region features the world’s three largest economies; three of the largest militaries; three of the five declared nuclear weapons states, and one de facto nuclear state. It is the locus of the greatest near-term threat to regional stability and order—the North Korea nuclear problem—and it is also increasingly the nexus of the global economy. Each North Korean missile launch and nuclear test highlights the risks of a very dangerous nuclear flashpoint.

This paper examines current trends, uncertainties and wild cards in relation to international trade and investment. It then considers implications for the European Union.
The European Union’s interest remains clear: a rules-based order is better than a transactional or winner-takes-all approach to international trade. But it is wise to plan for the worst, while hoping for the best.
The future of international trade and investment may lie somewhere between the extremes of the status quo and a reversion to protectionism. This would involve a thorough revision and rebalancing of multilateral norms, to take account of major global changes on many fronts. The EU has traditionally been a leading player in the creation of international institutions and norms. But the days when Europe could dictate the global agenda are over. Europe’s role will be increasingly a matter of seeking to influence events, rather than asserting dominance. In the coming decades, internal unity and a strong sense of purpose will be all the more important.