by Giles Merritt
It died at the hands of Donald Trump but was anyway in terminal decline.
The role of the Bretton Woods institutions – the IMF and World Bank – is increasingly disputed, NATO looks moribund and the WTO has long lost the power to resolve trade squabbles. Trump’s destruction of international trust has been spectacular, and threatens chaos and economic pain for all.
But it points to the need for an EU-led worldwide discussion on how to fill the vacuum. The US cannot be separated from this process but clearly couldn’t lead it, and nor could China.
t’s tempting to think Trump’s abandonment of longstanding external commitments is a flash in the pan. In fact, it reflects fundamental shifts in US thinking on its global role. And for America’s allies, it underscores the danger of relying on volatile and dysfunctional US politics to continually deliver friendly presidencies.
Europe is still reeling from the impact of Trump’s return, yet the EU is uniquely placed to organise a global re-think of the international architecture built around the Bretton Woods institutions and the UN. That doesn’t mean scrapping them, but adapting them to a fast-changing world in which the powerful G-7 countries are only a shrinking tenth of the global population.
The European Union has its weaknesses, but it has credibility as a deal broker capable of reconciling conflicting pressures. It can work with China and other rising powers in ways denied to a US that insists on ‘America First’.
What should an agenda for reforming the global rulebook look like? Clear proposals are needed from emerging super-powers who contest decision-making in the IMF and World Bank. China has 6 per cent of votes, while America’s 16.5 per cent gives it a veto over anything it opposes. A radical overhaul is long overdue, as is that of many UN agencies.
Rich countries along with the US dominate trade, development aid and climate-related policies, creating deep-seated resentment among rising super-powers like China, India, Brazil, Indonesia and a dozen other emerging giants. Representation and financial arrangements in the IMF, World Bank, UN agencies, the WTO and WHO – and even their headquarters – must be openly discussed so as to rebalance international decision-making and the conditions that confer economic advantage.
It’s hard to say how such a discussion might be initiated in today’s fevered atmosphere. China wants a ‘multi-polar world’ but lacks the cultural and political openness that leadership demands. Russia’s membership in the BRICS excludes this growing bloc from playing a significant part. That leaves the EU with the most credibility.
Fitting the US into a debate on a new rulebook won’t be easy because of its dominant geo-political role. Trump is, however, withdrawing from external ties that he believes take advantage of America. He seems intent on devaluing the ‘almighty dollar’ to boost export competitiveness, while ignoring the huge risks involved.
Although US debt has soared to $36tn it has been largely painless because it is compensated by foreign purchases of treasury bonds. A weaker dollar would slash investors’ profits and open the way for the euro to compete more effectively as a favoured international reserve currency.
Trump’s focus is on restoring US manufacturing strengths, but America’s power lies more in its multinational corporations – especially the digital and internet giants. Regulating these in the AI era is a burning question that offers leverage for America’s competitors. US dominance of financial markets and monetary policies is also at risk if investors become spooked by Trump’s excesses.
So how could a global debate be kick-started? It’s unlikely that governments in Europe or elsewhere will want to initiate anything official, yet might welcome progress towards a revised and strengthened international rule of law. Think tanks, NGOs and governmental policy advisers could begin an informal global discussion as a first step. Once the parameters of debate are clearer a more structured approach would eventually follow.
Right now, with the Ukraine and Israel-Palestinian conflicts so far from resolved, the outlook for a new rules-based international framework seems dim. But Donald Trump has inadvertently opened a Pandora’s Box that US policymakers have wanted to keep shut. Re-shaping the global rulebook demands concessions by richer nations, and is inevitable at some point. Thanks to Trump, it will happen sooner rather than later.
*Founder of Friends of Europe
**first published in friendsofeurope.org
By: N. Peter Kramer
