Breaking Global Deadlocks MEETING REPORT The Future of International Governance Architecture Mexico City Meeting Report #3 The Project March 10-11, 2008 The Centre for International Governance This is one of a series of meeting reports from the Breaking Global Innovation (CIGI), in partnership with the Deadlocks project. These meetings attempt to refine the concept of how Centre for Global Studies at the University leaders play an instrumental role in addressing pressing global issues. of Victoria (CFGS) and with the support Past meetings have included prominent individuals, including former of several other organizations, has since leaders, summit sherpas, and deputy ministers from most of the coun- 2003 led an extended multinational effort tries that have been identified as potential members of a new leaders’ to explore the practical prospects for forum (the G8 countries plus key emerging and regional powers). significant reforms to the institutions This meeting held in Mexico City explored international finance, gov- through which governments decide key ernance mechanisms to address climate change, and the reform of international issues. existing international institutions. The discussion also included debate about the expansion of the G8 to include key emerging powers and the Since its inception, the project has undergone role of a “world steering committee” made up of regional powers and several phases. During the initial phase, the powerful economies. concept of a leader's level G20 summit, or L20, was explored (www.L20.org). This top-level, intergovernmental forum would Global Economic Issues facilitate a commitment to breaking global deadlocks on issues that cannot be resolved This session addressed 21st century challenges to governance through other mechanisms. Pressing global architecture for international finance. There appears to be a crisis issues were examined in depth to test the – the West thinks its values and formulae are universal, whereas hypothesis that a more inclusive and well- many do not accept them. There was a bad start to the 21st prepared summit process would yield century – cooperation and multilateralism were the goals, but significant progress. confrontation and unilateralism prevailed. The global institutions are sixty years old and are outdated. In the finance area, they The project seeks to build upon the L20 include the International Monetary Fund (IMF), the World project outcomes by exploring in greater Bank, the Bank of International Settlements (BIS), the Financial depth the importance of leadership in for- Stability Forum, the Organisation for Economic Co-operation mulating policy and catalyzing solutions and Development (OECD)’s Working Party 3, and the Regional to pressing global problems. Development Banks. Available for download at: www.cigionline.org/publications BREAKING GLOBAL DEADLOCKS In 30 years China, India, Brazil, Indonesia, and Korea (if One view was that there must be a Leaders’ “Steering unified) will be among the world’s 10 most influential Committee” and that it should not be based on variable countries. Pakistan, Bangladesh, and Nigeria will each have geometry.1 The question is not whether, but what kind. a population greater than 200 million. The world will be Powers from each region must be included, because the more complex and there will be new demands to address lack of representativeness will decrease legitimacy, and emerging issues. More structures and more international hence effectiveness. The discussion turned to the practical arrangements will be needed. It would be beneficial if a questions of the emerging new financial mechanisms for 16-20 country steering committee would work together, climate change. Climate change should drive developmental but only if the members themselves were to be bound by policies, since without a hospitable climate, development its decisions and rules. The reality is that the decisions of investments will be in vain. Unprecedented amounts of such a steering group will affect other countries. money are being committed to addressing climate change, much of it about to be entrusted to the World Bank and The IMF is being marginalized. Discussion of governance RDBs. The OECD’s Paris Declaration on Aid Effectiveness reform must go beyond votes, shares and executive board – calling for recipient partner countries to exercise genuine seats. The important factors are institutional memory and ownership over the process – seems to have had little the weight and influence of good people. Participants were influence. The Bali conference’s decision on the governance reminded that John Maynard Keynes wanted to abolish structure of the Climate Change Adaptation Fund has had the BIS, preferring a legal rather than an informal body. no impact. The World Bank will produce another top down Accounting standards, codes, and debt restructuring mechanism where outreach will be for information, not approaches are all informal and non-enforceable. There consultation. There ought to be concern because one cannot was a failure of regulatory agencies to monitor and afford business as usual practices which have plagued supervise; they ignored off balance-sheet activity. Leaders Official Development Assistance (ODA); these approaches could push standards bodies to be more inclusive. have generally led to failure. Instead, multi-faceted approaches should be devised rather than a single delivery Moments of crisis can lead to institutional innovation. The mechanism. Redundancies should also be built in to one-size-fits-all prescription tendered to Asian countries ensure local buy-in, local engagement and local decision- emerging from financial crises cannot be applied to the making. An analogue to the G8 Okinawa Task Force in United States. The world is facing a decentralizing trend, ICT is needed to devise optional financial mechanisms moving to a multi-currency order. This leads to the pre- and governance structures. scription that leaders should push the IMF to accept decentralization and become a central node of networks, It was conceded that starting anew rather than trying to rather than an institution. The IMF should accept regional reform the World Bank is necessary. A new paradigm and arrangements and look to the Regional Development new governance mechanisms needs to be found. Questions Banks as models. were raised concerning potential revenues flows from carbon trading schemes. Who will regulate the system? What new mechanisms can be developed based on a more generalized system of property rights for forests? Future financial flows will be the key element of any deal. The opinions expressed in this paper are those of the author and do not necessarily reflect the views of The Centre for International Today, China and India will not join the G8 since they do Governance Innovation or its Board of Directors and/or Board not want to compromise their G77 membership. If the G8 of Governors. does not accept expansion, a parallel institution such as the G20 could be established. Further, the G8’s arrogance Copyright © 2008 The Centre for Global Studies, University of Victoria, British Columbia (www.globalcentres.org), and The Centre for International Governance Innovation, Waterloo, Ontario, Canada. (www.cigionline.org). This work is licensed under a Creative 1 Commons Attribution-Non-commercial – No Derivatives License. There was contention on this point – with some arguing that the composition of To view this license, visit (www.creativecommons. org/licenses/ such a group should vary to ensure the presence of the most appropriate countries, which varies depending on the problem at issue. The rejoinder was that personal by-nc-nd/2.5/). For re-use or distribution, please include this relations and institutional memory trump the argument. A consistent group will copyright notice. build empathy and understanding. 2 | Mexico City The Future of International Governance Architecture and obtuseness has created the possibility of a rival bloc Development, Political, and – the G5. At the Leaders level, there are several ways to get to a Leaders’ “Steering Committee.” Perhaps the Five Security Issues (and Indonesia) should convene their own summit meet- ing in 2009 and invite the G8 (having first secured the Climate Change acceptance of the next US president). The history of the United Nations Framework Convention on Climate Change(UNFCCC), the Kyoto Protocol, and Discussion continued on composition. The G5 – the lessons from the Montreal Protocol were reviewed. These Gleneagles 5 – was created with little reflection. Indonesia lessons included the importance of scientific assessments should probably be added. But ultimately the subjects to simplifying issues for decision makers; development of be discussed, climate change or deterioration in the global safe alternatives; availability of funding to assist develop- economy, are more important than composition. Several ing countries; collaboration among industry, academics, participants advised not to build the case for a Leaders’ NGOs and government institutions; and monitoring and Steering Group based on legitimacy criteria; instead, the follow up. The Montreal Protocol evolved over a period of focus should be on effectiveness. The question should be years from a weak agreement with few countries to a robust who are the key players needed to solve the problem, and effective agreement, with manageable mechanisms emphasizing that this was a pre-negotiation steering group and with global adherence. that would send