A final advantage of multilateralism, and perhaps the most important one, is that it engenders goodwill and respect from other nations. Related Content A second, and related, point, is that "globalization" was certainly occurring during the golden quarter century. There would be less resistance now to developing protection for multilateral regimes for capital flows than could happen at a later date should preferential treatment become more prevalent. If a PTA opens the way toward greater multilateral trade liberalization and is consistent with a multilateral system, it can improve the welfare of the countries involved in the arrangement, and will not involve significant "trade diversion" from the rest of the world. And the multilateral system has underpinned much of that success. 5 Advantages . Continue to support measured collaboration on shared challenges; Create or revitalize fora to provide for deconfliction and crisis off-ramps; and. An advantage of multilateral action is that different countries have different resources and areas of expertise. The Fund will be strengthened by changes that better reflect the current relative positions in the international economy: and countries that do not gain shares will nonetheless gain from the healthier international economy that will result from stronger, better-functioning multilateral institutions. The world is a far more affluent place than it was a half century ago. value of exports in the late l940s; that figure had fallen to 3 percent by the late l990s. The arguments for a level playing field in which all transactions with foreigners are subject to the same regime are straightforward, glaringly obvious, and hence very dull. A famous case was Polish golf carts; the full story is too long to recount, but the main effect of the American effort to impose a CVD on Polish imports was to induce entry of Spanish carts into the American market. That levels the playing field. More than one person has told me that his country has nothing to gain from the realignment of voice and representation in the Fund, indicating indifference, at best, to recent efforts. Efforts to impose trade sanctions against a country or group of countries are of course an extreme form of trade discrimination. One disadvantage of multilateral actions is that it can make taking any action more difficult or at least slow things down. For my purposes today, I shall focus on the three key organizations: the International Monetary Fund, charged with maintaining international financial stability; the World Bank, responsible for the provision of development capital; and the World Trade Organization (earlier the General Agreement on Tariffs and Trade) supervising the world's multilateral trading system. And, as I shall note later, efforts to discriminate by country of origin or destination also confront enormous practical problems that normally can be addressed, if at all, only with a highly complex, distortionary, and costly set of regulations. 1. In economic and environmental areas, a number of countries acting in concert can achieve greater results than each country acting alone. The United Nations: Challenges and Change, Javascript must be enabled for the correct page display. Others have already addressed the important question of the advantages and disadvantages of free trade in general. That same growth enabled even greater benefits to accrue to them when they liberalized their own trade regimes in the 1980s and 1990s, encouraged by the examples of East Asian success. One disadvantage of multilateral actions is that it can make taking any action more difficult or at least slow things down. Living standards, measured by indicators such as life expectancy, infant mortality, nutritional status, and literacy, have all improved. But, to many observers, Europe's stellar performance appeared (misleadingly) to be attributable to European integration. The United States was therefore in a position of bargaining with all MFN countries while being excluded from tariff reductions already undertaken among MFN members. It enabled them to enter markets more readily than they otherwise would have done, and to increase their exports when domestic incentives were appropriate. International Affairs In other words, participating states will be winners and losers in turn. The post-Cold War moment witnessed a tremendous flourishing in multilateral cooperation. I have already discussed the tendency for increasing proliferation of PTAs. For many nations and governments, this makes working multilaterally on issues of mutual concern more important. There are many advantages inherent to multilateralism that are not possible under a unilateral approach, such as the assurance of participation by all in the management of world affairs, and the legitimacy that it provides, particularly when it comes to matters regarding … I shall return to this issue later and argue that the absence of a multilateral, nondiscriminatory framework governing international capital flows (and exchange control mechanisms) is an important and potentially costly gap in the multilateral economic system. While the East Asian "tigers", whose policies included increasing integration with the international economy, were growing at spectacular rates, other developing countries benefited substantially from the rapid growth of the world economy, despite their failure to liberalize. The United States, the system’s imperfect cornerstone, scorns a growing number of multilateral institutions and norms each day. What are the advantages and disadvantages of multilateralism? And experience with reforms has been applied elsewhere, in part because the IFIs have enabled rapid transmission of lessons learned. It bears repeating that in 1931 a 3 minute phone call between London and New York had cost $293 in constant 1998 prices. A multilateral framework to avoid this possible outcome seemed clearly warranted. These were different from earlier current account crises, in part because the capital account was more open and thus permitted more sizeable outflows relative to trade flows. It is not often asserted that the existence of preferential arrangements is a reason for failure to support, or opposition to, further multilateral liberalization. In economic and environmental areas, a number of countries acting in concert can achieve greater results than each country acting alone. To their enormous credit, the founders of the post-war international economic system knew, and understood, the importance of multilateralism. Post was not sent - check your email addresses! Even in cases where "most countries" are supportive, even one open border (whether the authorities are openly permissive, simply turn a blind eye, or cannot enforce) has generally been sufficient to mitigate most of the potential impact of trade sanctions. An advantage of multilateral action is that different countries have different resources and areas of expertise. Moreover, one of the main objectives of the EU is to promote economical and social growth and this has been somewhat achieved thus far through the creation of a single market in 1993 as well as the single currency in 1999. On almost all issues, the cumulative impact of decisions that affect the strength and health of the institutions is usually underestimated, if it is recognized at all, and the "common good" is generally under-represented in global fora. The multilateral trading system is the lifeblood of our open, globalized, modern economy. My theme this evening is that the achievements of the multilateral economic system are increasingly underappreciated as it is ever more taken for granted, while the need for a well-functioning multilateral international economic system is greater than ever as globalization proceeds. The proliferation of PTAs and the continuing absence of a multilateral regime governing capital flows are both glaring and dangerous departures from multilateral principles. Acting multilaterally can mean compromising on both the timeline and goals of a proposed action. How has the 2003 invasion of Iraq fueled terrorism? The international economy has prospered over the past few years. Hence, the postwar international economic system and organization was assumed to be complete when, in addition to the GATT for multilateral trade relations and the World Bank for official capital flows, the IMF was charged with international financial and macroeconomic stability and rules governing current account transactions. Obviously, trade credits and perhaps some other short-term credits might enter international trade, but it was not thought that issues of discrimination would arise. Such a transformation is not in the interests of nations around the globe that seek to maintain democratic governance against the growing reach of authoritarian influence. On the face of it, there is wide support for the multilateral institutions and for the principle of multilateralism. I shall close by considering each of these in turn. Finally I'll examine some of the practical issues on which the common good seems to be underestimated relative to the particular concerns of individual countries or groups of countries. Only 4 countries in the world had full currency convertibility. Related Units. The Pros And Cons Of Multilateralism 1887 Words 8 Pages The European Union (EU) is an alliance of fifteen independent states based on the European Communities, initiated to enhance political, economic and social co-operation among European nations. Across the globe, multilateralism appears in crisis. suffered. All rights reserved. How did the end of the Cold War change international relations? When, in the l980s, industrial countries adopted anti-inflationary policies, the higher debt-servicing costs faced by developing countries, and other factors, led to the "debt crisis" of the l980s.