Less is better says Dani Rodrik!

Some recent reading on multilateralism and the need for global trade rules, the extent of its influence and what should the ideal world have:

Dani Rodrik in his latest paper titled "How to smooth US-China economic relations for the benefit of the global economy: A light model of global economic governance" where he as argued that global economic governance should be minimal and not over intrusive. In other words, less is better. Deep integration agreements, in terms of prescribing rules in every sphere both on substance and procedure would be undesirable in this model. Transparency and a "meta-regime" of agreement on certain core principles is what is suggested.

While transparency enhancing procedures are straightforward, the meta regime that he proposes are based on 4 principles:

1. Actions that are prohibited - Policies that are definitely harmful to the other and need to be prevented

2. Co-operative negotiations - import restrictions fall in this category

3. Independent and autonomous action - each State ha a free-will to calibrate its own policy like food safety and labour or perhaps intellectual property (?)

4. Multilateral governance - where there are clear incentives for global governance

What kind of measures fall into each of these categories can sometimes be a challenge but what this framework attempts to do is to give more credence to national/local priorities when it comes to global economic governance. It is premised on the understanding that the world is more multipolar now than it was a few decades ago. This understanding is reflected in the polarity principle here:

The current economic indicates such as GDP share, no single state will be able to completely dominate all other countries in the world economy. Therefore, no single power can write and enforce all the rules of a future order by itself. The structure of global power for the next several decades will be either bipolarity (with the United States and China as the two poles) or highly uneven multipolarity, with Japan, India, Germany or EU and possibly some other states occupying significantly weaker positions among the major powers. The character of a future global order will be heavily shaped by the relations between the United States and China, what other countries choose to do will also matter considerably.

We see a trend of a whole swathe of issues being discussed in bilateral trade agreements and FTAs. Of course they are limited to the treaty parties, but they do form templates for multilateralization at a later stage. Should multilateral economic governance be limited to transparency enhancing provisions and a core set of understandings on principles? What would it mean for future WTO negotiations? Does the WTO rule book have to be re-written?

Less overarching global rules, more autonomy for the States, more diversity, more ideological differences permitted and less harmonization - where the lines are to be drawn and how countries will agree on which category each of their actions fall into would be the challenge.