Copenhagen: Convergence of National Interests; Dynamics of 21st Century Power Structures; Carbon Trade War?
DK Matai
We are grateful to:
. Hervé de Carmoy, Vice-Chairman of the Trilateral Commission Europe
and Chairman of ETAM, Paris, for "Convergence of National Interests";
. Dr Harald Malmgren, Chief Executive, Malmgren Global, Washington DC,
who has worked for Four US Presidents, for "Dynamics of 21st Century
Power Structures"; and
. Prof Jim Rollo, Professor of European Economic Integration,
University of Sussex, and Editor of the Journal of Common Market
Studies (JCMS), for "Carbon Trade War?";
in response to:
. Bill Emmott, Distinguished ATCA Contributor and Independent Writer,
"Is the Copenhagen Analysis Right?"; and
. The ATCA Briefing, "Copenhagen Accord Heralds Geo-Political Power
Shift".
Dear DK and Friends
Re: Convergence of National Interests
Bill Emmott is raising an important issue: he feels that Copenhagen
does not mark a dramatic shift in terms of geopolitical strategic
balance in the world. I maintain that the geopolitical power
transformation has now become much more pronounced and visible, as
highlighted accurately by the ATCA Briefing on Copenhagen. This is a
major asset in the way power can and will be exercised in the future.
We all know that over the last ten years, the global balance of
economic power has been shifting in favour of the Asiatic giants:
China and India. The reasons are well recognised: Chinese and Indian
rates of industrial growth; an accumulation of savings; as well as a
fantastic jump in education and research.
During the same period the US has maintained its share of the world
GDP and the Americans have woven an intensive network of strategic
contacts with China and India at all levels of government and business
albeit for different reasons. In the case of china, they have created
sixty sub-commissions between the Chinese and the US government.
Nothing new, one could say! However, the world has changed
dramatically in regard to a specific dimension and that is the growing
convergence, for the time being, of national interests between China
and the US and India. That convergence leads to common actions in
world affairs such as finance, currency management and climate
change. Not only does this represent a significant shift in power
towards the Asian giants but this is to the detriment, partly of
Europe and partly the international institutions such as the United
Nations (UN) and the International Monetary Fund (IMF). Why? Because,
together, the Asian giants and the US can get action, while the other
parties seem to be quite ineffective.
What Copenhagen did is to reveal that fundamental shift in the global
balance of power in the clear light of day whilst the whole world
public was watching and forming opinion, thus further increasing the
distance between Europe’s ability to get action to take place on its
terms and the power of the United States and Asian giants acting in
concert.
Amitié
Hervé
Hervé de Carmoy is Vice-Chairman of the Trilateral Commission Europe,
and Chairman of ETAM, Paris. Previously he was chairman of Almatis
(formerly Alcoa Specialty Chemicals), a majority-owned company of
Rhône Group LLC in Frankfurt-am-Main. Until 2004, he was a partner of
the Rhône Group LLC in New York and Paris since 1998. Prior to this
position, he was chairman of the Banque Industrielle Mobilière et
Privée (BIMP) and advisor to the chairman of HR Finances in Paris.
Educated at l'Institut d'Études Politiques in Paris and at Cornell
University in the United States, he began his career at Chase
Manhattan Bank in 1963. After joining Midland Bank in 1978, Mr de
Carmoy became director and chief executive international, London and
Paris, and chairman of Thomas Cook, a position he held until 1988. He
was thereupon chief executive of Société Générale de Belgique in
Brussels until February 1991. Mr de Carmoy was also a Trilateral
Commission task force author on Restoring Growth in the Debt-Laden
Third World (1987, with Martin Feldstein and Koei Narusawa). He was
elected European deputy chairman of the Trilateral Commission in 2004
and served as chairman of the French Group of the Commission. His most
recent publication is L'Euramérique (2007).
[BREAK]
Dear DK and Friends
Re: Dynamics of 21st Century Power Structures
The ATCA Briefing on Copenhagen focused our attention on what the
negotiating process portends for the future of multilateral
cooperation: “…the overarching significance of Copenhagen lies in the
manner in which it exemplifies how the geo-strategic contours of the
21st century have begun shifting.”
For many decades, the primary model for multilateral negotiation had
been close diplomatic interaction between the US and Europe in pursuit
of consensus, followed by joint efforts to draw the rest of the world
into a process of collegial decision making. Transatlantic
cooperation was the foundation of the Bretton Woods framework of
institutions and rules for managing liberalization of trade and
financial flows. This framework successfully brought about
globalisation of the world economy, enabling a vast array of nations
to rise up from dire predicament and to participate in rapid
development of economic, technological, social, and even political
advances.
What Copenhagen revealed to us is that globalisation had also
realigned the power structure which underlies international
cooperation, rivalries, and conflict. At Copenhagen, the US-EU basis
for establishing international consensus failed, and was replaced by
newly improvised collaborative efforts of a handful of countries led
by China and India, and joined by the US. Most governments, including
that of the US, found that they could not accept the EU’s proposed
heavy reliance on regulatory mechanisms and targets.
Copenhagen was about the economic dynamics of the next several
decades: the costs to be borne, and by whom. From that perspective,
the European influence was perceived as that of relatively prosperous,
well-intentioned intellectuals who believed they held the right
answers for the rest of humankind. Politicians from other capitals,
primarily concerned with domestic economic and social consequences of
potential decarbonisation, emission cuts, and technology transfers,
did not assign credence to what was perceived as a self-serving
European agenda.
But even beyond that reluctance, most governments were not ready to
accept the huge costs and limitations of economic growth that would be
imposed on their industries and their peoples. A degree of
international political cooperation was called for on a scale that has
been proven again and again to be unachievable. The majority of
governments, and especially their politicians and legislatures, still
cannot find significant domestic support for yielding sovereignty over
jobs and resources to “foreign” authorities.
Nonetheless, China’s leaders recognized that primary blame for failure
of Copenhagen would have been laid at their doorstep unless they
offered something positive. In the past, China might have remained in
the background while another nation or group of nations was willing to
step up to block international consensus. For example, when the Doha
Round of international trade negotiations broke down last year, it was
the Indian representative who effectively stood in the way of further
progress, with a reluctant China well hidden in the background.
In Copenhagen, for the first time China firmly asserted a multilateral
leadership role. Chinese diplomats gathered together the handful of
other big, core economies that dwarf the rest of the emerging
markets: Brazil, South Africa and India. Together with China, these
countries were dubbed the BASIC coalition. President Obama evidently
wanted to bring home to the US some achievement that could have
political impact in Washington. With China clearly the leader, these
countries offered to President Obama the only concrete proposal that
he could show for his trip. There was little to negotiate. Accept
the Chinese proposal – or not. The BASIC accord did not expose him to
a wave of domestic political criticism. This US-BASIC accord was an
agreement on the political intentions of leaders, without challenging
the Constitutional authority of the US Congress to implement or reject
what a President might agree.
It should be kept in mind that the Kyoto Accord taught President
Clinton, and the rest of the world as well, that no US President has
the power to negotiate and approve an agreement that would have the
effect of changing US laws and circumscribing the authority of
Congress. When Vice President Gore flew to Kyoto to consummate an
environmental agreement the initial news throughout the world was that
an historic breakthrough in global cooperation had been achieved.
Instead, the Congress reacted by advising President Clinton that he
should not seek Senate approval.
At the time of Congressional inaction on the Kyoto Accord, much blame
was assigned to the reluctance of countries like China and India to
participate. Congressional politicians argued that the US could not
limit its own economy when other major world polluters were free to
continue without restraint. Frankly, this was a convenient excuse for
Congressional reluctance to act, but it was not the only reason for
inaction. This rejection was not simply a matter of Republican
reluctance. The “Blue” Democratic states of the US industrial
heartland and Democrats in the states mining coal and producing oil
and gas could not accept that accord. An open vote would have become
a huge political embarrassment to President Clinton as well as to Vice
President Gore. In subsequent years, President George W Bush received
the same advice from Senate leaders, so he simply avoided addressing
the Kyoto accord in the same way as President Clinton had done, by
ignoring it.
Now that China and India seem to be party to some political commitment
to limit environmental contamination, President Obama will likely use
this apparent breakthrough to help gather support for the Waxman-
Markey “cap and trade” carbon bill pending before Congress. It is
doubtful that the Chinese and Indian recognition of their
responsibilities will dramatically change the outlook for the
President’s carbon initiative. He would still face objections, not
only from Republicans, but from members of his own party which
represent industrial, mining, and oil and gas sectors. In the midst
of continuing high unemployment and in anticipation of rising taxes
and costs underlying the President’s health care reforms, Congress
will likely prove extremely reluctant in 2010 to impose dramatic new
costs on the American economy. Based upon present polls indicating
substantial losses of Democratic Congressional seats in next year’s
elections, Democrats determined to keep their own seats are unlikely
to go against popular resistance to new restrictions and costs of
energy use.
While these immediate questions linger, the ATCA Briefing on
Copenhagen raises more fundamental questions about the power structure
of the world in the 21st century. Even before Copenhagen it was
becoming evident that the Transatlantic power structure of preceding
decades had fading influence, and that newly emerging powers were
being asserted by a growing array of participants in the functioning
of the world economy. In the struggle for broader acceptance of their
initiatives, both the Europeans and the US increasingly engaged in a
competition of rivalry for influence with other nations around the
world. The functioning and voting structure of the IMF came into
question. New regional arrangements for economic and political
cooperation began to proliferate, sometimes taking the form of Free
Trade Arrangements (FTAs) and sometimes less legally binding but
enhanced cooperation. The structure of the UN Security Council and
other UN bodies also came into question.
The Doha Round which had been under way for almost a decade under the
framework of the WTO has now reached the point that a US-EU accord,
even if it could be reached, would have only minor influence. The
primary trade interests of both the EU and the US are now focused on
the emerging markets, and particularly on China, India and the Asian
tigers, and it is their objectives that must be reconciled with those
of the advanced industrial world in order for a new international
agreement to be achieved. There is little possibility of a
breakthrough on that basis for at least the next couple of years.
The enlargement of the G-8 to a new G-20 framework gives the
appearance of comprehensiveness, but the underlying reality is that
this group is far too large to facilitate formulation of new
initiatives. What will happen is that ad hoc collaboration of
individual governments will take place within the G-20, and that these
dynamic couplings will vary according to the issues being addressed,
and the relative power of participants to affect the outcome.
International financial reform will be of primary interest to some,
but not all of the members; food supplies will take primacy for some
but not others; relative emphasis on economic growth versus
distribution of the gains from growth will vary; environmental issues
will continue to “be of interest” but without enthusiastic pursuit of
solutions by all members; geopolitical disruptions will from time to
time interrupt and divert attention.
Separately, the Financial Stability Board (FSB) will grind out an
array of important proposed reforms of the functioning of
international financial markets, and national governments will
intervene to impede or delay their implementation. Already, the EU
and Eurozone governments, led by Germany, have been applying the
brakes to reforms that would have painful consequences for European
banks and insurers. The US and the Europeans can sometimes find
common ground, but for the most part they are on different
trajectories which reflect the national interests of the participants
and the relative pace of adjustments to the Great Recession of the
last couple of years.
At the heart of Copenhagen was President Obama’s apparent acceptance
of the importance of the emerging “G-2” relationship of the US and
China. From China’s point of view, the G-2 is a collaboration between
the receding, but still relevant dominance of the US in world affairs,
and the emerging power of China on the world stage. Given President
Obama’s evident emphasis on the primacy of China in his recent trip to
Asia, it seems natural that these two rivals would also find an array
of common interests.
Recognizing that the G-2 is a new reality, it may also be questioned
whether China is really ready for such a potent role in world
affairs. The Chinese economy has suffered grievously from the deepest
downturn in world trade since the 1930s. The Chinese leadership has
levitated its economy with a combination of fiscal and lending
stimulants that reach half of China’s GDP. This artificially
levitated economy is unstable, and will require continuous and
obsessive attention to avert collapsing bubbles, growing unemployment,
and massive problems of industrial stockpiling and growing
overcapacity of industries for which there is inadequate world
demand. China’s present leaders, and those to take over in 2012, will
have their hands full in just the task of keeping the Chinese economy
functioning without disruption. There can be doubt whether this China
is yet ready to take on a role of global leadership.
In the meantime, the ATCA Briefing on Copenhagen correctly notes that
the world’s geopolitical power structure will remain in flux, with the
power structures of the past less and less able to provide a road map
for the future. This poses new challenges to collegial decision-
making in a world of ever closer interaction among nations and peoples
of those nations, with continuously evolving changes in the dynamics
of world power projection.
Best regards
Hal
Dr Harald Malmgren is Chief Executive of Malmgren Global and also
currently the Chairman of the Cordell Hull Institute in Washington,
DC, a private, not-for-profit "think tank" which he co-founded with
Lawrence Eagleburger, former US Secretary of State. He is an
internationally recognised expert on world trade and investment flows
who has worked for four US Presidents. His extensive personal global
network among governments, central banks, financial institutions, and
corporations provides a highly informed basis for his assessments of
global markets. At Yale University, he was a Scholar of the House and
Research Assistant to Nobel Laureate Thomas Schelling, graduating BA
summa cum laude in 1957. At Oxford University, he studied under Nobel
Laureate Sir John Hicks, and wrote several widely referenced scholarly
articles while earning a DPhil in Economics in 1961. His theoretical
works on information theory and business organization have continued
to be cited by academics over the last 50 years. After Oxford, he
began his academic career in the Galen Stone Chair in Mathematical
Economics at Cornell University.
Dr Malmgren commenced his career in government service under President
John F Kennedy, working with the Pentagon in revamping the Defense
Department's military and procurement strategies. When President
Lyndon B Johnson took office, Dr Malmgren was asked to join the newly
organised office of the US Trade Representative in the President's
staff, where he had broad negotiating responsibility as the first
Assistant US Trade Representative. He left government service in 1969,
to direct research at the Overseas Development Council, and to act as
trade adviser to the US Senate Finance Committee. At that time, he
authored International Economic Peacekeeping, which many trade experts
believe provided the blueprint for global trade liberalisation in the
Tokyo Round of the 1970s and the Uruguay Round of the 1980s. In
1971-72 he also served as principal adviser to the OECD Wise Men's
Group on opening world markets, under the chairmanship of Jean Rey,
and he served as a senior adviser to President Richard M Nixon on
foreign economic policies. President Nixon then appointed him to be
the principal Deputy US Trade Representative, with the rank of
Ambassador. In this role he served Presidents Nixon and Ford as the
American government's chief trade negotiator in dealing with all
nations. While in USTR, he became known in Congress as the father of
"fast track" trade negotiating authority, which he first introduced
into the historically innovative Trade Act of 1974. He was the first
official of any government to call for global negotiations on
liberalisation of financial services, and he was the first US official
to call for the establishment of an Asian-Pacific Economic Cooperation
arrangement, known in more recent years as APEC. In 1975 Dr Malmgren
left government service, and was appointed Woodrow Wilson Fellow at
the Smithsonian Institution. From the late 1970s he managed an
international consulting business, providing advice to many
corporations, banks, investment banks, and asset management
institutions, as well as to Finance Ministers and Prime Ministers of
many governments on financial markets, trade, and currencies. He has
also been an adviser to subsequent US Presidents, as well as to a
number of prominent American politicians of both parties. Over the
years, he has continued writing many publications both in economic
theory and in public policy and markets.
[BREAK]
Dear DK and Friends
Carbon Trade War?
Two comments on Bill Emmott's percipient intervention:
G-2 Bipolarity
This appears to be the first public and explicit case of the G-2 at
work governing the global economy and climate, as noted by the ATCA
Briefing on Copenhagen. The G-2 may de facto be at the heart of the
G-20 but they use that somewhat chaotic organisation as useful cover.
Breaking cover in this way may be the first signal that we are in a
bipolar world and of China acknowledging the burden of responsibility
that comes with leadership. Let's hope this transfers to the WTO where
Doha needs this level of bipolar leadership.
Carbon Trade War
Perhaps per contra the EU may have the moral high ground as Bill
suggests but I worry that this might be an eventual excuse for the EU
(and others not excluding the US - see drafts of Waxman-Markey) to
introduce carbon tariffs against countries it asserts are not doing
enough to meet the 2 degree Celsius goal. More precision in the
Copenhagen result would not by itself have prevented such tariffs but
lack of precision and apparent lack of commitment by trading partners
could trigger a carbon trade war with malign effects on both the
climate and on the global trade system.
Best wishes for 2010
Jim
Jim Rollo is Professor of European Economic Integration at the
University of Sussex and Co-Director of the Sussex European Institute
since 1999. He is Editor of the Journal of Common Market Studies
(JCMS), a Research Affiliate at the Centre for Analysis of Regional
Integration at Sussex and an Associate Research Fellow in the
international Economics Programme at Chatham House. He is director of
Interanalysis Ltd which design software to help trade negotiators. He
was until December 1998, Chief Economic Adviser in the British Foreign
Office and before that Director of the International Economics
Research Programme at the Royal Institute of International Affairs in
London. Between 1968 and 1989 he was an economic adviser to successive
British Governments. He has published widely on international economic
issues, principally in the field of European and global economic
integration. His main research interests are trade policy and the
economics of preferential trade liberalisation, agricultural policy,
EU enlargement and EMU. Recent research includes on EMU and
Enlargement; EU bilateral trade policy; EU enlargement; standards,
domestic regulation and the trade policy; and on Climate Change and
the potential for protectionism.
[ENDS]
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All the best
DK Matai
Chairman and Founder: mi2g.net, ATCA, The Philanthropia, HQR, @G140
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