Multilateral Economic Institutions and U.S. Foreign Policy: Hearing Before the Subcomm. on Multilateral Int\u27l Dev., Multilateral Insts., & Int\u27l Econ., Energy, & Envtl. Pol\u27y of the S. Comm. on Foreign Relations, 115th Cong., Nov. 27, 2018 (Statement of Jennifer A. Hillman)

Abstract

Virtually every major international gathering of world leaders recently has ended in failure—or at least failure to reach enough agreement to issue a concluding statement or communique. These failures come at a time when many have been looking for signs that world leaders would come together to address the most pressing problems facing the world—including climate change, the breakdown in the rules of the international trading system, the need everywhere for good jobs that pay a living wage, and rapidly growing income inequality. The failure of these meetings to produce formal agreements—or even specific paths to reaching agreements in the future—despite the high stakes has left many questioning the ability of the world’s leaders to meet global challenges, shedding a spotlight on the institutions and fora that were established for the purpose of achieving multilateral solutions—particularly the World Trade Organization (WTO), the World Bank and the International Monetary Fund (IMF). The failure to reach agreements can best be seen as part of a long-term trend toward increased complexity in the world that makes it nearly impossible to reach traditional multilateral binding accords, combined with a waning of faith on the part of many countries in multilateralism and multilateral institutions. A number of clear trends emerge from the failures to reach accords at virtually all recent international gatherings: 1) Government policies and international arrangements for collective decision-making have not kept pace with changes in the world, especially the high degree of international economic integration and interdependence. Much of the increasing complexity in the international economic order stems from the explosive growth in the number and size of multinational corporations and financial institutions, many of which now dwarf the size of most of the nations in the world. Added to the complexity is the increase in the speed at which goods, money and technology moves around the globe in our digital age. 2) Learning to operate in this vastly more complex world will require more multilateralism, not less. As countries emerged from the era of colonialization and began opening their markets, the number of players on global stage increased, making reaching consensus among a much larger group of disparate interests more difficult. But because the most significant problems facing the world cross many international boundaries, solving them will require that countries come together to find regional, plurilateral, or global solutions. 3) It is essential that the international economic institutions be updated and improved, not destroyed or left to wither. Because it is clear that reaching major new binding accords or creating new international institutions is quite difficult, the best and most achievable solution is to renovate our existing institutions. Each needs to modernize and improve their governance structures to ensure that work can get done despite the increases in complexities and to update their mandates to ensure the ability to address the problems of the 21st century, many of which are quite different from those that existed in the 1940s when these institutions were created. Given that the crisis is most acute at the WTO, this testimony will focus on what must be done to renovate the World Trade Organization and why doing so is critical, both for the trading system and for the continued existence of a rules-based international economic order. The need for the WTO and its dispute settlement system to remain viable is particularly critical if we are to address the challenges presented by the explosive growth of China and its transformation into the largest exporter of goods in the world