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Global governance and the rise of the South

Dr Celine Tan, School of Law

Published August 2014

The world's economic horizon is changing. As industrialised nations are struggling with financial crises, developing countries see their star in ascendance. But does a rapid growth in wealth necessarily mean a shift in political power towards the BRICS, or is global governance still dominated by northern hemisphere institutions? Dr Celine Tan lifts the lid on the global economy, international law and where the power really lies.

e_sao_paulo_sunrise.jpgIn economic terms, these assertions are certainly supported by data. Recent figures from the United Nations (UN) show that the combined output of the world’s three leading economies – Brazil, China and India – is now about equal to the combined output of the six traditional industrial powers – Canada, France, Germany, Italy, the UK and the US1. Developing countries now account for 42 per cent of global trade2 and constitute over a third of global investment outflows3.

The big question is whether this growing economic clout of southern countries is translating into greater political and legal influence in the international arena. There are certainly signs that the new economic strength of developing countries is being accompanied by transformations in existing arrangements of global governance dominated by industrialised countries. This has included greater voice and representation in existing institutions of global governance and the emergence of new arrangements which bypass traditional economic, legal and political regimes.

The imperative to involve major southern states in the resolution of the global financial crisis – notably the need to secure financial resources from the emerging markets for emergency financing to crisis-stricken countries in the north and south – led to some changes in the way the global financial system is managed. Previously a closed-shop dominated by G7 countries, the leading forum for international financial governance has now been broadened to include the BRICS and other developing countries under the auspices of the G20. Developing countries are also establishing their own mechanisms of financial cooperation and regulation – such as the Chiang Mai initiative set up by the members of the Association of Southeast Asian Nations (ASEAN) after the Asian financial crisis of 1997 – 98 and the recently proposed BRICS Contingency Reserve Arrangement – or reviving existing regional arrangements, such as the Arab Monetary Fund and the Latin American Reserve Fund, to reduce their financial reliance on northern-dominated institutions.

Developing countries are also becoming more assertive in other international rule-making fora, including at the World Trade Organization, the World Intellectual Property Organization (WIPO) and the UN Framework Convention on Climate Change (UNFCCC). Developing countries have formed new or actively used existing negotiating blocs to challenge the dominance of northern states within these institutions and to defend and forward their own interests, particularly in the development of international law in these areas. Coalitions, such as the G77 at the UN, the G24 at the IMF and the G20 and the G33 at the WTO, provide a common platform for developing countries to coordinate negotiating positions in multilateral regimes based on common shared agendas. Developing country leaders are also becoming more vocal in the international arena, offering alternative voices and critique on a range of issues from international financial regulation to global security to climate change.

However, despite their increased prominence on the world stage and greater economic prowess, developing countries remain mostly marginalised from contemporary regimes of global governance. Western industrialised countries, led by the US, continue to set the agenda for international law and the governance of global affairs. This includes shifting the sites for global regulation from one institution or network to another when the former no longer suit their interests, a process known as ‘forum shifting’. For example, increased coordination by developing countries in defence of their interests at the WTO has resulted in industrialised countries seeking to pursue their agenda of trade and investment liberalisation outside these institutions, notably through series of bilateral and regional trade and investment agreements which have proliferated in the past 15 years.

Developed countries have also established informal networks of governance to replace regulation through formal multilateral institutions or to prevent reform of existing organisations.

International Monetary Fund conferenceThe creation and elevation of the G20 as the leading forum for global financial regulation, for instance, enables industrialised countries to engage major economies in the prevention and resolution of financial crises without instituting major changes to the anachronistic way in which the IMF is governed. Although developing countries, mainly emerging markets, have seen their share of votes increase at the institution as a result of recent incremental reforms, the voting and representation structure of the International Monetary Fund (IMF) and its sister institution, the World Bank, remains dominated by industrialised countries.

Aside from these geopolitical manoeuvres, developing countries’ participation in global governance is also hampered by basic financial constraints. It is expensive to take part in international negotiations. Despite their impressive economic growth rates and their relative resilience to the global financial crisis in recent years, most developing countries still do not have the financial resources and technical capacity to participate effectively in the global arena. With more pressing domestic demands, including major human development and poverty reduction challenges, it is unsurprising that many developing states cannot expend the requisite financial or administrative resources to contribute significantly on the international stage. Industrialised countries, for whom the current rules of global governance are written, continue to possess the historical and economic advantage in shaping international law and regulation and the institutions which support them. Until and unless these disparities are addressed and the playing field levelled accordingly, global governance will continue to be an asymmetrical affair that privileges the interests of a minority of wealthy countries over the majority of world states.

1 UNDP (2013), Human Development Report 2013: The Rise of the South: Human Progress in a Diverse World, New York: UNDP.

2 UN DESA (2013), World Economic Situation and Prospects 2013, New York: UN Department of Social and Economic Affairs (DESA).

3 UNCTAD (2013), World Investment Report 2013: Global Value Chains: Investment and Trade for Development, Geneva: United Nations Conference on Trade and Development (UNCTAD), p 4.

Dr Celine TanDr Celine Tan is Associate Professor of Law at the School of Law, University of Warwick. She completed her PhD at Warwick and was previously a lecturer at the Birmingham Law School, University of Birmingham. She has also worked with international NGOs and international organisations on issues relating to social and economic development and human rights. Celine’s research centres on exploring aspects of international economic law and regulation with a focus on international development financing law, policy and governance. Celine is among the academics at Warwick working together as part of the Global Governance Global Research Priority.

Images: Sao Paolo at sunset by Murilo Cardoso (via Flickr).
IMF Photograph by International Monetary Fund (via Flickr).