Bridges Weekly Trade News Digest • Volume 12 • Number 33 • 9th October 2008

World Bank Chief Calls for a ‘New Multilateralism’

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World Bank President Robert Zoellick called for the break-up of the G-7 and the creation of “a new multilateral framework” on Monday, saying that the global financial crisis has shown that world leaders need to adopt a more flexible and inclusive approach to managing the global economy.

“The G-7 is not working,” Zoellick said, referring to the Group of Seven Western industrial powers that have traditionally taken the lead in structuring the world financial system. “We need a better group for a different time.”

“Until we build a more inclusive globalisation, the world will remain unstable, no matter how big the financial rescue packages,” he said.

Finance ministers and central bank governors from the G-7 countries - Britain, Canada, France, Germany, Italy, Japan and the US - are set to meet in Washington on 10 October. Annual gatherings of the International Monetary Fund and the World Bank are scheduled for the following day. Zoellick’s comments, made in a speech at the Peterson Institute for International Economics in Washington, are expected to set the tone for those meetings.

At those gatherings, the finance ministers will grapple over how best to respond to a financial crisis that has stunned markets the world over and, in Zoellick’s words, pushed many developing countries to an economic “tipping point.”

“September’s financial shock waves in the United States are reverberating in the world economy,” the World Bank chief said. “The stark reality is that developing countries must prepare for a drop in trade, capital flows, remittances, and domestic investment, as well as slow-down in growth.”

Pointing to other arenas in which multilateralism has faltered of late, the former US Trade Representative said that the WTO “has entered dangerous waters,” and that the Doha Round of trade talks is “gasping on life support.” In the absence of a global deal to liberalise trade, Zoellick said that countries should focus on forging regional agreements “linked to global disciplines,” and that they should try to use trade facilitation measures to decrease the costs of cross-border commerce.

At the mulitlateral level, Zoellick said that the world leadership structure should be expanded to include Brazil, China, India, Mexico, Russia, Saudi Arabia and South Africa. The larger group would account for 56 percent of the world population, 70 percent of global GDP, and would include all of the major carbon emitters and regional players.

“But this steering group would not be a G-14,” Zoellick said. “We will not create a new world simply by remaking the old,” he said. “It should be numberless, flexible, and over time it could evolve. Others may be added, especially if their rising influence is matched by a willingness to help shoulder responsibilities.”
Not only did the World Bank chief call for an expanded set of actors at the multilateral level, he also urged the group to update its agenda.

“We must redefine economic multilateralism beyond the traditional focus on finance and trade. The changing world economy demands that we think more broadly. Today, energy, climate change, and stabilising fragile and post-conflict states are economic issues. They are already part of the international security and environmental dialogue. They must be the concern of economic multilateralism as well.”

ICTSD reporting.