Mains Exhaustive

What is multilateralism?

Multilateralism refers to the coming together of three or more states, in formal or informal institutional settings, to discuss issues of mutual interest and coordinate their policies.

An example of multilateral institution is United Nations (UN) since it has universal membership. All countries, irrespective of their size and power, enjoy equal status in the form of one-country, one vote.

If such a grouping is small in size, it is best referred to as a mini-lateral or plurilateral forum. 

One example of a plurilateral forum is BRICS, of which India is a member along with Brazil, Russia, China and South Africa. Another example is G20, a grouping of top 20 economies of the world based on their GDPs (at PPP). Both these are cross-regional forums. Examples of regional multilateral forums are South Asian Association for Regional Cooperation (SAARC), Gulf Cooperation Council (GCC), etc

Difference from Multi-alignment

Multi-alignment, on the other hand, refers to the policy of formation of several alliances, not necessarily military, to fulfil national interests ranging from the more tangible security and development related ones to the more intangible ideational ones.

Multi-alignment conveys a sense of engagement and participation and a strong pragmatic outlook aimed not only at a better India but also a better world.

But multilateralism cannot be completely isolated from power politics. The Bretton Woods institutions, for instance, with their contribution-based quotas and weighted voting are standing edifices of realpolitik. Normatively, multilateralism is a counter to unilateralism.

Challenges to Multilateralism

• Dominance of West: The postcolonial backlash against the predominance of the West and the rising tide of populism have been profoundly eroding the liberal values underpinning the multilateral system
• Crisis in UN: The UN and its manifold agencies have been losing their lustre, criticised for their lack of efficiency, institutional sclerosis and ideological infighting.
• Trade Talks: The WTO has failed to conclude the negotiations of the Doha Agenda started in 2001, as bilateralism and protectionism are resurging worldwide, and its dispute settlement system has stalled
• Climate: Multilateral efforts to address climate change have made symbolic progress at best.
• Digital Space: The governance of the internet is forfeiting its initial aspiration of a borderless knowledge society as a few private companies are hoarding data exponentially and authoritarian states are misusing it as a tool of surveillance and repression.
• Rise of Nationalistic politics: Seen in global as well emerging powers. Example: BREXIT or withdrawal of UK from the EU marks a dent to the spirit of multilateralism. The powerful nations are challenging the multilateral world order. 
• Changing Geopolitics: Rise of China, concretization of Russia China axis, SCO etc. has made West conscious of preserving its hegemony. West sees China as a challenger to US led world order and does not seem to cooperate with China and Russia. At the same time, China and Russia try to counter the west. This competition has led to erosion of spirit of cooperation and collaboration, hurting multilateralism. 

Why is it difficult to Reform

1. Multilateralism is deeply entrenched in global power politics. As a result, any action in reforming multilateral institutions and frameworks automatically transforms into a move that seeks changes in the current distribution of power.
2. The status quo powers see multilateral reforms as a zero-sum game. For instance, in the context of the Bretton Woods system, the U.S. and Europe believed reform would reduce their influence and dominance. This makes decisions about reform in these institutions, by consensus or voting, hard.
3.  Multilateralism appears at odds with the realities of the emerging multiplex global order. The emerging order seems more multipolar and multi-centred. Such a situation facilitates the formation of new clubs, concerts and coalitions of the like-minded, which makes the reform of older institutions and frameworks more challenging.

What G20 and India can do

• G-20 should first focus on setting proper narratives of multilateral reform. G-20 may constitute an engagement group dedicated to bring the narrative to the forefront of global discourse. India should also urge the upcoming chairs of the grouping, Brazil and South Africa, to place multilateral reforms as their presidential priorities
• It should be acknowledged that limitations of multilateral cooperation. Competing interests and the dominance of powerful states are there to stay in multilateral platforms. Therefore, while supporting multilateral cooperation, G-20 should continue encouraging mini lateral groupings as a new form of multilateralism and try to transform them into multi-stakeholder partnerships
• Creating networks of issue-based mini laterals, particularly in areas related to the governance of the global commons will be helpful in preventing competitive coalitions where other actors play the same game to their advantage, leading to a more fragmented world order.
• The group needs to be more inclusive without sacrificing efficiency. For example, including the African Union as a permanent member and the UN Secretary-General and General Assembly President as permanent invitees would be helpful to enhance its legitimacy.
• G-20 should put all its efforts into solving one or two pressing global issues and showcase it as the model of new multilateralism. Food, fuel and fertilizer security can be one such issue. On the one hand, it falls under the ‘low politics’ of world politics, so cooperation is more achievable.

INDIA’s STRATEGY OF REFORMING MULTILATERALISM

India’s strategy for reformed multilateralism rests on 5S pillars which includes

1. Samman (Respect)

2. Samvad (Dialogue)

3. Sahyog (Cooperation)

4. Shanti (Peace)

5. Samriddhi (Prosperity)

• Moreover, India has to engage with regional groupings in stronger ways though China has a pre-eminent position in the architecture of these organisations. Interdependence in the economy cannot be overlooked, especially for an emerging state like India.
• India must continue to pursue institutionalisation of multilateral frameworks irrespective of regional conflicts. On such occasions, one has to look at the possibility of strengthening neighbourhood multilateral frameworks (such as SARRC
• India needs to build multilateral trade blocs/economic groupings involving its South Asian neighbours along with Indian Ocean neighbours, while rejuvenating organisations such as BIMSTEC and IOR-ARC.

Thus India should not allow a “recession for multilateralism” in its diplomatic vision as  it can be concluded that the multilateral system is merely undergoing a profound mutation and one that might even end up making it more effective and better adapted to the realities of the 21st century. 

Key Developments Summit

During the Bali Round, discussions covered all the four pillars of the IPEF i.e. Trade, Supply Chain resilience, Clean Energy and decarbonisation and Fair Economy (Taxation & Anticorruption) 

However India participated in the discussions related to Supply Chain resilience and Fair Economy (Taxation & Anticorruption) 

The pillar which deals primarily with trade was not joined by India because the contours of the framework - particularly on commitments required on environment, labour, digital trade and public procurement — are still emerging. 

• India reiterated its belief that IPEF will deepen the economic engagement and promote inclusive development through enhancement in trade and investment in the region. 
• On the side-lines of the negotiating round, the Chief Negotiator and the Pillar Leads also held bilateral meetings with IPEF countries and other concerned stakeholders.
• Further a representative from National Payments Corporation of India (NPCI) also gave a detailed presentation at the Business Forum on Unified Payment Interface (UPI),  a successful example of Digital Public infrastructure in India.

ABOUT IPEF (Indo-Pacific Economic Framework for Prosperity)

In the backdrop of US withdrawal from the Trans- Pacific Partnership under Donald Trump, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region. 

The US President first talked about it at the at the October 2021 East Asia Summit. It has been launched at present Quad summit 2022. 

Objective

To “advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness” in these economies. 

Members and Membership

Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. Together, these countries account for 40% of global GDP. 

Countries are free to join (or not join) initiatives under any of the stipulated pillars but are expected to adhere to all commitments once they enrol. 

Leadership

• U.S. Trade Representative (USTR) will be spearheading the trade pillar, 
• Supply chain resilience, clean energy and decarbonisation, and taxes and anti-corruption measures will fall under the purview of the U.S. Department of Commerce. 

Areas of cooperation

1. Trade Pillar: To establish “high- standard, inclusive, free, and fair-trade commitments” to fuel economic activity and investments benefitting both workers and consumers. 

2. Digital Trade Pillar: Incorporates not just the purchase and sale of goods online but also data flows that enable the operation of global value chains and services, like smart manufacturing, platforms and applications 

3. Supply chain resilience Pillar: The framework aspires to secure access to key raw and processed materials, semiconductors, critical minerals and clean energy, tech, particularly for crisis response measures and ensuring business continuity 

4. Clean energy, decarbonisation and infrastructure Pillar: In line with the Paris Agreement, provide technical assistance and help mobilize finance, including concessional finance, to improve competitiveness and enhance connectivity by supporting countries in the development of sustainable and durable infrastructure for adopting renewable energy. 

5. Tax and anti-corruption Pillar: Aimed at promoting fair competition by enforcing robust tax, anti-money laundering and anti-bribery regimes in line with existing multilateral obligations, standards and agreements to curb tax evasion and corruption in the region. 

Benefits

• A new US vehicle for economic re- engagement with East Asia and Southeast Asia. 
• It would help in countering China dominated Regional Comprehensive Economic Partnership (RCEP) and other regional trade initiatives like Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economic Partnership (DEPA) (A new type of trade agreement to facilitate digital trade and creating a framework for the digital economy, was born out of the common interest of Chile, New Zealand and Singapore) of which US and India are not a party. 
• Would help U.S. companies that are looking to move away from manufacturing in China. 
• It is significant that 7 of 10 ASEAN countries and 11 out of 15 of countries that form RCEP took part in the launch. 
• Signifies first multilateral attempt to boost supply chain resilience to ease global inflationary pressures and mitigate effects of future disruptions, particularly key raw materials, critical minerals, and semiconductors. 

Challenges

• IPEF is not a traditional trade agreement. 
• It would include different modules covering “fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anticorruption.” 
• Countries would have to sign up to all the components within a module, but do not have to participate in all modules. 
• The “fair and resilient trade” module will be led by the US Trade Representative and include digital, labour, and environment issues, with some binding commitments. 
• IPEF will not include market access commitments such as lowering tariff barriers, as the agreement is “more of an administrative arrangement,” and Congressional approval, which is a must for trade agreements, is not mandatory for this. 
• Critics suggest it would be security, and not economics, which will drive U.S. trade engagement in the region. 
• Exclusion of U.S. ally Taiwan from the arrangement, despite its willingness to join, exhibits USA’s geopolitical caution to call out China and despite Taiwan being eligible on economic merit. 

Concerns for India

• US’ preference to allow free and open data flows under digital economy pillar will constrict India’s ability to regulate data for domestic purposes. 
• India might be reluctant to sync its tax policies with the push for a global tax standard amongst US partners to mitigate tax avoidance and evasion. 
• Labour Standards and non-Tariff barriers will remain a bone of contention for India.