Liberal International Economic Order Research Articles

When Foreign Policy Becomes Trade Policy: The EU's Anti‐Coercion Instrument

AbstractThe European Union (EU) has taken a geoeconomic turn since 2017 by creating a series of new unilateral instruments designed to preserve European autonomy and adjust to the progressive unravelling of the liberal international economic order. The most controversial of these instruments is the 2023 Anti‐Coercion Instrument (ACI), designed to deter third countries from targeting the EU and its member states with economic coercion through measures affecting trade or investment. This article analyses why this new policy instrument was created, traces its institutional genesis and explores its implications by asking whether the ACI represents an intentional attempt to transform the foreign policy issue of coercion into a commercial one. Using process tracing based on interviews and primary and secondary materials, we argue that ‘foreign policy becoming trade policy’ through the ACI was an unintended consequence both of external pressures to institutionalise the trade–security nexus and of the EU's uneven internal competence base.

Domestic Investment Laws and State Capitalism

AbstractState capitalism and the liberal economic order have had an antagonistic relationship. While the international economic law rules have sought to reduce the role of the state in the economy, state-controlled entities have more recently increased in size and importance – both domestically, as well as internationally. In this connection, the article analyses the effects of state capitalism's expansion simultaneously with the domestic investment law of States. The article analyses the underlying principles of state capitalism in an effort to answer the question of whether domestic laws promoting investment – as defined in the special issue – are positive, negative, or neutral to state capitalists. The article further interprets the trends spawned by the propagation of the liberal international economic order as states realize their development targets and envisage to actively contribute to the regulation of international trade and cross-border transactions globally.

Globalisation, Divided Societies and Nation-Centred Economic Policies in America and Britain

Abstract A stronger emphasis on domestic politics and national sovereignty has recently shaped international economic relations, for instance, in the United Kingdom and the United States. This trend weakened the liberal international economic order (lio) with its promotion of globalisation and multilateralism. Why have the UK and the US, which formerly spearheaded the liberal order, embraced nation-centred foreign economic policies (ncp) under the Trump and Johnson governments? I argue that domestic forces predominantly drove this shift, since a political de facto alignment of value-based societal ideas and material interests increasingly favoured national self-determination and the privileging of domestic groups. The negative consequences of the lio such as rising income inequality, job losses and a perceived heteronomy had strengthened societal ideas and interests that converged in support of ncp. I examine these arguments by applying the societal approach to governmental preference formation in case studies on Johnson’s Brexit policy and Trump’s trade policy towards China.

Wither the Trade Regime?

Abstract Democratic governance, liberal values, and the open trading regime are facing interconnected existential challenges. For most of the post-WWII period, they were “legs to the same stool.” Today, the connections among the three have frayed, and this has implications for the future of the liberal international economic order. While the trade regime successfully incorporated smaller autocratic states, the rise of China and increasing tension among signatories to the WTO has challenged the rule-based trading system. This essay argues that even with these divisions among the memberships, all trading nations, including China, need the General Agreement on Tariffs and Trade (GATT)/WTO. Trade requires market predictability; exporters and their home governments require some means to adjudicate conflict. The GATT/WTO remains the best, and perhaps the only, organization that can facilitate such coordination and finesse the changing nature of the international system to assure an open world economy.

The Green Backlash against Economic Globalization

AbstractDespite the steady increase in environmental provisions being included in trade agreements to address potential environmental risks associated with increased trade, growing public concern about environmental issues has given rise to major public protests against various trade agreements. However, facing the widespread backlash against the liberal international economic order, pro-trade leaders have yet to respond adequately to the public's concern over the potential implications of trade on the environment. A review of European Union (EU) officials’ public communication on the Transatlantic Trade and Investment Partnership shows that trade advocates narrowly focus on the economic benefits of trade in their trade-related communication while paying little attention to the environmental impacts of the trade deal. This ignores an important aspect of the public discontent with economic globalization. This article argues that the pro-trade camp's failure to engage the public in an inclusive and transparent debate about the environmental effects of trade presents a missed opportunity that has triggered widespread resistance to trade liberalization. By studying the communication channel, this essay highlights the important role of information and dialogue as a potential response to the current public backlash against economic globalization.

Nationalism, Populism, and Trade Agreements

Abstract The rise of nationalist and populist movements throughout the world has led to concerns about the future of the liberal international economic order. Central to these worries is the belief that nationalist and populist publics and their leaders will reject open trade, which has been a cornerstone of the global order. Yet despite these fears, very little empirical research has been conducted on the links between either nationalism or populism and trade policy. In this paper, we argue that nationalism and populism are likely to discourage trade liberalization in democratic states, but that these forces will have little influence on trade policy in non-democracies. To test this argument, we focus on state involvement in preferential trade agreements (PTAs). Based on a variety of tests, we find considerable support for our argument. Democracies with nationalist or populist governments are especially reluctant to join PTAs, but neither nationalism nor populism systematically influences whether non-democracies enter PTAs.

Legitimacy challenges to the liberal world order: Evidence from United Nations speeches, 1970\u20132018

The liberal international economic order has been facing high-profile legitimacy challenges in recent years. This article puts these challenges in historical context through a systematic analysis of rhetorical challenges towards both the order per se and specific global economic institutions. Drawing on Albert Hirschman’s classic typology of exit, voice and loyalty, we coded leaders’ speeches in the General Debate at the UN General Assembly between 1970 and 2018 as articulating intentions to abandon elements of the order, challenges or calls for reform, unequivocal support, or factual mentions of cooperation. Surprisingly, we find that explicit criticisms towards the liberal order are at an all-time low and that exit threats remain rare. An analysis of the historical evolution of criticisms to global economic institutions reveals a move away from the Cold War insider-outsider conflict towards insider contestation. For example, we find that as countries’ economies become more open, their leaders expressed more support for global economic institutions during the Cold War but less support since. Finally, we demonstrate consistency between the public policy positions leaders announce in UNGA General Debate speeches and their government positions on consequential reform debates on debt relief.

Trump and the End of an Era? The Liberal International Order in Perspective

ABSTRACT The liberal international economic and political order which the United States created from the ashes of World War II and has since led is in trouble. To United States President Donald Trump, the order which provided the framework under which sovereign states agreed to follow a rules-based system of economic and political cooperation and shared multilateral governance, has not only allowed other nations (in particular, China) to take advantage of US ‘magnanimity’, but also weakened the United States economically, while asymmetric alliances compromised its military advantages. Given the sustained assault this cosmopolitan order is facing, many fear that it may not survive if Trump is re-elected in November 2020. Indeed, if the United States response to the COVID-19 pandemic is any guide, an ‘America First’ agenda, especially a hard-line approach to China, will shape US policy if Trump wins a second term.

Clash of Powers: US-China Rivalry in Global Trade Governance

The US-China trade war instigated by President Trump has thrown the multilateral trading system into a crisis. Drawing on vast interview and documentary materials, Hopewell shows how US-China conflict had already paralyzed the system of international rules and institutions governing trade. The China Paradox – the fact that China is both a developing country and an economic powerhouse – creates significant challenges for global trade governance and rule-making. While China demands exemptions from global trade disciplines as a developing country, the US refuses to extend special treatment to its rival. The implications of this conflict extend far beyond trade, impeding pro-development and pro-environment reforms of the global trading system. As one of the first analyses of the implications of US-China rivalry for the governance of global trade, this book is crucial to our understanding of China's impact on the global trading system and on the liberal international economic order.

Conflict in the absence of war: a comparative analysis of China and Russia engagement in gray zone conflicts

ABSTRACT Wars between states, especially great powers, are now fought in the gray zone, in which elements of soft and unconventional power dominate the arsenal. The effectiveness of such tools is contingent upon the interconnectedness of the world in the economic and political domains. The liberal international political and economic order provides an opportunity for rapid economic growth – at least for powerful states – but it also creates an opportunity for illiberal states to exploit this environment in their favor. In this paper, I examine the cases of Russia and China which successfully utilize such gray zone tactics to promote their strategic agendas. I argue that Russia and China’s utilization of different tools and technique combinations in their engagement in gray zone conflicts can substantially be attributed to two distinct geostrategic momenta I call “offensive hybridism,” utilized by China, and “hybridism in retreat,” associated with Russia’s actions. My research finds that engagement in gray zone conflicts should not be treated as a homogenous phenomenon to characterize all contemporary interstate disputes. Rather, all participants utilize their distinct tools and combination of techniques, which should be countered with tailored approaches.

Power transitions and global trade governance: The impact of a rising China on the export credit regime

AbstractThe existing liberal international economic order was constructed during the era of American hegemony and has been heavily shaped by US power. How is the rise of China affecting global economic governance? This article analyzes the case of export credit, which has long been considered a highly effective international regulatory regime and an important component of global trade governance. I show that the rise of China is profoundly altering the landscape of export credit and undermining its governance arrangements. State‐backed export credit is a key tool of China's development strategy, yet I argue that an explosion in China's use of export credit is eroding the efficacy of existing international rules intended to prevent a competitive spiral of state subsidization via export credit. The case of export credit highlights a fundamental tension between liberal institutions of global governance and the development objectives of emerging powers.

Rising Powers and the Reform of Global Economic Governance: The BRICS and the Normative Challenge Ahead

At a time when the liberal international economic order seems under threat, the transformation of global economic governance poses a strong normative challenge to existing international institutions. The recent establishment of new international financial institutions (IFIs)–the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB)—signified a steady process of transformation of the architecture of contemporary global governance. How rising powers understand, establish and conduct formal and informal rules within new international financial systems is of fundamental importance for the future of world economic order, although not necessarily signaling a decline for the Western-style economic governance and its normative principles. While global economic governance has profoundly changed in the last decade, the suggestion here is that rising powers’ efforts to reshape the current global economic order have often been overestimated and only partially contextualized within the enormous achievements gained from economic opportunities driven by Western globalization. Focusing on the contestation of these different worldviews, the paper analyzes the approach of BRICS (Brazil, Russia, India, China and South Africa) New Development Bank countries to global economic governance within the newly established IFIs, questioning how the normative challenge represents either an opportunity or a threat to the current global order.

Power Transitions and Global Trade Governance: The Impact of a Rising China on the Export Credit Regime

The existing liberal international economic order was constructed during the era of American hegemony and heavily shaped by US power. How is the rise of China affecting global economic governance? This article analyzes the case of export credit, which has long been considered a highly effective international regulatory regime and an important component of global trade governance. I show that the rise of China is profoundly altering the landscape of export credit and undermining its governance arrangements. State-backed export credit is a key tool of China’s development strategy, yet I argue that an explosion in China’s use of export credit is eroding the efficacy of existing international rules intended to prevent a competitive spiral of state subsidization via export credit. The case of export credit highlights a fundamental tension between liberal institutions of global governance and the development objectives of emerging powers.

On the High-Standard Trade Rules in the 21st Century and China’s Responsive Strategy—A Classical Liberalism Perspective

Abstract In the nineteenth century, classical liberalism originated from Britain. Nearly all the countries across the globe had benefited from the liberal international economic order (LIEO) under the Pax Britannia. However, the United States has never taken in classical liberalism. Rather, it regards international trade as a “zero sum game” and upholds “fair trade” through the international institution of WTO/GATT. From the British free trade to the U.S. fair trade, from the WTO to the fragmented PTAs, and from free trade to protectionism, classical liberalism has been gradually fading away. The higher standards on the various non-tariff issues in the TPP have reached a new altitude against classical liberalism. In face of the high-standard trade rules in the 21st century, China should not follow them recklessly but give due consideration to the status quo of its economic development when negotiating FTAs in the future.

The Rise of Populist Nationalism and the Renegotiation of NAFTA

Countries that have traditionally led the way in promoting economic globalization and its institutions have seen a recent surge of populism and nationalism, calling into question the liberal international economic order. The rhetoric of these critics is often vague, however, and it is unclear what a populist or nationalist approach to international economic policy would look like. The North American Free Trade Agreement (NAFTA) renegotiation initiated by the Trump administration could give us the first clues. Will their proposals destroy the trading system as we know it, or merely tweak it? This article examines these issues by discussing the concepts of nationalism and sovereignty, and then viewing the Trump administration’s specific NAFTA proposals through those lenses.

Introduction: Putin's New Russia: Fragile State or Revisionist Power?

Introduction:Putin's New Russia: Fragile State or Revisionist Power? Andrew Natsios (bio) Much of the content in this collection of articles in the South Central Review were presented by scholars and journalists at a September 2015 conference and subsequent talks between 2016–2017 on Putin's New Russia at the Bush School of Government at Texas A&M University. These articles help to fill a gap in the western understanding of Putin's Russia by examining the structure of its political and economic systems, the motivation of its ruling elite, the threat it poses to its neighbors, and its profound dysfunctions. The authors answer the question: How does Russia's external demonstrations of strength relate to growing evidence of its internal weaknesses? To respond to this question, we must review Russia's foreign and defense policies to understand how they are related to the country's internal challenges. ________ When Boris Yeltsin named Vladimir Putin Acting President in December 1999, many in the western capitals hurriedly attempted to determine who he was and how he rose in three years from being an obscure municipal official to Acting President of Russia. In his earlier career, Putin served 16 years in the KGB, the Soviet Secret Police, as a Lt. Colonel assigned to East Germany. After retiring from the KGB, he went to work in St. Petersburg city government in several posts, including Deputy Mayor. The Yeltsin government then brought him to Moscow where he held several positions before being appointed as the director of the Federal Security Service, the new Russian name for the domestic KGB. He then became Prime Minister and Acting President, and then was elected in his own right in March 26, 2000. Some believe Putin's meteoric rise was a function of his reputation for absolute loyalty to his superiors above all other considerations and his ruthlessness in executing orders. In the most comprehensive research into corruption in [End Page 1] the Russian government to date, Dr. Karen Dawisha argues in her book, Putin's Kleptocracy, that a small group of former KBG agents from St. Petersburg hatched a plan to take over the Russian economy and political system, a plan they had effectively accomplished by the mid-2000's. She argues that Putin pursued successively higher offices in part to protect himself from an ongoing investigation of his corruption while serving in St. Petersburg city government. Much of the initial Western perception of Vladimir Putin was based on his early years as President, when he was thought to be an economic reformer who sought to bring Russia into the liberal international economic order. For the first six years of Putin's Presidency, Russia was treated as a great power and was one of the select countries included in G-8 meetings. Beginning in the mid-2000's, Putin abandoned his economic reform agenda and shifted the direction of his government, ending Russia's integration into the world economy, crushing civil society, gaining virtual control of the Russian electronic news media, and seizing the territory of neighboring states such as Georgia and Ukraine, while aggressively rearming. Russia began its withdrawal from global economic integration well before the invasion of Ukraine, for reasons which remain debated among Russia observers. After the invasion of Ukraine, Russia was expelled from the G-8 and has been isolated in international bodies. Perhaps the most glaring evidence of this isolation is the vote on resolution 68/262 in the U.N. General Assembly on March 27, 2014. Resolution 68/262 condemned Russian aggression in annexing Crimea, which had been part of Ukraine: 100 nations voted yes, 11 voted no, and 58 nations abstained. European and U.S. policymakers were slow to acknowledge and react to the reality of Putin's Russia, its revisionist policies, and the threat it posed to western democracies and its other neighbors.1 European paralysis in the face of Russian aggression in Ukraine was in part a result of multiple, simultaneous other crises distracting it from Putin's military adventures. Since the end of the Cold War, many European countries had virtually unilaterally disarmed by neglecting its military. The financial crisis in Southern Europe caused serious...

The Liberal International Economic Order on the Brink

[W]hat Trump has done so far represents an intensification and deepening of existing patterns of US behavior in the trading system rather than a fundamental change.

Protectionist Empire: Trade, Tariffs, and United States Foreign Policy, 1890–1914

Between 1890 and 1914, the United States acquired overseas colonies, built a battleship fleet, and intervened increasingly often in Latin America and East Asia. This activism is often seen as the precursor to the country's role as a superpower after 1945 but actually served very different goals. In contrast to its pursuit of a relatively liberal international economic order after 1945, the United States remained committed to trade protection before 1914. Protectionism had several important consequences for American foreign policy on both economic and security issues. It led to a focus on less developed areas of the world that would not export manufactured goods to the United States instead of on wealthier European markets. It limited the tactics available for promoting American exports, forcing policymakers to seek exclusive bilateral agreements or unilateral concessions from trading partners instead of multilateral arrangements. It inhibited political cooperation with other major powers and implied an aggressive posture toward these states. The differences between this foreign policy and the one the United States adopted after 1945 underscore the critical importance not just of the search for overseas markets but also of efforts to protect the domestic market.

Asian Infrastructure Investment Bank: Governance Innovation and Prospects

ON 29 JUNE 2015, THE LEADERS OF CHINA AND REPRESENTATIVES OF FIFTY-SIX nations gathered in Beijing to sign Memorandum of Understanding for creation of Asian Infrastructure Investment Bank (AIIB). According to its Articles of Agreement, purpose of bank is: first, to foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors; and, second, promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions. The creation of this new bank is latest in a wave of new global initiatives that China has promoted, alongside Group of 20 Leaders Summits (G-20); internationalization of renminbi (China's national currency); New Development Bank (NDB) of BRICS grouping (Brazil, Russia, India, China, and South Africa); and Silk Road Economic Belt and Twenty-first Century Maritime Silk Road (One Belt & One Road). The AIIB will be headquartered in Beijing, with an initial capital stock of $100 billion. China is contributing largest share for new bank, by a large measure ($29.8 billion). According to its fifty-seven founding members, AIIB grew from recognition of importance of infrastructure to development of Asia, and need for significant additional long-term financing for infrastructure and development in region and beyond region. (1) The other motivation is that China and many developing countries have grown frustrated with what they perceive as often slow and overly bureaucratic ways of traditional lenders and their slow pace of representational and operational reform. (2) The fact that it has been a quarter-century since last major multilateral development bank was created (the European Bank for Reconstruction and Development, founded in 1991), (3) and that new bank is championed by China (and not by traditional Western powers or Japan), signals a shift in balance of world economic power. The lack of precedence of People's Republic sitting at center of table, setting agenda, defining priorities, and rethinking rules means that rules could emerge in AIIB-funded projects that differ from those of liberal international economic order. That a number of allies of United States, including Australia, South Korea, Britain, Germany, and France, decided to join AIIB, even though United States had discouraged them, suggests that geopolitical calculations among followers are also shifting. (4) Thus, People's Daily, official newspaper of Chinese Communist Party, observed wryly that the expanding Asian Infrastructure Investment Bank shows China's growing global influence. AIIB is attracting international attention. (5) The points above suggest that creation of AIIB is an important development in global governance and reflects key shifts in balance of world economic power. It further suggests that China has made transition to global leadership, including building new multilateral organizations, after decades where it mainly learned established norms. (6) In this essay, I examine whether and how AIIB represents innovation in global governance. I further provide a critical appraisal of prospects for new China-backed multilateral bank. My main findings are that AIIB reflects both continuities and innovations in global governance. So far, most of innovations are in governance structures of bank and its overarching legal frameworks. What is significant about AIIB's governance innovations is that they are aimed at unlocking creative potential for new bank to make breakthroughs in decisionmaking, management, and staffing, and, most importantly, in lending practices and business models of bank. …

The transformative potential of the Sustainable Development Goals (SDGs)

How can global governance shape a transformation toward sustainability? How can a transformation toward sustainability shape new forms and strategies on global governance? These questions grow increasingly important as the human impact on the environment increasingly exceeds the planetary boundaries (Rockstrom et al. 2009; Steffen and Smith 2013; Steffen et al. 2015). In addition, the prevailing approach to sustainability will only achieve sustainable futures for some, which would not be sustainable at all. In the post1992 era, roadblock after roadblock for global governance on sustainability was confronted and increased skepticism became warranted. In this context, the Rio?20 Conference in 2012 was seen as a conference with little substantive purpose (Andresen and Underdal 2012) and interest grew in efforts that ‘‘tipped toward’’ sustainability (Westley et al. 2011) rather than hard law-induced transformations. Global governance was seen to have the wrong processes and wrong ideas, animated by zero-sum interstate negotiations and a prioritization of the liberal international economic order over any alternatives. If we approached the question from a traditional effectiveness or influence perspective (Bernstein and Cashore 2012), such skepticism is understandable. Formal rules of the environment gave way to less legalistic approaches to sustainability in a muddled institutional context. Specifically, the Rio?20 process produced nothing in the realm of hard law, and the small-scale efforts appear scattered haphazardly without a core to organize global action. An alternative approach though would highlight that such outcomes have potential impacts primarily in changing global governance practices, defined as the techniques actors use to make sense of the world (Best 2014). Such an approach would be critical of the