Erosion of international institutions a major challenge to managing and responding to global concerns

The 2020 World Economic Forum (WEF) identified the erosion of international institutions as a major challenge to managing and responding to pressing global concerns. In Asia-Pacific, regional governance institutions play a crucial role in maintaining peace, stability and security in the region. However, the geopolitical challenges to institutions the WEF identifies at a global level also apply in Asia-Pacific.

Regional architecture in Asia-Pacific has traditionally had a strong emphasis on economic institutions, which is set to continue. Political and security institutions however remain relatively underdeveloped. In Asia-Pacific, it tends to be economic dialogues that form the foundation of cooperation, as APEC shows.

While regional institutions have been successful in their overarching goal of economic cooperation, they are not immune to shifting geopolitics, particularly given that the biggest story of our time – the changing US-China relationship and their respective global roles – is being played out in the region. China’s rapid development over the past few decades has transformed its role in the Asia-Pacific region. At the same time, there is a perception that US influence in the Pacific is gradually eroding. Domestic geopolitical concerns also affect the ability of institutions in the region to function effectively.

No existing institution addresses all the challenges the region now faces, including providing a forum for leaders to address economic issues; dealing with the consequences of economic integration, in particular investment and trade but also financial and macro-economic aspects; and addressing political and security challenges arising from structural change in the region. This is not likely to change in the near to mid-term with the creation of a new super-institution, as was seen with the sceptical response to the Asia Pacific Community proposal; nor the reform and expansion of an existing institution.

One regional institution which has been particularly affected by both international and domestic geopolitical dynamics is ASEAN. There are strong differences among member states in attitudes towards China’s increasing role which have, for example, led to no consensus being reached around the South China Sea, instead agreeing it should be resolved bilaterally between China and claimant states, rather than through the China-ASEAN framework. Addressing this disunity is a critical challenge for ASEAN. Right now, ASEAN needs to be as strong and unified as it can to deal with the continuing dynamism and unpredictability in the region.

Multilateral trade institutions such as the Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP) are also impacted by geopolitical dynamics, both international and domestic.

If all 16 negotiating countries signed on, RCEP would cover 25 percent of global GDP, 30 percent of global trade, 26 percent of foreign direct investment flows, and 45 percent of the world’s population. However, negotiations, which began in 2012, have been complex and protracted, reflecting not only economic but also political concerns of the countries involved. At the November 2019 meeting in Bangkok, the text of the agreement was finalised, and 15 of the 16 countries committed to agreeing on the last outstanding matters and signing the deal next year.  Despite projections of significant economic benefits, India remains reticent, largely because of the politically untenable potential impacts on domestic enterprises.

Negotiations for the TPP-11 (or CPTPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, renamed after the US withdrew in 2017) concluded in January 2018. The combined economies of the eleven countries who signed make the agreement the third largest free-trade agreement in the world, with about 13.5 per cent of global GDP. Ongoing geopolitical dynamics means the Agreement may yet expand. The UK has shown interest in membership, motivated by the need to find new trade alliances after exiting the EU, which Japan supports as a means of strengthening global free trade against protectionism. China is reported to be considering joining, but entry standards particularly around sharing information around state-owned enterprises are likely to continue to be difficult to overcome for domestic political as well as economic reasons. If trade tensions with the US continue, however, China may find itself more inclined to compromise. Even without US participation, the TPP-11 will be valuable in setting the direction for economic cooperation in Asia-Pacific.

Another challenge for institutions in the region is that there are (at least) three visions of how Asia-Pacific should work which push and pull at institutional shape and direction. The US wants to maintain its ‘hub and spokes’ approach based on sovereign equality but US centrality – what it describes as a ‘free and open Indo-Pacific’. China wants recognition of its growing status, and holds the notion of ‘a community of common destiny’ as its regional vision. ASEAN is committed to ‘ASEAN centrality’ in which ASEAN preserves autonomy, voice and agency and is not subsumed by great power competition. None of these visions will entirely prevail, but each perspective influences the evolution and development of institutions in the region.

The WEF 2020 home page notes in its first lines that the new global geopolitical reality and the erosion of institutions capable of managing it is “why communities and networks are forming to address pressing global concerns”.  There is no doubt that in Asia-Pacific, the web of institutional interrelationships has played an important role in maintaining peace, stability and security. However, geopolitical flux is creating a new fluidity to the shape of the regional architecture, without much clarity around the ultimate direction. Overall, Asia-Pacific institutions are, like their global counterparts, being profoundly challenged by the dynamic and unpredictable geopolitical environment.

Read the full report: Asia-Pacific Geopolitics and Regional Institutions

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