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Panel I: Global Governance, De-globalization and the Role of the the EU and East Asia

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Panel I: Global Governance, De-globalization and the Role of the the EU and East Asia
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3
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15
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Transcript: English(auto-generated)
Well, how should I use my 10 to 15 minutes? I thought I start from a kind of theoretical venture point and, towards the end, move to some policy issues, though. When I saw the heading talking about global governance, deglobalization,
and the role of our two regions, East Asia we are interested in, and the EU, I thought maybe we should start with what is the problem of globalization or deglobalization. And what I find particularly helpful
is the notion that the American economist, or Turkey-born American economist, Danny Rodrik, used, and with which he made a big splash several years ago, when he talked about we don't actually need what he calls hyperglobalization,
because it creates problems. And we definitely don't need deglobalization, because it's too costly in terms of effectiveness. We need smart globalization. And why do we need smart globalization? Well, he says because we have a trilemma between three
objectives we face on the global level. One is the issue of globalization and reaping the profits of a more effective, better allocation of resources through free trade, through free flow of capital, and so on. On the other side, or the second part of the triangle,
that's national economic policy sovereignty over issues we find important on a national level, like issues of social policy. What happens to those who are unemployed because of globalization? And then, thirdly, there's the challenge of democracy.
Who makes these kind of decisions? Are we actually legitimized to make policy decisions? So this is a triangle. And what he says, and I think it's worthwhile to read his 2012 book on that, is that we cannot reach these three
objectives at the same time. We have to make compromises. And these compromises have to be smart. And they are difficult. Now, second point is we are interested in regions. What does Dani Rodrik say about regions?
Well, actually, very little, almost nothing. He talks about the role of nation states in the global system. So we have to come up with our own ideas. And I think there are two ways regions can play a role.
One, they form alliances. And they get active on the global level, for instance, in formats like G20 or other formats. Maybe most of the discussions we're going to have these day
will focus on this kind of perspective. And I think that's also what Chaddah Islam, if I understood that correctly, was talking about mostly now how can Europe and maybe in alliance with East Asia be effective on that level. Well, as an economist, I'm rather
pessimistic that this works. I would love to share the optimism and the hope. But as an economist, what is global governance like? And here I would like to make another theoretical point. It's producing a public good.
Economists love to talk about public goods. A public good is something that is very difficult to create because it serves everybody. It's also hard to exclude someone from global governance. So who should have an incentive to create it to bear the cost of doing it
and maybe also bear the disadvantages of trying to influence others? That's extremely hard. And usually it works best if you have what is in theory called a hegemon, a benevolent hegemon who takes the lead, tries to create some advantages
for his or her own, and at the same time create legitimacy for leadership through providing these kind of public goods. And we don't have it anymore. I mean, that's the basic problem. It's about Trump. But we also saw this before happening. Even if maybe we have a much more positive emotional feeling
about Mr. Obama, let's face it, in terms of creating public goods on a global level, he was not successful. So this is a long-term development. We are in a post, what is sometimes called post-hegemonic era.
So this doesn't work. Would a stable alliance may be able to overcome it? So we don't have one hegemon, but we have a stable alliance of actors that move the global agenda into a certain direction. Well, I'm pessimistic. I mean, even for Europe, if you call Europe an alliance,
we know this is hard. Europe and East Asia, a stable alliance to move G20 forward. Well, as a political economist, I find this hard, extremely hard. And let me just mention Japan in this context.
I mean, on the East Asian side, Japan would be an important partner for such a kind of alliance. But Japan these days has very little wriggle way in order to make its policies effective, because in a way,
they are a little bit in a corner. They are in a very difficult regional situation. The situation with China is difficult. The role of North Korea is disastrous. So what Japan needs is a kind of stable security alliance
with the US. And almost everything that Japan has done in recent months, the famous visits of Prime Minister Abe in New York, can only be understood on this background. To follow different agendas, I think, for Japan
is hard these days. So is there a different role for regions, apart from building alliances on a global level for global public goods? Well, yes, I think there is. And this is to create regional public goods. And I think this is what is currently actually happening.
And this may be the most active part we see on a global level. That particularly in East Asia, we see these kind of movements to create new institutional mechanisms with the One Belt, One Road,
or the Belt and Road Initiative, so OBOR or BRI, whatever you like to call it. Being the most talked about mechanism that really seems to be moving somewhere currently. Now why is that so, and why is it
important for global governance? I think it's serious, whereas a lot of what is happening on the global level is, for an economist, cheap talk. But it's serious on the global level, I think, with CSIS. Japan was very hesitant about it because it started from China.
Let's face it, that was the major reason. But these days, a few days ago, actually, Prime Minister Abe made a public statement that he will be willing, with his government, to join the OBOR initiative to be part of the Asian Infrastructure and Investment Bank, AIIB.
That is a major instrument of that initiative. So even Japan is moving along. Why is that so? Well, I think it is about leadership again. It's a strategy, in my eyes, followed
by China to reach several objectives at the same time. Make a case for leadership, which is a national perspective, to be a diplomatic leader, to have the foreign policy advantages of that.
It has economic advantages, again, for China on a national level, because it helps the backward regions of China, for instance, through its infrastructure projects. But at the same time, it can also create advantages on the international level.
Let's not forget that. I mean, we have a lack of infrastructure spending. Already 10 years ago, the Asian Development Bank estimated the infrastructure needs of the region until 20 to the amount of $8 trillion US dollars.
This is an enormous amount. And others have not been active to fill it. I mean, we know the problems on the global level, a World Bank system. It's not moving forward.
Other initiatives as well, I don't want to go into the details. They are not moving. And in a way, China is creating this kind of public good. Now, OK, so this can be effective. And why would it be meaningful on a global level? Well, we can have learning effects.
We can have gestation effects. So new parallel mechanisms are used in order to overcome. And now I come back to my initial point to find a better solution in this kind of strange triangle. It's not the Bermuda Triangle, but it's
this kind of trilemma of globalization. And we create new points of solutions. They may not be very close to democracy, right? So that is sometimes called a problem, for instance, of the Ober initiatives, that it lays too little stress
on how policies, if you cooperate with a central Asian country, to what extent policies are democratically liberalized. But it may be helpful on the other two sides of the triangle. Couldn't we find a point that is closer to the democracy
corner as well? That is my next and already almost final point. Yes, I mean, it's always helpful to find such solutions, but it is not easy.
And in that context, let me discuss the role of Japan a little bit more. Japan was not too successful in recent years to start these kind of regional kind of initiatives.
And strangely, as it may sound, although Japan is often considered not to be interested in political issues like democracy, I think one of the major reasons why it was not successful in this kind of field of creating such kind of regional public goods
was actually that its proposals were too political. And I think few people know what is now considered these kind of Chinese initiative, belt and road. Well, you had something similar 10 years ago from Japan,
but it vanished into nothingness. It was called the New Silk Road Initiative. It was based on diplomatic relations. The Ministry of Foreign Affairs was very active, but also, of course, the Ministry of Finance.
They had it all laid out, more or less, but somehow it vanished. And I think one of the major reasons was that it was too political. It set stringent conditions on democratic processes in the partner countries.
And that had its origin in the situation around 1919 when we had the Eastern European Central Asian countries becoming market economies, leaving the Soviet umbrella. And that was the kind of legacy.
So Japan put that into the New Silk Road Initiative, and it didn't work. So it's not easy, but let me sum up. Although Japan was not successful, in a way, you may say that China learned from that. I'm a little bit oversimplifying history here, maybe.
But from that point of view, China's initiative is a serious one. And I think this would also be something for the EU to learn. This is my very final point, for the EU to learn. Let's not hope for these kind of alliances on the global level
because they cannot be very stable. Rather, look at these kind of regional initiatives and try to play a role, or maybe also create them.
There are some initiatives that are almost overlooked. And I think that Europe has a strong incentive to support them. For instance, there's an economic initiative in Northeast Asia between China, Japan, and South Korea with a trilateral cooperation secretariat located in Seoul.
This is still a very weak cooperation, but it's something that I think Europe has a strong interest to try to work harder on and support it because this is a kind of new point in this triangle I was talking about. Second, and really now the final point, European initiatives.
I wonder in this audience, has anybody heard the acronym EBRD before? It stands for the Europe, of course the experts know, but hardly anybody else.
It stands for European Bank for Reconstruction and Development. It was created around 1990 as a European mechanism to work into the newly freed economies of Eastern Europe up to Central Asia to create infrastructure problems.
It was a big hope in those days, but again it lost power, I think also to some extent for political reasons. Anyway, also on the European level we have initiatives to work on in order to create regional public goods and indirectly make
an impact on the global level. And yeah, that's what I would suggest as a policy point to end up with. Thank you very much for your patience. Thanks.