National interest versus world welfare
CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat (The Philippine Star) - September 4, 2019 - 12:00am

There is a saying. “All politics is local.” Hence, national policies are an expression of local policies.

Last week’s topic about the Amazon fires and the danger to world environment is an indication of local politics coming to clash with world welfare issues. That is just one case.

A policy that seems a true expression of promoting the national interest could be in conflict with a larger goal that others also would want to achieve. Thus, some countries enact policies with little regard to the adverse or negative impact on the global community

The US, under the Trump administration, started the trade war with with China to extract concessions that would correct its trade imbalance with that country. The trade war, as it evolved, has upset the orderly economic growth of world trade and commerce. Further, it added layers of uncertainty and volatility to the world economy.

World welfare vs. exploitation of national resources. To go back to the forest fires of the Amazon. If they continue in their intensity, they pose a world environmental health tragedy.

The political debate inside Brazil focused on the exploitation of the resources of the Amazon to benefit the country’s economic needs. The newly elected Bolsonaro government favored the opening up of new lands for agricultural expansion. It, therefore, undertook new policies to actively exploit the resources of the Amazon.

To this effect, the new government relaxed some environmental controls and allowed more forest clearings to expand agricultural use. The standard use of fires to prepare for new cultivation of existing fields and to clear forest lands exacerbated the fires.

In short, the national interest became one of more active utilization of forest lands for output growth over that of protecting the forest lands from active encroachments giving weight to other concerns, such as world climate impact.

The critical challenge for the world community is to find ways to incentivize countries such as Brazil – and many other countries, those in Africa, in Asia, in the tropical parts of the world that still possess a wide range of rainforests to protect, preserve, and not to destroy them.

If their tropical forests are essential for the survival of the world’s ecosystem, what must be done so that their economic and environmental policies conform also to what the world needs most:  a breathing ecosystem that is also not warming itself toward unlivable conditions.

The Paris Accord on the environment and world welfare. The Paris agreement on the environment was signed in 2016. This multi-nation agreement is part of the UN action program on climate change so that countries can deal with greenhouse gas emissions, undertake technological adaptation and change and to facilitate appropriate financing.  It is an agreement with 195 signatory countries.

The Paris Accord has specific long term goals: to keep the increase in global average temperature to well below two degrees Centigrade above pre-industrial levels and to limit the increase to 1.5 degrees Centigrade.

However, the accord has a weak implementation arm. It depends on a coordinated collective action that has no implementing organization. The countries, through their own actions, are simply called to align their climatic goals with the Paris Accord.

The weakest part of the Paris Accord is that the most powerful country with a lot of stake on the state of climatic events and whose economic activities are seen as important in influencing climate change has opted out of it – the United States. The Trump administration had different ideas in mind.

Multilateral agreements need enforcers, otherwise national interest calculations weaken them. Other multilateral agreements need an enforcer, an organization that can help to change the course of events because of the powers given to it as well as the actions that it can take to make a difference.

At the end of the second World War, international institutions were created to promote the common interest of nations. Such effort was guided and inspired mainly by the power of a single leader – the United States – the country that made allied victory in that war possible.

The peace that followed led to the creation of United Nations, with its major organs. The General Assembly was the parliament of nations, but the Security Council – with the power of the veto vested in four great powers – helped to keep the peace, which it did, despite the disagreements and turbulence among nations.

But in the realm of world economic affairs, the UN organs were able to provide bodies that helped promote peace, growth, and even world prosperity. The main institutions for these – the World Bank and of the International Monetary System – were mainly responsible in helping to coordinate international economic policy and finance.

The lack of a similar trade organization that regulated and prescribed rules for international trade policy often led to turbulence and crisis among some nations. The world of trade among nations was, therefore, conducted with excessive tariff rates, the application of import controls, and retaliatory measures in trade in place of orderly growth of trade.

It took nearly 50 years for the world community to negotiate and develop such a world body. The negotiations started in the 1960s after the suggestion of then US president John F. Kennedy that the world undertake multilateral negotiations to reduce trade tariffs and practices.

Those negotiations ended in the founding of the World Trade Organization (WTO) in the 1990s. This body is designed to regulate the conduct of trade and the rules of trade and practice of trade dispute resolution.

Can we believe it, though? In our time, it is the US, under President Trump, which weakened the same WTO by behaving outside of trade rules to fight its own trade wars!

My email is: gpsicat@gmail.com. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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