Can international rules help prevent national self-harm? (Live Mint)

Mains Paper 2: International Relations
Prelims level: Not Much
Mains level: Global governance challenges

Context

• US President Donald Trump has used national security as a justification for his tariffs on steel imports, his threatened tariff hikes on autos and the tariffs he recently vowed to impose on Mexican imports.
• “If you don’t have steel, you don’t have a country," he declared (to cite just one example).
• While Trump’s national-security claim seems absurd on the face of it, it raises difficult questions for the word trade regime and global economic governance more broadly.

Global governance challenges

• The critical challenge of global governance is determining the dividing line between policy domains in which nation-states are free to do as they please and those that are regulated by international agreement.
• In a world economy that has become increasingly interdependent, pretty much everything that one country does spills over to others.
• But such spillovers are not by themselves a sufficient reason to constrain national autonomy.
• Consider public education, gasoline taxes or highway speed limits. Each of these policies has consequences for trade partners.
• Improved skills alter a country’s comparative advantage and hence others’ trading opportunities.
• Gasoline taxes and speed limits affect demand for oil and hence prices on world markets. Such policies are not regulated internationally, and doing so would be widely—and rightly considered absurd.

Two classes of problems

The global public goods (or bads):

• The policies that benefit the world at large but produce little or no benefit at home. Controls on greenhouse-gas emissions is a key example.

The second class of problems is so-called beggar-thy-neighbour policies:

• To actions that produce economic benefits at home only to the extent they harm others—and generate global inefficiency in the process.
• A classic example is the cartelization of some scarce commodity to extract monopoly prices from trading partners.

Case of national security

• World Trade Organization (WTO) principles are vague and remain largely untested in practice.
• The relevant text seems to open the door very wide by saying “Nothing in this Agreement shall be construed to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests."
• And yet, in a recent ruling in a case not involving the United States, the WTO has adopted the position that it can review national decisions in this area and judge their appropriateness.

Way forward

• Global governance enthusiasts must reckon with the fact that most policy mishaps in the world economy today as in the case of Trump’s tariffs occur as a result of failures at the national level, not because of a lack of international cooperation.
• Trump’s tariffs are bad policy not because they harm certain other countries, but rather because they impose substantial costs directly on the US economy.
• Global arrangements cannot be relied on to prevent such domestic failures, and they are as likely to be captured by special interests as domestic political processes with far less democratic legitimacy.
• External constraints may in fact aggravate domestic governance failures, insofar as they empower particular distributional coalitions at the expense of the broad public.
• It is doubtful that such a light mode of global governance would make a difference when it comes to Trump’s trade follies.
• But at least it would deny Trump (and other nativist politicians) any basis for the chronic complaint that the WTO and other international bodies are trampling on national sovereignty.

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Prelims Questions:

Q.1) Consider the following statements regarding 'Token cut motion':
1. It represents the disapproval of the policy underlying the demand.
2. It states that the amount of the demand be reduced to One rupees.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: D
Mains Questions:
Q.1) Can international rules help prevent national self-harm? Explain.