[Issue Briefing] Global Governance in an Era of Hyper-Uncertainty

[Editor's Note]

To diagnose the changing international landscape and key issues ahead of the presidential election and the launch of a new administration in 2017, and to propose desirable directions for South Korea's foreign policy, EAI convened a roundtable discussion with experts from various fields. This paper, authored by the representative author, is based on the discussions held at the roundtable. Today, global politics faces significant challenges that no single nation can address independently. These include, for example, collective efforts by nations to combat global climate change, multilateral consultations among countries to overcome the global financial crisis, and cooperation to eradicate international poverty. Thus, nations have established global governance through cooperation to address global political issues. This means addressing global problems with a global approach. However, due to changes in global politics today, existing global governance is predicted to face challenges. Not only are there changes in global leadership from the United States, China, and the EU, but the issues that the international community must resolve are becoming increasingly complex and intertwined. Thus, global governance is entering an "era of hyper-uncertainty." Professor Lee Seung-joo (Chung-Ang University) diagnoses the current state of global governance, focusing on Official Development Assistance (ODA) and climate change, and discusses the tasks that South Korean diplomacy must address.

The early 2000s seemed to herald a golden age for global governance in world politics. The 2008 global financial crisis saw the emergence of the G20 Summit as an alternative to the existing G7 for managing the world economy, signaling the dawn of an era of global governance with representation that included developing countries. Amidst the global financial crisis, the G20 Summit demonstrated the potential of global governance in resolving world economic issues by achieving an agreement on maintaining the status quo of protectionism (standstill) and withdrawing new protectionist measures. The approach of resolving global issues through global governance also achieved significant progress in individual areas. In September 2015, at the 70th UN General Assembly, an agreement in principle was reached on the launch of the "post-2015 era" responsible for implementing the "Sustainable Development Goals (SDGs)," which replaced the existing Millennium Development Goals (MDGs). Subsequently, in December 2015, at the 21st Conference of the Parties (COP 21) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris, France, an agreement was successfully reached on the launch of a "new climate regime" after 2020. The resolution of global issues through global governance was not confined to the realm of low politics.

The approach based on global governance thus appeared to be emerging as a new alternative for resolving global issues. However, considering the rapidly changing global political environment, global governance, which forms the institutional basis for multilateral efforts to resolve global issues such as trade, climate change, energy, nuclear safety, and sustainable development, is entering an "age of hyper-uncertainty" (Eichengreen 2016).

The factors causing uncertainty can be summarized into two main categories. First, there is a shift in the policy orientation of major powers that have effectively led global governance. The United States, which led the 21st-century liberal international order, is increasingly likely to exercise limited leadership in resolving global issues following the advent of the Trump administration. This is because the Trump administration is likely to prioritize national interests, as evidenced by its strengthening of neo-protectionism focused on reviving domestic manufacturing and protecting jobs, and its aggressive unilateralism that exerts strong pressure on foreign governments over issues of market opening and exchange rates. The US's prioritization of national interests is evident in the Trump administration's proposed budget for fiscal year 2018, which includes an increase of approximately $52 billion in the defense budget while drastically cutting the joint budget of the State Department and USAID by 28%.

China, another pillar of the world order, appears to be differentiating itself from Trump's United States by emphasizing its role as a "guardian of free trade" that promotes the liberalization of trade and investment, as stated by President Xi Jinping at the Davos Forum in January 2017. However, it is difficult to confirm China's commitment to upholding the liberal international order, given its decision to suspend imports of Philippine bananas following the Permanent Court of Arbitration's ruling on South China Sea territorial disputes in July 2016, and its imposition of various economic sanctions in response to South Korea's announcement of the deployment of THAAD. Furthermore, resolving global issues requires not only hard power but also knowledge power and normative power, including scientific solutions and normative superiority. Currently, China lacks a sophisticated knowledge system and exemplary leadership, which limits its ability to exercise independent leadership.

The situation in Europe is also not favorable. Europe, which has played a leading role in climate change and development cooperation, is struggling to address its internal issues, including the ongoing Eurozone crisis, domestic conflicts arising from the surge in refugees, terrorist threats, and Brexit. Consequently, its capacity to exercise strong leadership in resolving global issues is limited. For instance, Brexit was not only an unexpected shock for Europe but also presented the Theresa May government with the new challenge of absorbing its potentially significant repercussions internally and enhancing the standing of the European Union (EU) after choosing "hard Brexit" amidst controversy. Moreover, the rapidly changing domestic political landscape, as seen in the French presidential election in May 2017 where Emmanuel Macron and Marine Le Pen secured the first and second highest vote shares, and the failure of candidates from traditional mainstream parties like the Republicans and Socialists to reach the runoff, is hardly conducive to resolving global issues. As a trend of increasing inward orientation is observed in other European countries following Brexit, the prospect of expecting European leadership in resolving global issues is diminishing. This growing inward orientation among major powers, focused on domestic issues, is likely to make it difficult for them to actively exercise leadership in resolving global issues.

Second, the increasing interconnectedness and complexity of issues is another major factor amplifying uncertainty. Most issues that have been addressed through global governance are significant in their own right. However, emerging issues are characterized by their complex entanglement with issues that were previously considered separate and unrelated. Official Development Assistance (ODA), which was traditionally focused on aid in a narrow sense, has become complexly linked with various issues due to the growing importance of private financing, leading to discussions on aid-investment linkages, environmental issues arising from climate change, and the need for a comprehensive approach to sustainable development at the global level. Climate change, too, has moved beyond discussions focused primarily on its environmental impact to include a new dimension of climate-energy linkages.

The increased complexity resulting from issue linkages requires significant effort and time to explore solutions and organize collective action. This is why, even with a general consensus on the principle of "global answers to global problems" (Martin 2005), it is difficult to automatically reach specific agreements on solutions.

Development Cooperation Governance

In the realm of development cooperation, the relatively simple issue of providing aid in a discretionary manner between traditional donor and recipient countries has undergone multiple simultaneous changes during the transition to the post-2015 era. First, pressure for changes in development cooperation governance has increased due to the emergence of new actors. Development cooperation agendas were primarily set by the leading donor countries of the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC). However, the OECD DAC has recently expanded its membership to 28 countries, leading to increased heterogeneity among its members. Given that membership is expected to continue to grow, the OECD DAC can no longer be considered a homogeneous group as it once was. The number of non-OECD DAC donor countries is also increasing. There are 19 non-OECD DAC countries that submit official development assistance data reports, such as Estonia, Hungary, and Turkey, along with non-member countries like China, India, and Brazil that do not submit reports. These countries accounted for 17.8% of total development cooperation as of 2014. This will likely act as a pressure factor promoting changes in development cooperation governance in the medium to long term.

Furthermore, the complexity of development cooperation governance is expected to increase further, considering the significant influence exerted by non-governmental actors. While past development cooperation was a matter between the North and the South, i.e., developed and developing countries, the post-2015 era involves not only the North-South dynamic but also the South-South dynamic due to the rise of emerging donors, and the interaction between governmental and non-governmental actors. In other words, development cooperation governance is transforming into a more complex issue of global partnership formation, encompassing not only donor-recipient relationships but also emerging donors and non-governmental actors. Reflecting this reality, development cooperation governance has evolved into a multi-layered structure during the transition to the post-2015 era. The question is how this multi-layered governance will mitigate the trade-off between representation and efficiency. Multi-layered governance is effective in ensuring representation and legitimacy by allowing various stakeholders to participate in decision-making. However, this also increases the possibility of hindering decision-making efficiency. It remains to be seen whether the increase in the number of actors with diverse interests can stably maintain a global partnership for sustainable development.

Second, in the post-2015 era, the complexity arising from the increasing linkage between issues in the field of development cooperation has dramatically increased. Unlike the MDGs, which focused on poverty eradication as a relatively narrow issue, the SDGs have significantly expanded the scope of development cooperation to include not only economic development, social and human development, and environmental sustainability, but also peace, institutions, and inequality. As a result, development cooperation is closely linked with climate change from the perspective of global sustainable development, and to actively respond to these changes, it is rapidly shifting from a narrow definition of aid to the issue of aid-investment linkages, mobilizing private funds in various ways.

Third, in relation to the two points above, attention should be paid to the impact of China's rise on development cooperation governance. As an emerging donor, China is pursuing a strategy of actively linking aid and investment outside the existing framework of development cooperation governance. As the goals of development cooperation expand, the importance of mobilizing resources to achieve them becomes more pronounced. China is strategically utilizing the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB) to fill this gap. In Asia, there is a rapidly growing demand for infrastructure in developing countries, but public funds are severely insufficient to meet this demand. In 2015, net ODA from OECD DAC members was only $131.4 billion, and even then, most ODA was used for education and health, with only 19% allocated to infrastructure construction. The ADB's annual new investment is only $13 billion, and its focus on addressing income and social disparities, resource management, innovation, and emergency relief limits its capacity for infrastructure construction.

China is attempting to link aid and investment as part of its strategy to preempt the Asian infrastructure construction market. The BRI is neither pure foreign aid nor solely a commercial investment project (Wang Yiwei 2016). The BRI serves as a means for China to expand its influence in Asia by combining investment and foreign aid. As repeatedly stated by the Chinese government, the AIIB is also expected to provide mechanisms for actively investing private funds compared to existing multilateral development banks, thus exhibiting a utilitarian aspect of investment-aid linkage. Fundamentally, it also harbors a motive to gain an advantageous position in the process of redefining international norms related to aid or the multilateral development order. By linking aid and investment through the BRI, China is increasingly enhancing its economic influence in Asia and is likely to leverage this to project strategic interests, such as the redesign of regional architecture.

Climate Change Governance

The Paris Agreement, adopted in December 2015 and entered into force in November 2016, serving as the foundation for the "new climate regime" after 2020, is expected to be a milestone in responding to climate change. Climate change governance faces various structural problems, despite the severe progression of climate change. These include the slow perception of change due to the nature of the issue, imbalances in interests as carbon emitters and victims differ, and continued attempts to delay active responses to climate change by restructuring existing fossil fuel systems. Consequently, although there is a broad consensus on the seriousness of climate change, the burden of initial high costs has historically relegated it to a low policy priority, making it difficult to exercise leadership at the global level.

However, the Paris Agreement is considered an advancement over the Kyoto Protocol in several aspects. First, unlike the Kyoto Protocol, which involved 27 major developed countries, the Paris Agreement has 195 signatory parties, making it a truly global response to climate change. Second, the Paris Agreement has achieved significant results in terms of institutional design. The Kyoto Protocol faced backlash from major developed countries like the United States and Japan by imposing a dual burden of reduction commitments on developed countries and support for developing countries under the principle of "common but differentiated responsibilities" (CBDR). In contrast, the Paris Agreement adopted a flexible system by encouraging all UNFCCC parties to implement their "nationally determined contributions" (NDCs), submitted according to their respective circumstances, thereby successfully mitigating the conflict between developed and developing countries. Third, unlike the Kyoto Protocol, the Paris Agreement has the significance of quantifying the goal of limiting global average temperature rise to 1.5-2°C. Fourth, the compromise reached between the United States and China, the world's top two greenhouse gas emitters, which had effectively hindered the implementation of the Kyoto Protocol, holds significant implications from an international political perspective. This compromise not only signifies that the leadership of the EU, which had previously led climate change negotiations, has been replaced by the US and China, but also, more broadly, it can be seen as a prelude to the long process of the US and China establishing a new world order.

Despite considerable achievements, the Paris Agreement still has many unfinished tasks. Above all, the support system for developing countries, which is absolutely essential for achieving the quantified goals, is not explicitly stipulated as an obligation for developed countries. While the Paris Agreement appears to build upon the Copenhagen Accord's commitment to mobilize $100 billion annually for developing country support by 2020, the general assessment is that the binding nature of this provision remains unclear. Furthermore, the reliance on individual parties' voluntary contributions for greenhouse gas emission reductions, while an unavoidable choice for reaching an agreement, inevitably raises questions about the enforcement mechanism.

Most importantly, the biggest concern is whether the United States and China, which showed a forward-looking stance during the Paris Agreement negotiations, will maintain their current policy direction. The Trump administration, which took office in February 2017, shows a tendency to adjust its foreign policy based on domestic politics, as evidenced by its espousal of national interest prioritization to protect domestic manufacturing and create jobs. The Trump administration's policy of prioritizing national interest appears to extend to the field of climate change. During his election campaign, President Trump publicly expressed negative views on climate change discussions, stating that the concept of global warming itself was a Chinese ploy to weaken American manufacturing competitiveness. Although the Trump administration has not yet taken specific measures to nullify the Paris Agreement, it has undoubtedly weakened the momentum for its implementation. The Trump administration's proposed budget for fiscal year 2018, which includes a 31% cut in the Environmental Protection Agency's (EPA) budget, the largest percentage cut among all agencies, and the dismissal of approximately 19% of EPA staff, indicates the policy direction of the Trump administration.

Given the Trump administration's favorable stance towards industries that deny climate change, it is unrealistic to expect leadership similar to that of the Obama administration. President Trump's position is heightening doubts from countries like China about the US's commitment to implementing the Paris Agreement. The potential for a policy shift in the US to trigger a change in China's attitude cannot be ruled out, raising the possibility of a leadership vacuum in the implementation of the Paris Agreement.

South Korea's Response Strategy

Since the 2000s, global governance has made significant contributions to the stable supply of global public goods in various fields, led by development cooperation and climate change. Global governance has emerged as a viable alternative for resolving current and future world political issues because it has demonstrated flexibility in achieving compromises amidst the projection of diverse interests by various actors. Specifically, the formation and maintenance of global governance have been driven by three factors: the epistemic community, which provided a basis for consensus based on scientific knowledge to set new goals; the EU, which has practiced intellectual and moral leadership; and, most importantly, the United States and China, which have shown a degree of compromise in establishing the world order.

However, global governance in 2017 faces a completely new international political environment. Trump's United States is highly likely to adhere to national interest prioritization, prioritizing its own interests in the field of global governance. Europe, which has been a pillar of global governance, is also highly likely to focus on resolving its numerous internal issues. Consequently, a leadership vacuum is inevitable in global governance, which has been led by existing developed countries. Meanwhile, China, as seen in the cases of development cooperation and climate change, is leveraging this leadership vacuum to pursue strategic linkages between its domestic and foreign policies.

Ultimately, global governance in 2017 is likely to see a shift towards major powers more actively projecting their national interests amidst an increased risk of instability stemming from the leadership vacuum. This development can be considered a crisis for global governance. What are the implications of this potential shift for South Korean diplomacy? First, it is necessary to pay attention to the complex relationship between the United States and China, which form the main pillars of global governance. As seen in the case of climate change, the adjustment of interests between the US and China contributed to the conclusion of the Paris Agreement. However, since the possibility of weakened policy commitment from both the US and China regarding the implementation of the Paris Agreement cannot be ruled out, proactive preparation is necessary. In the field of development cooperation, China is pursuing a strategy of expanding its influence on the periphery of global governance, which has been shaped by existing developed donor countries. South Korea needs to explore various ways to ensure that the US, including developed countries, and emerging countries, led by China, form a complementary relationship rather than a conflicting one in resolving global issues.

Second, considering the nature of issues related to global governance, it is necessary to focus on issue linkages rather than individual approaches to issues. Environmental and development cooperation issues, once considered subordinate to economic growth, are increasingly becoming mainstream. This change in the nature of issues is due to the fact that issue linkages are proceeding differently than in the past. The South Korean government must make efforts to prepare proactively for changes in issue interconnectedness. For example, the Fourth Industrial Revolution, which is gaining importance, could fundamentally alter the relationship between development cooperation, the environment, and economic growth, or even the linkage between domestic and foreign policies, and therefore, proactive preparation is necessary. Above all, this requires efforts to preemptively grasp market movements.

Third, South Korea needs to make multifaceted efforts to maintain the political momentum driving global governance. The trend of increasing inward orientation in the United States and Europe could entail qualitative changes in international politics, and therefore, their direction must be closely monitored. President Trump's national interest prioritization is unlikely to remain merely domestic political rhetoric or diplomatic posturing. This represents not only a crisis for global governance but also a significant challenge for South Korea, which has a high degree of external dependence. South Korea needs to approach the possibility of a crisis in global governance from the perspective of middle power diplomacy. Global public goods provided by global governance are like air; their importance is often not recognized in normal times. However, if global governance weakens or collapses, rebuilding it will require immense cost and effort, making efforts to maintain and manage global governance more crucial than ever. The South Korean government needs to pursue middle power leadership by fostering cooperation among middle powers to advance global governance. This can serve as a middle power diplomacy strategy to fill the leadership vacuum left by major powers.

Fourth, South Korea must make efforts to enhance the consistency between its global governance diplomacy and domestic policies. South Korea has experienced difficulties in balancing domestic policies with its diplomacy aimed at providing global public goods. In the field of development cooperation, debates have arisen regarding the tension between pursuing universal values and prioritizing national interests. This issue can be resolved by redefining it as enlightened or long-term broad national interests, thereby alleviating the tension between the two. Furthermore, considering that the goals of development cooperation diplomacy, as seen in the cases of major developed donor countries, were the product of intense deliberation and debate to gain domestic legitimacy for providing ODA and align it with overall foreign policy objectives, it is necessary to maintain a dynamic perspective that allows the goals of development cooperation diplomacy to evolve flexibly according to South Korea's reality, moving beyond a binary discussion of national interest versus universal values. Such an approach is also required in environmental diplomacy. In the past, South Korea vigorously pursued green growth diplomacy in the environmental sector, but sometimes omitted the process of consultation with domestic stakeholders who would bear the actual burden of carbon reduction. This ultimately led to South Korea losing the opportunity to exercise leadership in global green growth diplomacy. It is time to re-emphasize that consistency with domestic policies is crucial for exercising initiative in diplomacy that provides global public goods. ■

[Representative Author]

Lee Seung-joo_ Professor of Political Science and International Relations at Chung-Ang University. He graduated from Yonsei University with a degree in Political Science and International Relations and earned a Ph.D. in Political Science from the University of California, Berkeley. He has held positions as a researcher at the Korea Institute for National Unification, a postdoctoral researcher at the UC Berkeley APEC Study Center, an Assistant Professor in the Department of Political Science at the National University of Singapore, and an Assistant Professor in the Department of International Relations at Yonsei University. His primary research areas include East Asian regionalism, trade, and development cooperation.

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