Multilateralism has long been the wave of the future. It still is the wave of the future.
Most economic historians agreed that the two world wars of the twentieth century and the major one of the nineteenth century were to a large extent caused by the trade-related disputes between the world’s great powers.
Sensing impending conflict, the U.S. and the major Western European countries sought to restrain the build-up of the armed forces of Germany and Japan by prohibiting or restricting the flow of natural resources to those countries.
Similarly, most economic historians agreed that the remarkably long period of world peace that has lasted since the end of World War II is in large part attributable to the environment of economic multilateralism that was created, and has been promoted by, the General Agreement on Tariffs and Trade (GATT) of the them-newly-founded United Nations.
In a multilateralist environment, countries organize themselves into groups – called economic communities or customs unions or free trade areas – whose rules require members to extend tariff-free treatment and full economic support to their fellow-members.
The beneficial effect of granting preferential tariff and customs treatment on a reciprocal basis was recognized in the nineteenth century by the numerous German principalities and dukedoms, who got together and formed the Zollverein, a customs union that proved to be instrumental in the creation of the state of Germany. The Zollverein became the model for similar movements in other European countries.
Not very many people know that the foremost exemplar of multilateralism – the powerful European Union (EU) – had modest beginning. In 1952, barely seven years after the end of World War II, the French statesman.
Jean Monnet thought that the time had come for the European combatants to leave the devastations and enmities behind them and move toward economic integration. Looking around the European economic landscape, Monnet decided that Europe’s coal and steel industries were the best candidates for integration. Accordingly, he got six countries – France, Belgium, The Netherlands, Luxembourg, Italy and West Germany – to agree to form the European Cool and Steel Community (ECSC).
The accession of the United Kingdom and a number of other countries caused ECSC to metamorphose into the European Economic Community (EEC). EEC became an official reality with the Treaty of Rome’s coming into force in 1970. In recognition of its growing political concerns EEC, was in due course renamed EU.
Since the founding of ECSC many countries have formed trade groups in order to gain the enormous benefits offered by multilateralism.
In the 1950s, Malaysia, the Philippines and Indonesia formed Maphilindo, which was later renamed the Association of Southeast Asia (ASA). ASA became the Association of Southeast Asian Nations (ASEAN) when Thailand, Singapore and Brunei expressed a desire to join the three ASA countries in a single Southeast Asian trade group. ASEAN will celebrate its 60th anniversary in 2027.
With the encouragement and support of the international financial institutions, the countries of South Asia (India, Pakistan, Bangladesh, Nepal, Bhutan and Afghanistan) likewise formed a preferential-trade group.
The wave of multilateralism washed over the shores of Africa. The countries of East Africa and West Africa likewise organized preferential-trade groups among themselves.
Multilateralism has likewise been the trend in the Western Hemisphere. After years of arduous negotiations the three North American countries – the U.S., Canada and Mexico – agreed to form arguably the most important free-trade area in the world, viz., the North American Free Trade Area (NAFTA).
During his first presidency, Donald Trump demanded certain changes in NAFTA’s terms. With the changes approved and incorporated, NAFTA – now renamed the Mexico-Canada-U.S. Trade Association (MCUTA) resumed its operations.
Two giant free-trade areas were organized south of the southern Mexican border one was the Latin American Free Trade Area (LAFTA). A number of countries opted not to join LAFTA and formed their own preferential-trade group, Mercosur. Not to be left out, the countries of Central America got together and formed a common market.
During the twenty-first century, the concept of multilateralism has shifted from being limited to a number of regional countries to having memberships spanning entire continents.
A case in point is the Trans-Pacific Partnership (TPP) whose membership consisted of Australasian, North American and Latin American countries. TPP became inoperative when Trump disapproved the participation of the U.S., which has the world’s largest economy.
Into the breach stepped the Regional Comprehensive Economic Partnership (RCEP), which has more or less the same membership structure as TPP. The Senate has ratified this country’s membership in RCEP.
With his reciprocal-tariffs program, in which all countries are required to separately negotiate tariff rates with the U.S., Donald Trump has been seeking to replace economic multilateralism with economic bilateralism. That won’t work. Multilateralism has long been the wave of the future. It still is the wave of the future. Trump’s bilateralism is a passing distraction that will end when he is gone. (llagasjessa@yahoo.com)
