Multilateral institutions such as the World Trade Organization (WTO) need an urgent revamp in order to remain relevant, European Central Bank (ECB) policymaker Pablo Hernandez de Cos said.
European Union officials, he said, are the best placed to undertake that rethink.
“One of the biggest challenges confronting the WTO and, in general, the system of international institutions, is how to transform themselves to be able to incorporate the big, global actors, which are tempted on the one hand by bilateralism (United States) and, on the other, to remain in a model of state capitalism (China),” Hernandez de Cos said during a speech in Madrid on January 28 evening.
“The European Union, so used to ensuring that the heterogeneity of its economies does not impede the progress that comes with economic integration, must take on a key leadership role in this task,” he added.
The WTO and its system for resolving trade disputes among countries fell afoul of US President Donald Trump and now the organisation’s appellate body can’t rule on new cases, a major setback for supporters of multilateralism.
Hernandez de Cos, who is also the governor of Spain’s central bank, said that the WTO’s appellate body has been “key for the effective functioning and predictability” of dispute settlements. “Therefore, it’s urgent to find a solution to the current paralysis in appointments to the appellate body,” he said.
When examining how the WTO and other multilateral organisations can be more effective to respond to the splintering global trade landscape, Hernandez de Cos said it’s important for policymakers to be self-critical.
“There’s no doubt that the hope of progress may have led us to be somewhat naive when it came to assessing the potential adverse implications of globalisation and, above all, the effect that the rapid and parallel process of technical change would have on some segments of the population,” he said.
Policymakers probably also underestimated the risks associated with the opening up of China and its emergence on the global stage. The remarks were made during the launch of “Excesses: Threats To Global Prosperity,” by Emilio Ontiveros.
ECB’s inflation goal ideas lack merit: Constancio
The European Central Bank’s former vice president has weighed into the institution’s review of its inflation target, saying two of the key ideas on the table don’t stand up to scrutiny.
Vitor Constancio, whose term ended in 2018, said on Twitter that including housing costs in measure of consumer-price growth could look like a trick to get the ECB artificially closer to its goal after years of falling short.
He also said a target range for inflation that starts lower than the current aim of “below, but close to, 2%” leaves the euro area exposed to risk of deflation if there’s an economic shock. His comments were retweeted by the head of the ECB’s press office.
Both ideas are up for discussion under Christine Lagarde as ECB starts its first strategic review since 2003. While Lagarde has promised to reach beyond current policy makers for input, some former officials seem keen to have their say right away.