Over the next few decades, emerging markets will come to dominate the global economy. By 2050, China will be the largest economy and six of today’s emerging markets will be among the world’s seven largest economies, along with the United States. This economic sea change, as well as the rebalancing of political and military power that will likely accompany it, will pose significant challenges for international coordination.
In no area are these challenges greater than in managing the global commons, starting with climate change but also including essential resources and preventing global pandemics. Differences in income, technological capacity, and the capability of institutions can complicate arriving at deals to preserve the global commons. Going forward, such deals will require agreement by a core group of advanced and developing countries; they are unlikely to be reached by universal assemblies.
The following excerpt is adapted from Juggernaut: How Emerging Markets Are Reshaping Globalization (Carnegie Endowment for International Peace, 2011), which explores the implications of the rise of emerging markets for the main channels of global integration—trade, finance, migration, and the global commons.
Negotiations over mitigating climate change illustrate most clearly how differences in income levels among countries affect discussions, as well as the ethical dilemmas that can arise during the process. Developing countries, home to about 1 billion chronically hungry people, face the urgent task of providing for the basic human needs of a large part of their population. Understandably, they are likely to value marginal changes in short-term income more than countries with much higher incomes; for them, a small decline in income could drive many people into extreme poverty, while in rich countries, it could mean many people foregoing a vacation or settling for less fashionable clothes. Thus poor countries may be more willing to risk long-term damage to the environment and their economies than to forgo part of their meager income today.
China (now the largest source of carbon emissions) and India—with per capita incomes only 6 percent and 2 percent of U.S. levels, respectively—are likely to resist binding emissions limits, which could hinder GDP growth, particularly in the short run (even as they argue for much greater reductions in rich countries). The tradeoffs involved are made even more difficult by the uncertainty surrounding the timing and nature of climate change’s effects.
Moreover, serious ethical issues arise in allocating emissions limits between developing and industrial countries. Developing countries should not bear a proportionate share of reducing emissions, since they have contributed a relatively small share of the stock of emissions now in the atmosphere (which is what drives climate change) and the welfare cost for them to meet emissions targets would be higher than that for rich countries.
Despite these practical and ethical considerations, the participation of developing countries in agreements to limit carbon emissions is essential to reducing climate change, since they now produce more than half of new global emissions and their share is set to rise sharply over the coming decades. Involving developing countries also is essential to reduce emissions efficiently—that is, at the lowest cost to the world as a whole. Because their economic interests will be proportionately greater in the future (due to their faster growth in population and incomes), their preferences must play a more important role than the size of their economies suggests today.1
While industrial and developing countries tend to adopt opposing positions on climate change, some potential exists for coalitions across the two groups, based on the expected impact on the countries. For example, the poorer island nations and tropical countries, bound to suffer disproportionately from climate change, may argue for stricter limits.
But the potential for conflict between developing and industrial countries over climate change is enormous. Disputes concerning carbon emissions could endanger the global trading system (as rich countries attempt to impose tariffs on polluting exporters) or conceivably threaten world peace as rich countries take more direct action to suppress emissions in developing countries that seek to achieve rich-country lifestyles.
Differences in technological capacity can also complicate international policy coordination. In the third Law of the Sea Conference (1973–1982), developing countries with limited technological capacity and capital to engage in deep sea mining argued that such mining should be supervised by an international organization and the revenues distributed among all countries. By contrast, industrial countries wanted to organize an international claims registry to avoid boundary disputes, but otherwise leave deep sea mining to private exploitation.
These differing positions raised an important ethical issue: Are resources outside the geographical border of any country the “common heritage of mankind,” and thus all countries should enjoy their benefits? Or do they simply belong to whomever has the technology and finance to reach them first?
For deep sea mining, a compromise was struck. The final treaty recognized that seabed resources were the “common heritage of mankind” and established an international regulatory regime. However, requirements that mining firms pay high licensing fees to the regulatory agency and provide technology to developing countries were dropped. As with any compromise, all parties disliked parts of this agreement, but it created a framework to allow mining by private firms while recognizing the rights of the global community to seabed resources.
Thus, while developing countries may have made reaching an agreement more problematic than if negotiations had been limited to the advanced countries, the outcome could be seen as both more equitable and more conducive to sustainable exploitation than a result that entirely ignored their interests.
Differences in technological capacity have also complicated global coordination when poor and fast-growing countries have laid claim to a larger share of resources than their present capabilities and economic weight suggest they should be entitled to. For example, in 1979, developing countries claimed radar frequencies based on their future, not current, needs, for fear the frequencies would no longer be available when they achieved the ability to use them. While complicating negotiations, these claims can make outcomes more equitable and more efficient in the future, as a larger share will go to countries that will need, and will be better placed to use, these resources.
Advances in technology can also create frictions between industrial and developing countries, as has happened in fisheries. “Factory ships” that can harvest and process very large quantities of fish have threatened the sustainability of many traditional fishing areas. The United Nations Food and Agriculture Organization estimates that almost 30 percent of global fish stocks are overexploited, depleted, or recovering, and that 50 percent are fully exploited. Setting and enforcing limits on fish harvests is therefore essential, but balancing the interests of industrial-scale and traditional fishing when forming an international agreement is problematic—particularly given the limited information on fish stocks and the administrative weaknesses of regional fishery organizations in many developing countries.
Sustainable management of migratory fish species is not the only arena in which weaknesses in public administration make it difficult for developing countries to deliver commitments, even when they want to do so. Limited resources also make it difficult to control land use and deforestation, administer the distribution of condoms and treat AIDS, react quickly and effectively to signs of a possible flu epidemic, and enforce pollution standards, for example.
While administrative capacity varies greatly among developing countries, the average value of some indicators of developing countries’ administrative capacity (bureaucratic quality and corruption) in the International Country Risk Guide (ICRG) is about half the average value of that of high-income countries.
Although the fastest-growing and more successful developing countries (including those likely to have the largest environmental imprint) tend to have better administrative capacity than very poor countries, their capacity may be uneven across the national territory and across sectors—making them reluctant to undertake commitments. Examples include the differences in incomes and public administration between Moscow and rural areas of the Caucusus, Shanghai and western China, and Mumbai and Orissa.
Authoritarian and unaccountable governments in developing countries have also sometimes made global coordination more difficult. For example, during the 1970 cholera epidemic when the World Health Organization (WHO) was working to limit the spread of the disease, Iran and Egypt dismissed cholera reports as “summer diarrhea,” while Guinea denounced WHO findings on the incidence of cholera and withdrew from the organization. More recently, China notified the WHO of the SARS outbreak four-and-a-half months after the first known case.
Additionally, the control of information and the press in some developing countries makes withholding information easier than in the more open societies of rich countries.2 But economic progress in developing countries has made it more difficult to enforce controls. By 2003, the Internet, e-mail, and mobile phones made it impossible for the Chinese authorities to bottle up information on SARS for long.
To be sure, the elaborate checks and balances in democracies, beginning with the United States, can also make global cooperation difficult. For example, several international treaties—including the Kyoto Protocol—as well as numerous trade agreements, have failed or been executed less successfully because the United States did not ratify them. Many other potential agreements, such as the Doha Round of trade negotiations, have been slowed or stopped because congressional approval seemed unlikely.
Cultural differences and social norms affect global coordination as well. A U.S. nonprofit organization, operating under a memorandum of understanding with the U.S. Commerce Department (although with an international board), controls the assignment of domain names and Internet Protocol numbers, for example, while other countries (including other rich countries) question why a single country should enjoy such influence over a critical international communications vehicle. Meanwhile, advocates of an open Internet fear that some developing countries that are particularly concerned about objectionable material (Islamic societies that abhor Internet pornography) or that control Internet access to protect a particular regime (such as China) will limit the content available online.
In short, although the impact of developing countries on global public goods has grown, differences with industrial countries make agreements to improve global coordination more difficult to reach than they were when only advanced countries were involved. Yet ignoring the interests of developing countries is bound to make outcomes not just inequitable by definition, but also inefficient. Increasingly, finding durable solutions to the challenges of managing the global commons requires the participation of developing countries. It is highly unlikely that such solutions will be hammered out in universal assemblies, however; instead a critical mass of countries, developed and developing, will need to negotiate core agreements that can gradually be extended to cover a broader group.
Uri Dadush is the director of Carnegie’s International Economics Program. William Shaw is a visiting scholar in Carnegie’s International Economics Program.
1. The Stern Report’s review of climate change defines an efficient reduction in carbon emissions when the marginal cost of the measures taken equals the marginal social cost of carbon emissions. If the discount rate used in these calculations is set too low (reflecting the time preferences of high-income consumers), the policies adopted will not be efficient, since developing country interests will be proportionately greater in the future.
The Carnegie Energy and Climate Program engages global experts working on issues relating to energy technology, environmental science, and political economy to develop practical solutions for policymakers around the world. The program aims to provide the leadership and the policy framework necessary to minimize the risks that stem from global climate change and to reduce competition for scarce resources.
The Carnegie International Economics Program monitors and analyzes short- and long-term trends in the global economy, including macroeconomic developments, trade, commodities, and capital flows, drawing out their policy implications. The current focus of the program is the global financial crisis and its related policy issues. The program also examines the ramifications of the rising weight of developing countries in the global economy among other areas of research.
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