Most governments recognize the importance of pandemic prevention, orderly trade, effective corporate taxation, and the fight against climate change. The question is whether they can find common ground on each of these issues, and pursue a shared agenda without the United States.
PARIS – “The postwar global order is not just obsolete; it is now a weapon being used against us.” So says US Secretary of State Marco Rubio, perfectly encapsulating his boss’s attitude toward global governance. President Donald Trump’s administration is completely rejecting the principles that the United States has promoted since the 1941 Atlantic Charter.
The 70-plus executive orders and memos issued since Trump returned to the White House on January 20 envision a very different global system than the one that has prevailed for the past eight decades. Gone is the balance between privileges and obligations that characterized the rules-based postwar order.
Most governments are rightly appalled by what they are seeing. They still recognize the importance of preventing pandemics, respecting trade rules, limiting a race-to-the-bottom tax competition, and fighting climate change. The question is whether they can find common ground and act in an effective way without the US.
We believe they can, especially if the European Union, which itself is governed by rules and shared commitments, takes the lead in organizing a collective response. To that end, EU countries should start reaching out to each other and non-EU countries to form “coalitions of the willing” across four key domains: global public health, climate change, international trade, and corporate taxation.
Start with public health. One of Trump’s first decisions as president was to withdraw from the World Health Organization, a move understandably met with dismay around the world. Fortunately, though, preventing future pandemics does not require US membership in the WHO. While there will certainly be budgetary consequences, the rest of the world can easily fill the gap, which amounts to some $500 million per year. What matters most is that the WHO can continue to fulfill its mission, especially in disease-prone poorer countries.
On climate change, the EU already sets binding policy targets for member states, and is therefore well positioned to act as one, form alliances with third countries and exert significantly more global influence. It could negotiate new partnership agreements and build a coalition of the willing to maintain momentum toward net-zero emissions, despite the US withdrawal from the Paris climate agreement. Potential partners include major advanced economies and many emerging markets, the most obvious one being China. Despite being the world’s top emitter of greenhouse gases, China has a vested interest in the net-zero transition.
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True, as the Nobel laureate economist William Nordhaus has pointed out, the larger a climate coalition grows, the stronger the incentive for others to free ride on the discipline it provides. But this problem can be overcome. Nordhaus’s own solution is to form climate clubs whose members would place a tariff on imports from non-participating countries. This option may not be legal under current World Trade Organization rules; but given Trump’s misbehavior, it may still be the way to go.
On the matter of international trade more broadly, the EU has powerful cards to play in response to US tariffs. Here, too, it can create a coalition of the willing with countries that want to continue to play by reasonable rules and help reform the global trade architecture.
Trade policy is a quintessential EU competence. The European Commission negotiates trade agreements on behalf of all member countries, and once an agreement has been reached, it must be approved by a qualified majority of member states in the Council of the EU and by the European Parliament. As illustrated by France’s failure to block the recent EU-Mercosur trade deal, a minority of holdouts cannot stymie the will of the majority.
This arrangement has been instrumental in making the EU a global trading power. Now, Europe should take the initiative to bring together those who want to salvage what is left of trade multilateralism and define an agenda for the future. Obvious partners include India and China. By launching a major negotiation, the EU would demonstrate that it is not blindly following the US.
That brings us to taxation. In October 2021, after a long discussion process, more than 140 jurisdictions agreed on a minimum effective tax rate on multinational corporations’ profits. If a firm does not pay 15% in one country, participating countries can collectively tax it on the difference and then prorate the distribution of the proceeds according to the share of production in each jurisdiction. The great advantage of this system is that it is self-enforcing. If a jurisdiction does not collect the 15% tax, others will, creating a powerful incentive to collect it oneself.
To come into force, this agreement must be ratified by national parliaments. So far, more than 40 countries have done so, and many others are scheduled to vote soon. The Trump administration’s abandonment of the agreement was largely symbolic, because Congress had not approved it. In any case, other countries can still bring the minimum tax to fruition, though they should expect US pushback.
In this new world, where major multilateral institutions are likely to find themselves paralyzed in the near term, coalitions of the willing will be necessary to advance global progress and cooperation. On global public health, climate change, international trade, and corporate taxation, Europe can lead by example and help to keep multilateralism alive. Now that the Trump administration is openly repudiating the postwar rules-based system that the US was instrumental in building, Europe and others can and must fill the leadership vacuum – including through partnering with China.
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By choosing to side with the aggressor in the Ukraine war, President Donald Trump’s administration has effectively driven the final nail into the coffin of US global leadership. Unless Europe fills the void – first and foremost by supporting Ukraine – it faces the prospect of more chaos and conflict in the years to come.
For most of human history, economic scarcity was a constant – the condition that had to be escaped, mitigated, or rationalized. Why, then, is scarcity's opposite regarded as a problem?
asks why the absence of economic scarcity is viewed as a problem rather than a cause for celebration.
PARIS – “The postwar global order is not just obsolete; it is now a weapon being used against us.” So says US Secretary of State Marco Rubio, perfectly encapsulating his boss’s attitude toward global governance. President Donald Trump’s administration is completely rejecting the principles that the United States has promoted since the 1941 Atlantic Charter.
The 70-plus executive orders and memos issued since Trump returned to the White House on January 20 envision a very different global system than the one that has prevailed for the past eight decades. Gone is the balance between privileges and obligations that characterized the rules-based postwar order.
Most governments are rightly appalled by what they are seeing. They still recognize the importance of preventing pandemics, respecting trade rules, limiting a race-to-the-bottom tax competition, and fighting climate change. The question is whether they can find common ground and act in an effective way without the US.
We believe they can, especially if the European Union, which itself is governed by rules and shared commitments, takes the lead in organizing a collective response. To that end, EU countries should start reaching out to each other and non-EU countries to form “coalitions of the willing” across four key domains: global public health, climate change, international trade, and corporate taxation.
Start with public health. One of Trump’s first decisions as president was to withdraw from the World Health Organization, a move understandably met with dismay around the world. Fortunately, though, preventing future pandemics does not require US membership in the WHO. While there will certainly be budgetary consequences, the rest of the world can easily fill the gap, which amounts to some $500 million per year. What matters most is that the WHO can continue to fulfill its mission, especially in disease-prone poorer countries.
On climate change, the EU already sets binding policy targets for member states, and is therefore well positioned to act as one, form alliances with third countries and exert significantly more global influence. It could negotiate new partnership agreements and build a coalition of the willing to maintain momentum toward net-zero emissions, despite the US withdrawal from the Paris climate agreement. Potential partners include major advanced economies and many emerging markets, the most obvious one being China. Despite being the world’s top emitter of greenhouse gases, China has a vested interest in the net-zero transition.
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At a time of escalating global turmoil, there is an urgent need for incisive, informed analysis of the issues and questions driving the news – just what PS has always provided.
Subscribe to Digital or Digital Plus now to secure your discount.
Subscribe Now
True, as the Nobel laureate economist William Nordhaus has pointed out, the larger a climate coalition grows, the stronger the incentive for others to free ride on the discipline it provides. But this problem can be overcome. Nordhaus’s own solution is to form climate clubs whose members would place a tariff on imports from non-participating countries. This option may not be legal under current World Trade Organization rules; but given Trump’s misbehavior, it may still be the way to go.
On the matter of international trade more broadly, the EU has powerful cards to play in response to US tariffs. Here, too, it can create a coalition of the willing with countries that want to continue to play by reasonable rules and help reform the global trade architecture.
Trade policy is a quintessential EU competence. The European Commission negotiates trade agreements on behalf of all member countries, and once an agreement has been reached, it must be approved by a qualified majority of member states in the Council of the EU and by the European Parliament. As illustrated by France’s failure to block the recent EU-Mercosur trade deal, a minority of holdouts cannot stymie the will of the majority.
This arrangement has been instrumental in making the EU a global trading power. Now, Europe should take the initiative to bring together those who want to salvage what is left of trade multilateralism and define an agenda for the future. Obvious partners include India and China. By launching a major negotiation, the EU would demonstrate that it is not blindly following the US.
That brings us to taxation. In October 2021, after a long discussion process, more than 140 jurisdictions agreed on a minimum effective tax rate on multinational corporations’ profits. If a firm does not pay 15% in one country, participating countries can collectively tax it on the difference and then prorate the distribution of the proceeds according to the share of production in each jurisdiction. The great advantage of this system is that it is self-enforcing. If a jurisdiction does not collect the 15% tax, others will, creating a powerful incentive to collect it oneself.
To come into force, this agreement must be ratified by national parliaments. So far, more than 40 countries have done so, and many others are scheduled to vote soon. The Trump administration’s abandonment of the agreement was largely symbolic, because Congress had not approved it. In any case, other countries can still bring the minimum tax to fruition, though they should expect US pushback.
In this new world, where major multilateral institutions are likely to find themselves paralyzed in the near term, coalitions of the willing will be necessary to advance global progress and cooperation. On global public health, climate change, international trade, and corporate taxation, Europe can lead by example and help to keep multilateralism alive. Now that the Trump administration is openly repudiating the postwar rules-based system that the US was instrumental in building, Europe and others can and must fill the leadership vacuum – including through partnering with China.