How do international institutions adjust to shifting power distributions among their members? We argue that institutional adaptations to the rise of emerging and the decline of established powers are different from what power transition theories (PTTs) would lead us to believe. Institutional adaptations are not impossible, as pessimist PTT variants hold; and they are rarely easy to attain, let alone perfect, as optimist PTT variants imply. To bridge the gap between these versions of PTT, we propose an institutionalist power shift theory (IPST) which combines insights on the conditions and mechanisms of institutional change from functionalist, historical and distributive variants of rational institutionalism. IPST claims that institutional adaptations will succeed or fail depending on whether or not emerging powers are able to undermine the international institution and to make credible threats to this effect. To demonstrate IPST’s plausibility we analyze: (1) how India and Brazil gained the agreement of established powers to their membership in the WTO core negotiation group (“Quad”), which had previously been dominated by developed countries; and (2) how China reached agreement with established powers on (more) even-handed surveillance of IMF members’ financial stability, which, up to then, had focused on developing countries and exchange rate issues.
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The real threat to world order is not so much competition for a leading role in international institutions but rather that both established and emerging powers act as “shirkers” seeking to avoid the burden of providing and stabilizing order (Schweller and Pu 2011: 64).
This is in line with more recent variations and applications of PTT, which do not presuppose a full-blown power transition (Chan 2008, Schweller and Pu 2011). According to them, PTT is also applicable to a power transition in the making and, even more generally, to any power shift that leads relative winners in terms of aggregate resource power to challenge an institutional status quo which still privileges relative losers of aggregate power.
Among academics and public intellectuals (Bisley 2010; Kennedy 2010; Khanna 2009; Zakaria 2009) as well as policy-makers (Lamy 2012; Reuters 2008), there is a widespread perception “that power is shifting in global politics and that emerging powers are assuming a more prominent, active and important role” (Hurrell and Sengupta 2012: 463), which challenges established Western powers. For example, then WTO Director-General Pascal Lamy (2012) claimed that the “rising weight of influence of emerging economies has shifted the balance of power. This clearly implies a number of transitions.”
The Quad is also the institutionalized core for several informal and exclusive WTO negotiation fora, most notably the so-called Green Room Meetings (during a ministerial conference) and the “Mini-Ministerials” (between the conferences) which – organized by the Director General – bring together Quad members with relevant developed countries and selected developing countries (Drahos 2003; Liang 2005).
The Group of Twenty (G20) is a coalition of developing countries within the WTO. This developing country coalition within the WTO should not be mixed up with the broader G20, i.e. the group of the 20 major economies. Members of the G20 in the WTO are Argentina, Bolivia, Brazil, Chile, China, Cuba, Ecuador, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Peru, Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela, and Zimbabwe.
In this arrangement, the US and the EU represented the most powerful developed countries, Australia represented the Cairns Group, and Brazil and India represented the G20 (Efstathopoulos 2012).
This also served to comfort Japan, which criticized the formation of the FIPs and the new Quad but, due to its deteriorated bargaining position, could not do much about it (Wilkinson and Lee 2007), as well as Australia, which was one of the FIPs but also dropped out of the group of the privileged four in the Quad.
Given the great economic weight and the crucial role in international trade that it has gained over the past three decades, China might also be considered a likely candidate for joining the “new” Quad. However, China became a member of the WTO only in 2001. At that time, Brazil and India had already firmly established themselves as leaders of the developing economies in the WTO. Moreover, after its access to the WTO China pursued a strategy of quietism and shied away from any conflict with established WTO members (Scott and Wilkinson 2013).
The US also suffered from a loss of support from IMF staff. Even before the crisis, a group of key individuals, including Rodrigo De Rato and Mark Allen, had tried to install more even-handedness in IMF surveillance (Blustein 2014). In response to the crisis, however, IMF staff officially recognized that advanced economies and especially their financial sectors could be sources of financial instability (IMF 2009b) and strengthened the call for enhanced systemic surveillance. The IMF even went beyond China’s demands when it explicitly stressed in its 2010 Mandate Review (IMF 2010; see IMF 2011) that there was a need for a full-fledged reform of the surveillance system, including a revision of the relevant Articles of Agreement, so as to render it multidimensional and symmetric in terms of its prescriptions for exchange rates and other policies.
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Zangl, B., Heußner, F., Kruck, A. et al. Imperfect adaptation: how the WTO and the IMF adjust to shifting power distributions among their members. Rev Int Organ 11, 171–196 (2016). https://doi.org/10.1007/s11558-016-9246-z
- Institutional change
- Power transition
- Rational institutionalism
- World Trade Organization (WTO)
- International Monetary Fund (IMF)