|Will Europe still be a World Economic Player in the 21st Century?|
|November 25, 2005|
|ICRIER organized a lecture jointly with the Embassy of France in India and Euro India Centre on ‘Will Europe still be a World Economic Player in the 21st Century’ by Professor Jean Pisani-Ferry, Head Bruegel Center, Brussels on November 25, 2005.
Pisani-Ferry reflected on the international economic role of the EU (with political pressure starting to rise in favour of a reduction of Europe’s weight in international organizations), its representation in international economic institutions; the way it uses its power; the choices it faces and the potential role it can play in the rebalancing of power in the multilateral system to reflect rising economic powers like India and China?
Countering the growing perception that the EU is on the decline and does not respond well to global economic challenges, Pisani-Ferry argues that the EU is the clear winner and a dominant player. This is evident through its dominant share in several international institutions – the G7, the OECD, and the international energy agency and also its significant share of membership in global institutions such as the WTO or Bretton Woods Institutions.
Quoting Vijay Kelkar and co-authors, he notes that the “combined votes of Brazil, China and India in the Bretton Woods institutions are 19% less than those of Italy, Belgium and the Netherlands, while their combined GDPs at market exchange rates are 23% higher, their combined GDPs at PPP exchange rates are four times higher, and their populations are 29 times higher. These are astonishing figures, which may explain why the Asian countries feel so little ownership in the Bretton Woods institutions.”
However, he questions whether the EU makes effective use of its institutional power to set or atleast to shape the architecture or agenda of the multilateral system. To assess this, he addresses three key domains pointing out the limits in each. For instance, in international trade, EU has not been able to develop a consistent strategy. In the area of currency, although Europe has made economic and institutional investment in the creation of a common currency and the setting up of support institutions, since the launch of the euro, neither the EU as a whole nor the euro area have expressed strong intentions to build on it to enhance the international role. Even in the area of international finance, EU’s effective role does not seem to be commensurate to its potential role that its representation in the Bretton Woods organizations could allow it to play.
The policy issues according to him are evident: “Over representation in the international institutions and weaker use of power is unsustainable. The EU has an opportunity to trade off formal, but partially ineffective power for a formally diminished, but more effective influence in world economic affairs. For this to happen, it needs to sieze the opportunity of the call for a rebalancing of representations in the IMF and other institutions and grouping and reform of its own external representation. This does not need to imply a complete federalisation of external representation, which would not correspond to existing internal arrangements and for that reason would not be effective. The supervised delegation model in use in the trade field offers a middle path. It allows member states to retain control rights through the definition of a mandate and the supervision of its implementation.”
The lecture was chaired by Dr. Isher Judge Ahluwalia, Chairperson, ICRIER. It was attended by academicians, policy makers, thinkers and researchers.