SAJC Cluster 1,2 Lecture 15 Notes (Multilateral Institutions)

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture15_2025/pg 1 Lecture 15 Relative Role of Actors in Shaping the Global Economy (III): Multilateral Institutions KEY QUESTION: Can multilateral institutions influence economic activities? With the completion of this lecture, attached readings and tutorial, you should be able to discuss the influence of multilateral institutions on TNCs and states: − Association of Southeast Asian Nations (ASEAN) − World Trade Organisation (WTO) − World Bank Lecture Outline 15.1 Introduction: Multilateral Institutions 15.2 Influence of the Association of Southeast Asian Nations (ASEAN) on TNCs and States 15.2.1 The ASEAN Economic Community (AEC) Box 1: The Impacts of AFTA on the Philippines Box 2: The Impacts of AFTA on Indonesia 15.3 Influence of the World Trade Organisation (WTO) on TNCs and States Box 3: China joins the WTO Box 4: India – The impact of the removal of agricultural tariffs 15.4 Influence of the World Bank on TNCs and States Box 5: Closing the human capital gap in Egypt Box 6: World Bank won’t fund coal-related projects in India Box 7: IFC Invests in Pakistan’s Key Fashion Retail Sector to Help Create Jobs, Support Women Box 8: Singapore firm awarded urban water project in Ghana 15.5 Conclusion The World Trade Organization (WTO) sets out trading standards for much of the world to follow. But the relevance of such standards has been called into question in today’s economy which has grown more complicated compared to the time when it was formed. The WTO is an example of a multilateral institution, accorded with powers that can influence the global economy. Which other institutions operate above the scale of the state? How effective have these multilateral institutions been in influencing TNCs and states?

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture15_2025/pg 2 15.1 Introduction: Multilateral Institutions • Multilateral institutions (MIs) are international institutions created by states , usually as a means of achieving collective objectives , usually of global priority, that could not be accomplished by acting individually. • Some multilateral institutions have a truly global mandate, such as the World Bank and the World Trade Organisation (WTO). They play a powerful role in global development, including promoting economic and social development in specific countries or regions. • Other multilateral institutions operate at a macro-regional scale, such as the Association of Southeast Asian Nations (ASEAN). • In this chapter, we will examine how MIs shape the global economy. In other words, we want to be able to explain how MIs promote flows of trade, capital and labour within the global economy, thereby affecting connectedness and interdependence in the global economy. We also want to understand how MIs contribute to changes in the economic structures of countries. Finally, we should be able to explain how MIs contribute to variations in levels of development in the global economy. Many of these impacts will involve TNCs responding to the policies and measures implemented/recommended by MIs. • In addition, we learnt in Lect 13 that states regulate and manage the flows of economic activities across their borders. But when multilateral institutions are involved, the state’s role in governing its economy may arguably be compromised. • However, most of these multilateral institutions represent an upscaling of economic governance by states. They upscale from their national regimes of regulation to the international and macro- regional scale. • Nevertheless, while some states might have given up part of their capacity for economic governance to these multilateral institutions, it is important to remember that the world’s most powerful states today (e.g. the United States, Germany, and China) have remained the key movers behind these institutions. • Note that our syllabus requires us to be familiar with the: o ASEAN Free Trade Area (see Section 15.2) o World Trade Organisation (see Section 15.3), and o World Bank (see Section 15.4) 15.2 Influence of Association of Southeast Asian Nations (ASEAN) on TNCs and States • The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN: Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam joined ASEAN on 7 January 1984, followed by Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN.

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture15_2025/pg 3 • ASEAN operates at the macro -regional scale. A macro-region is a geopolitical subdivision that encompasses several traditionally or politically defined regions or countries. • As we saw in Lect 13, states – like firms – are competitors in the global economy. But they are also – again like firms – often collaborators: involved in trade agreements with other states. • One way that states collaborate with each other is by forming regional MIs, like ASEAN. • Regional MIs like ASEAN have become a pervasive feature of the global economy. At least one-third of total world trade occurs within such agreements. These have a two -sided quality: they liberalise trade between members while, at the same time, discriminating against third parties. • There has been an especially marked acceleration in formation of regional organisations since the early 1990s (see Fig. 1). Fig. 1 The Acceleration in Trade or Regional Bloc Formation • Although no regional MIs has yet adopted rules contrary to those of the WTO, there are some concerns about the impact of regional MIs on states and TNCs: o Regional MIs can divert trade, inducing a country to import from a country rather than from a cheaper supplier elsewhere; ▪ There is a growing consensus that regional multilateralism is an important force that shapes the global economy. The EU, NAFTA and ASEAN+ (associated arrangements with other countries) triad of regional trading arrangements dominate the world economy, accounting for about 70% of all world trade. o Regional MIsmight raise barriers against each other, creating protectionist blocks; o Regional trade rules may complicate the establishment of new global regulations. o In addition, regional MIs have a major influence on flows on investment by TNCs. The removal of internal trade (and other) barriers may lead firms to realign their organisational structures and value-adding activities to reflect a regional rather than a strictly national market. This, by definition, ‘diverts’ investment from some location in favour of others.

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture15_2025/pg 4 • ASEAN’S aims are to: o Accelerate economic growth, social progress and cultural development in the region. o Promote peace and stability in the region. o Promote mutual assistance and active collaboration based on common interest in various fields such as economic, social, and cultural. o Provide assistance to each other in areas such as research in education. o Collaborate effectively to facilitate continuous growth in the agriculture, industry, and trade sectors to increase the standards of living for ASEAN people. o Promote Southeast Asian studies. o Maintain close and beneficial cooperation with existing international and regional organisations. • The leaders of ASEAN view it as a community with enhanced capacity and capabilities to both respond effectively to challenges and to seize opportunities. To achieve the aims of ASEAN, ASEAN’s oper