As the rules-based world order has come to an edge, developing countries are trying to understand how trade would work for the global flow of goods and services. Nepal is set to graduate from the Least Developed Country (LDC) category in 2026, which would bring even more challenges in terms of trade and financing. There needs to be a reassessment of the existing strategies for the last three and half decades against the backdrop of a new world ‘disorder’.

Country case

Nepal has made tremendous efforts to integrate into the global economy since 1990, such as becoming a member of the World Trade Organisation (WTO) with more than 15 years of discussions and deliberations. However, with emerging global frontiers, countries like ours should be agile enough to swiftly readjust to the new realities. The process of readjustment and realignment with such realities would require resources which Nepal severely lacks. So, how can Nepal fund such efforts?

Nepal Trade Integration Strategy (NTIS) 2023 lists a total of 32 products as promising ones. However, the implementation of NTIS-2023 remains questionable as there is less clarity on how the country would advance the sectors to increase the export of identified products.

Perplexed world

‘The decadent international but individualistic capitalism in the hands of which we found ourselves after the [First World] war is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous–and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed,” wrote British economist John Meynerd Kyenes in 1933 about National Self-Sufficiency. His words seem more relevant today as we don’t know what to pursue. However, as Keynes said, small countries like Nepal do not have plans to become self-sufficient. A global effort is needed so that small countries can work collectively.

The global economy has been struggling with the global financial crisis, fuelled by the Covid-19 pandemic. In addition, multilateral institutions have lost their credibility. Although a fresh start is needed, we don’t have an institution or nation to lead the way forward.

At this time, the global south is more precarious, given that all the developed countries are focusing on securing hard power to deter each other from aggression. The West has now been divided into Europe and the rest. This will have enormous implications for multilateralism as Europe alone cannot fund it. Fueling the machine of multilateralism would be costly. On the other hand, ignoring it would impact international trade, global economic government and the financial system.

Plugging the notes

Several countries, including the United States and the United Kingdom, formed the General Agreement on Tariff and Trade (GATT). Russia and China were not on the table, and it took them several decades to access membership. Russia was admitted as a member of the World Trade Organisation only in December 2011, which took effect in August 2012, whereas China got membership in 2001. The question of whether Russia would value a liberal world order is still relevant. But we saw a historic departure in the nation’s policy that was fueling multilateralism.

We must revisit how developing countries viewed GATT when considering another multilateral institution. Criticising GATT in March 1965, Indian Diplomat KB Lall said, “The developing countries, of course, had had no bargaining power, politically and economically. The rule of reciprocity has required them to give a matching concession, but clearly, they are not able to give any.” This sounds more familiar today as the developed nations have been asking for the same treatment from both sides. In that sense, the world would be divided into rich and poor categories.

Leading from the centre

Countries like Nepal shouldn’t shy away from taking leadership. We should consider broader economic integration of developing countries and Europe, as we see potential threats to our trade and investment.

We need more efforts and reiterations to stop further decay in the credibility of existing multilateral institutions, envision better economic integration and uphold principles of free and fair trade globally. Countries can focus on building hard power, but it shouldn’t be at the expense of compromising global norms.

The question to Europe, China, India and the rest of the global south is whether they can function together with the discontinuity of the fuel flow to run multilateralism. However, the bigger concern should be whether China, India and Europe can lead the rest of the countries in the global south.

It is about time we think about a multilateral institution that can unite these forces, envisioning an even more liberal world where tariffs are used as instruments, not weapons. Europe can be part of a new global institution to lead and further strengthen multilateralism. The new institution should take bold, comprehensive and coordinated policy direction to support ongoing multilateralism and reset the norms for better economic engagement. The countries can then think of going beyond liberalism and preserving the values of free and fair trade to raise people's living standards.