Global Governance – Shaping Globalization

© Christian Kruppa

Germany is one of the world’s most globalized countries. Its prosperity depends largely on developments that cannot be controlled at the national level alone. In order to participate in shaping globalization and continue to benefit from it, Germany must engage actively in global governance.

Few other countries in the world are as globalized as Germany. According to a 2014 study by the McKinsey Global Institute, Germany’s international flows of goods, services and capital represent 110 percent of its total GDP. Foreign trade is one of the most important engines of growth, competitiveness and employment. About one in four jobs in Germany depends directly or indirectly on exports. In the manufacturing sector, the figure is even one in two. Germany is also one of the countries with the most foreign students, and benefits through that exchange of research, ideas, and cultures. Germany’s globalization is also reflected in international communications, where it is the country with the second-heaviest international data traffic in relation to population.

Germany’s prosperity depends on global developments

The fact is that Germany benefits from globalization. This produces a strong dependency. Germany’s prosperity depends on a multitude of global developments that cannot be controlled at the national level alone. Fair competition, rule-based trade, sustainable use of resources, open markets, political stability, an open Internet, climate change and epidemics are just some examples of global factors that are decisively shaping the future of the German economy.

No country can master the global challenges on its own. As the latest economic and financial crisis demonstrated more clearly than ever, global cooperation is indispensable in an interconnected world. The globalized world economy needs global governance and Germany must play an active role in shaping it.

The globalized world needs cooperative action

Global governance is a continuous process of balancing different interests and initiating cooperative action. On the one hand, the basis for this is coordinating national policies and identifying shared norms and rules of behaviour. Examples include financial market regulation in the Bank for International Settlements, and the guidelines for multinational enterprises produced by the Organization for Economic Cooperation and Development (OECD). Furthermore, global governance must also initiate joint action and bundle resources, as is the case in the International Monetary Fund and the World Bank Group.

Forms and formats of global governance

Global governance manifests itself in various forms. International agreements (such as the trade rules of the World Trade Organization, WTO) represent one aspect. But loose groupings (such as G7, G20) and informal discussion fora (for example the World Economic Forum) also contribute to effective global governance.

The pinnacles of global governance are the G7 and the G20, whose agendas range from geopolitical crises through climate protection to financial market regulation and transparent competition between national taxation systems.

The actors of global governance are as diverse as the forms and formats. Besides governments and international institutions, they also include civil society and businesses. Their participation extends from simple consultation in the OECD to decision-making powers in Internet governance.

German business in global governance 

In view of the importance of the global framework for German business, BDI participates actively in global governance.

In order to make the voice of German industry heard in the G8 process, BDI set up the G8 Business Summit (B8) in 2007. After Russia’s suspension from the G8 in 2014, the B8 became the B7. In the B7, the leading business and industry associations of the G7 nations support the G7 process by preparing consolidated business recommendations and analyses.

Business 20 (B20) offers a similar format for the G20 process, where representatives of global business support the G20 with concrete proposals for action. Leading business and industry associations of the G20 states have also formalized their cooperation in the B20 Coalition. The B20 Coalition supports the B20 process and ensures continuity of dialogue as the G20 presidency revolves.

BDI is also actively engaged in the Business and Industry Advisory Committee to the OECD (BIAC) that advises the OECD in its coordination work.

The International Chamber of Commerce (ICC), which has existed since 1919, remains a central forum of global governance. The ICC enjoys observer status in almost all relevant international organisations, and is closely involved in a huge range of global governance processes from WTO trade talks to Internet governance and the fight against money laundering. As well as national business organizations, the ICC’s members also include businesses and national chambers of commerce.

B7, B20, B20 Coalition, BIAC, and ICC support global governance with expertise and consolidated representation. Their members also create an important link, in that they not only contribute to international coordination processes but also track their implementation at the national level.