By Andrew Godwin, Associate Professor, Director of Transactional Law, Director of the Graduate Program in Banking and Finance Law, and Associate Director of the Asian Law Centre – University of Melbourne
Posted on February 23rd, 2021
This commentary was first published on the Asialink website. It is part of a series of commentaries curated by the Australian Committee of the Council for Security Cooperation in the Asia Pacific, in collaboration with Asialink (University of Melbourne). Anthony Milner, Visiting Professor at AEI, is Co-Chair of the Australian Committee, together with Ric Smith AO.
The international Rules-Based Order has been subject to competing perspectives and interpretations. Legal expert Andrew Godwin argues the way to resolve this contention might be to focus on outcomes.
The term ‘Rules Based Order’ (RBO) to describe the international order to which all countries should aspire has lost its cachet. References to the RBO tend to be identified with one perspective only — such as that associated with the post-War liberal international order led by the US — and to get mired in arguments about how rules should be interpreted, why the rule-makers have not followed the rules themselves and why those who have traditionally been rule-takers are not content with following the existing rules and insist on establishing their own (competing) rules or order.
The rise of the Asia Infrastructure Investment Bank (AIIB), for example, is seen by some as establishing an institutional order that competes with the World Bank and the IMF and prioritises norms or rules such as non-interference and state-led development policies over the liberalism as espoused by the RBO. That is not to say that rules are not essential: global issues of existential significance make it more important than ever to achieve cooperation in respect to the international order. But ‘rules’ are often expressed as ‘values’, or high-level principles and are consequently difficult to interpret and subject to contention.
Rules, it should be said, are unlikely to be followed or respected if they are not linked to behavioural norms or outcomes. Even when they are so linked, the rules are vulnerable to being disregarded or distorted if a country believes that another country is not applying the rules in a fair and non-discriminatory manner. The two main principles underpinning the multilateral trading system, for instance, are reciprocity and non-discrimination. These two principles speak to fairness, which is a fundamental concept within the human psyche and the core principle by which most societies are governed. What exactly is meant by ‘fairness’, however, is a matter of contention.
Interpretative difficulties abound in the multilateral trading system. An example is the ongoing debate about the interpretation of concepts such as the ‘normal value’ of goods and a ‘non-market economy’ in the context of anti-dumping cases under the World Trade Organization (WTO) framework. In determining whether imported goods have been dumped below their ‘normal value’, certain countries continue to use the normal value of the goods in a ‘surrogate country’ to determine whether goods from a non-market economy have been dumped. This is because a non-market economy is considered to be one in which there is a high level of government intervention that makes it impractical to use prices and costs in that market for determining anti-dumping margins. The United States continues to treat China as a non-market economy and to use a surrogate country to determine the normal value of certain imported goods from China, triggering an ongoing dispute between the two countries.
China argues that under the terms of its WTO accession protocol, all WTO members — including the United States — should have ceased treating China as a non-market economy by December 11, 2016. The United States argues that that those terms do not automatically require it to extend market economy status to China.
Difficulties between countries are exacerbated when high-level principles expressed in international treaties are implemented in domestic legislation. An example of these difficulties are the claims brought by the United States against China in relation to China’s domestic implementation of principles in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) — such as the thresholds for criminal enforcement obligations and trading rights in respect of films and home entertainment products.
Differences in perspectives affect cooperation and understanding. These differences occur in specific areas such as the application of national interest and national security tests in foreign investment approval regimes. At a broad, philosophical level, clashes of perspective occur when Western liberal democracies — such as the United States and its allies — view the RBO as incorporating a broad range of incontrovertible values, including those relating to human rights, political and religious freedoms and environmental protection. Against this view, many developing countries such as China have traditionally viewed the RBO primarily through an economic lens, arguing that it is unfair to expect developing countries to subscribe to these broader values before they have achieved economic modernisation and self-sufficiency.
There would be benefit in devoting greater attention to fairness in outcomes as a defining and unifying concept within the RBO — but there are again different perspectives about fairness and how fair outcomes might be achieved. Greater effort needs to be made by each country to understand the ‘other’ perspective or viewpoint, even if they do not agree with it, and to avoid delegitimising or rejecting the other perspective on the ground that it is spurious or based purely on self-interest. This is of critical importance in enabling countries to move beyond positional negotiations to interest-based negotiations. The competing claims in respect of the South China Sea provide an example of the challenges in this regard.
In seeking consensus, a stress on outcomes may be helpful. It is important here to move beyond arguing positions towards identifying interests through an understanding of the motivations that underpin those interests.
Turning to another issue, in what areas would the existing RBO benefit from amending or up-dating?
One area that is becoming increasingly global in its reach and impact is artificial intelligence (AI) — and related areas such as big data, cyber security, privacy and data protection. AI will challenge the existing order as it transcends borders and sovereign control. Of particular importance is maintaining transparency in the use of AI, trust in the technology involved and an appropriate balance between technology and human oversight. Jurisdictions around the world are increasingly adopting principles and standards for the regulation of AI. For example, the European Commission ‘White Paper on Artificial Intelligence — A European Approach to Excellence and Trust’, which was issued in February 2020, is an example of a move towards establishing standards and rules protecting fundamental rights and consumers’ rights. Closer to home, the New Zealand government launched an ‘algorithm charter’ in July 2020 to act as a guideline for government agencies on how to use algorithms and how to ensure that people have confidence that algorithms are being used in a fair, ethical, and transparent way.
The adoption of comprehensive standards and rules, however, is challenging for countries that do not have advanced legal or regulatory frameworks for consumer protection in areas such as privacy and data protection. The need for a global approach that standardises these principles and standards and strengthens consensus and cooperation in this fast-moving area is essential. Without a focus on outcomes, however, it will be difficult to achieve a globally harmonised approach. A recent example is the controversy over the possible use of face-recognition AI by technology companies to identify members of ethnic communities. In the absence of international consensus on the appropriate outcomes for the use of technology — supported by principles and rules — it will be very difficult to avoid ethnic discrimination and persecution.
There is also value in learning from those areas in which consensus and cooperation have been effective, such as health and international crime, and exploring ways in which the success in these areas can be translated into other areas. Global cooperation in the fight against drug syndicates is an area that has enjoyed relative success, largely because there is a consensus on the outcomes and fairness in achieving outcomes. Although outcomes are combined with rules and principles, it is the outcomes that drive the rules and principles rather than vice versa.
From this perspective, the RBO should be updated to strengthen its focus on outcomes. What could be described as an ‘outcomes-focussed RBO’ would recognise the need to achieve clarity around outcomes and to design the rules and principles with those outcomes in mind. The adoption of an outcomes-based approach is increasingly common in areas of domestic regulation such as financial regulation, and there is no reason why a similar approach could not be considered and applied in international relations.
Andrew Godwin is Associate Professor, Director of Transactional Law, Director of the Graduate Program in Banking and Finance Law, and Associate Director of the Asian Law Centre at the University of Melbourne.
Last Update: 30/12/2021