Fritz Fischer raised several interesting ideas in his article on regrouping EU countries' representation in the IMF and World Bank. They concern three different problems, each requiring separate examination.
The first relates to the mandate given more than 60 years ago to the Bretton Woods Institutions (BWI), and the way they are governed. It is a topic that arises regularly as the globalisation process progresses and the world economic map undergoes profound changes. The last time such a debate took place in earnest, at the end of 1990s after a series of dramatic currency crises in Mexico, East Asia, Russia and Brazil, it resulted in greater openness at both the IMF and the World Bank. It also produced a broader surveillance mandate for the IMF in respect of the Special Data Dissemination Standard (SDDS) and its reports on the Observance of Standards and Codes (ROSCs) of individual IMF members. The basic mandate and governance structures of both institutions have, though, remained intact.
The globalisation process undoubtedly calls for greater attention to be paid to the regional and global implications of individual countries' policies. The IMF and World Bank remain the best candidates for addressing these issues, although they have concentrated so far on policy surveillance, policy advising and providing financial aid to individual members, while often overlooking the regional and cross-country consequences of their policies. For example, when the IMF gives advice on the choice of exchange rate regime in an individual country, it does not always take into account “network externalities” for its neighbours and major trade partners. This is somewhat surprising, as the IMF’s original mandate was to facilitate exchange rate stability and discourage competitive devaluations that do so much damage to international trade.
Reviewing and updating the mandates of both institutions is therefore the first issue to be discussed, and only then should this be followed by an analysis of their governance structures. This analysis would include the potential for consolidating some governance bodies with analytical and functional units, where they overlap.
Regarding voting powers, I would be against giving more weight to population numbers and less weight to economic potential. But the periodic revision of member quotas as determined by the IMF Articles of Agreement should create enough room to reflect changes in the world economic map and the rising potential of some emerging-market economies. This could also be a good opportunity to re-interpret the EU (or eurozone) internal trade flows that would (as Fritz Fischer suggests) lead to a relative decrease in the EU countries' quotas and voting power. The number of executive directors and the consolidation of EU representation in a few “pure” constituencies seems to me to be less important. If one takes into consideration additional aid by developed countries to less developed partners in the “mixed” constituencies (the examples of the Netherlands, Switzerland, Belgium and Austria spring to mind) this kind of consolidation may not necessarily be beneficial to low-income countries.
The second group of problems relates to the EU's potential contribution to reshaping the global economic order. The Union could undoubtedly be more generous and less egoistic. Looking at the real needs of Europe’s less developed partners, a truly generous offer in the WTO's global trade negotiations, or a more flexible immigration policy, are more important than a new representation pattern in the BWI executive boards, especially as most of their decisions are taken using a consensus mechanism.
Third and last, from an EU perspective this is certainly a common foreign policy matter rather than an economic and financial one, and in this respect Fritz Fischer is absolutely right. But the EU's mandate to conduct a common foreign policy is still relatively weak, and will remain so under the current treaty arrangements. Looking ahead, there are other more urgent priorities on the EU's foreign policy harmonisation agenda than the rather symbolic issue of consolidating the EU's representation in the IMF and World Bank.