Positions on the rules-based order in 40 emerging market countries
By Sam Wilkin, Director of Political Risk Analytics, WTW
Positions on the rules-based order in 40 emerging market countries Executive summary Whatever one’s views on the so-called ’rules-based international order‘ or ’liberal international order,’ it appears to be on its way out. Macro indicators suggest that the order’s key principles, from international peace to free trade to electoral democracy, are in decline globally.
Although it was an ’international‘ order, the rules-based order was not based solely in international treaties or indeed the headquarters of multilateral organizations such as the WTO and IMF. Rather, in large part, the order was embedded in the political, legal and regulatory choices of countries worldwide, in many cases via substantial institutional changes, such as democratization.
If the order is indeed in decline, will these changes – from the adoption of the rule of law to trade openness to the protection of intellectual property rights – be reversed? That is the question we attempt to address in this edition of the WTW Political Risk Index.
We first overview commentary from Oxford Analytica’s experts on government positions regarding the rules-based order in the 40 emerging market countries and territories covered in this Index. We find the overall attitude ’lukewarm,’ partly because the order’s institutions are out of sync with the geopolitical and economic shifts of recent years.
We classify countries into a few categories, ranked roughly from the order’s strongest supporters to its greatest opponents: strong supporters , seeking to uphold the status quo order; committed reformers , seeking to overhaul the order from the inside; friendly opportunists , troubled dependents , troubled democracies , and regional powers , supporting the order but flouting its key principles in various ways; friendly critics , who are capitalizing on the order’s perceived flaws in domestic politics; the rising new order , demanding reforms that appear to be unacceptable to status quo powers; those on the sidelines ; and the opponents , such as Iran and Russia.
Introduction 1 Foreign direct investors had challenged and, in some cases, overturned or gained exemption from the laws and regulations of sovereign nations – including Mexican health policies, South African racial justice initiatives, and German and Canadian environmental laws.
How is it that Western “capitalists” – in the reporters’ words – had gained power over governments? The main venue for these challenges turned out to be the International Center for Investment Disputes, an arm of the World Bank. The duo researched the Center’s origin story (“a secret capitalist Magna Carta”), and promised their readers, rather boldly, to uncover “who really controls power and decision-making in our world today.”
As a specialist in political risk, I found this account of investor-state arbitration fascinating (most people see the topic as dull rather than as the centerpiece of a vast conspiracy). The reporters are persistent, candid and resourceful, travelling from El Salvador to South Africa to investigate arbitration cases – although at times their refreshing amateurism is taken to extremes (files are not ’secret’ simply because one is looking in the wrong archive).
After two years of on-the-ground research, though, the journalists’ frustration is palpable. It turns out that countries have freely entered the bilateral investment treaties that make many investor-state arbitration proceedings binding. The reporters cannot understand why countries would voluntarily enable foreign companies to overturn their national laws. “Were officials misled into signing these investment treaties?” they wonder.
Given that there were more than 1,100 bilateral investment treaties in force worldwide at the late-90s peak, that would imply a stunning number of bamboozled officials (including in sophisticated advanced economies).2
But there is in fact a global conspiracy of sorts – it is just that the reporters are looking in the wrong place. Bilateral investment treaties are one aspect of what is usually known as the ‘liberal international order’ or ‘rules-based international order.’
And by the time they published their exposé, this order was already fraying. In 2020, for the first time, the number of bilateral investment treaties terminated exceeded the number of new treaties coming into force; by 2022, the ratio of treaties terminated to new treaties was nearly five to one. And most of the treaties coming into force were ‘new model’ treaties that tipped the balance of power towards governments.3
Perhaps at one time, as the journalists wrote, the international legal system offered investors “a sort of secret insurance against any threat to their interests, present or future.”4 But that era now appears to be coming to a close.
Number of international violent conflicts involving goverments, 1971-2022
Global average scores for democracy and trade freedom, 1971-2022
Source: WTW analysis of data from Uppsala Conflict Data Program, Freedom House, and Heritage Foundation
Indeed, by most indicators, the rules-based order is, to a degree, unravelling (see graphs). During the peak of the rules-based order, countries had signed up to international agreements not only on the legal privileges of ‘capitalists’ but also to maintain electoral democracy, respect human rights, uphold intellectual property rights, allow free trade, and not to pursue their national security interests by violent means.
At least some countries have begun to turn their backs on these commitments. Beginning in around 2008, the number of international violent conflicts involving governments began to surge, mostly in Sub-Saharan Africa. (Following the escalation of conflict in Ukraine and the crisis in Israel, this surge has become more global.)
A few years later, the average level of electoral democracy began to decline (with a ‘coup epidemic’ erupting in Africa and Southeast Asia, along with well-publicized ‘democratic backsliding’ in wealthier countries).5 In the wake of the pandemic, average levels of trade freedom began to worsen, as countries hoarded scarce commodities, passed laws promoting domestic production, and attempted to deny their strategic competitors access to advanced technologies.
Of course, these trends reflect idiosyncratic local issues as well as many types of systemic stress (such as climate change and economic shocks caused by high U.S. interest rates).6 The rise in conflicts also, in part, reflects such stresses, as many of these conflicts are internationalized civil conflicts. It would be unfair to say the order is collapsing; but when pushed hard by such stresses, countries do appear to have become more willing to break the rules.
How far might this rule-breaking go? To address this question, we asked the Oxford Analytica experts who compile the country profiles in this Index to assess their country's relationship to the rules-based order. In the next section, we review the results of this analysis (details are available in the country profiles of this Index).
Positions on the rules-based order in 40 emerging market countries and territories
The overall embrace of the rules-based order in the countries and territories in this Index might best be described as ‘lukewarm.’
Partly, that lukewarm embrace is a function of the order’s sheer evangelical ambition: strong supporters are expected to sign up to democracy, capitalism, human rights, open markets and international peace – a breadth of standards that even the order’s founding states sometimes fail to live up to.
And partly, that lukewarm embrace is a function of political and economic shifts, to which the order has been slow to adapt. The governance structures of the order’s institutions (particularly the IMF and World Bank) were created for a world with a very different distribution of economic activity than the world today. Arguably, institutions of liberal democracy are less trusted today than in the immediate postwar period, even in countries that led the world in developing liberal democracy in the modern era.
Below, we have classified the countries in the Index into categories based on simple ratings assigned by Oxford Analytica’s experts. Each expert was asked to rate their country’s support for the order (whether supporting or seeking to undermine), and interest in reform (whether supporting the status quo or seeking changes – such as reform of IMF voting shares or UN Security Council membership).
The contributors were asked to emphasize the policies of the currently serving government (not prior governments or the opposition). They were asked to emphasize the government’s rhetorical position even when that position was somewhat out of keeping with its actions. Even with these simplifications, assigning ratings was a difficult and sometimes controversial task.
Below, we have grouped the rated countries into categories based on the stances or issues they have in common. Some countries could fit more than one category; we have somewhat arbitrarily picked the ‘best fit’ in each case. In general, this review proceeds from countries most supportive of the order to least supportive.
The strong supporters (actively support the order, and make little effort to reform it) Chile, Taiwan, Ukraine Governments in this category support the rules-based order in its status quo incarnation. Chile and the territory of Taiwan very nearly embody the order’s ideals (although Chile has recently indulged in some resource nationalism). The government of Ukraine probably did not embody these ideals prior to 2014, but since then, to the surprise of many, has become the order’s most heroic champion.
The committed reformers (active support, seeking to reform) Colombia, Cote D’Ivoire, Ghana, Kenya, Nigeria, Zambia Governments in this category support the rules-based order, while seeking to reform it (from the inside). Colombia’s new left-leaning administration, the first in the country’s history, retains the nation’s traditional pro-order stance, while seeking an overhaul of international economic institutions. The rest of the countries in this category are African; most of them are dependent on multilateral financial support and want a greater African voice in, for instance, the IMF and World Bank, or want African membership on the UN Security Council. For some, including Cote D’Ivoire, Ghana and Zambia (host to 2023’s Summit for Democracy), the order’s emphasis on democracy and human rights is an emphasis that permeates domestic politics as well.
The friendly opportunists (sometimes support the order, make little effort to reform it) Argentina, Kazakhstan, Philippines, Vietnam The rules-based order is, to an extent, an American order, inspired by American universalist ideas as well as the desires of its world-leading companies (although, according to the journalists, the idea for the investment disputes center came from a German).7 Regardless, a warm embrace of the status quo order is often seen as a pragmatic move for those countries seeking favors from the U.S. Argentina’s new government is charting a radical neoliberal path and has repeatedly highlighted its alliance with the U.S., but in domestic political terms support for the order may be difficult to sustain (the recently-departed opposition had a very different approach). The current government in the Philippines sees the order, and U.S. support, as vital to preserving its interests in the South China Sea (despite past human rights issues) – once again a view that is in stark contrast to the policies of the outgoing administration. Vietnam’s leaders are signing up to every international economic agreement they can, and reaping significant gains in the process, while the country’s strategic value has so far ensured that the West overlooks any illiberal tendencies. Kazakhstan is perhaps a strange addition to this category, as its ‘multi-vector’ foreign policy largely focusses on playing China off against Russia. But the country’s efforts to limit Russian influence have fostered a perhaps-surprising affinity for the order – Kazakhstan voted to condemn Russia’s actions in Ukraine, for instance; joined the WTO in 2015; and contributed troops to eight UN peacekeeping missions.
The troubled dependents (sometimes support, position is contested) Egypt, Iraq, Jordan, Lebanon, Pakistan Countries in this category have governments that support the rules-based order, largely because their survival depends on that support – but are sufficiently troubled that the support is in question. Iraq and Lebanon, for instance, play host to militant opposition groups (which are part of national or regional government in both countries) that actively seek to undermine the order. Parts of the Iraqi government are increasingly subject to Iranian influence; after repeated economic crises, Lebanon’s institutional decay and leadership vacuum are severe enough potentially to relegate it to the sidelines category (below). Jordan, Pakistan and Egypt have received large bailouts, and depend on the West’s security assistance, but are unstable (highly unstable in the case of Pakistan, where militant groups strongly opposed to the order are active).
The friendly critics (sometimes support, seeking to reform) Mexico, Morocco, Senegal, Tunisia Countries in this category have traditionally supported the order – and continue to do so in many ways – but current governments are playing to a home crowd that is dissatisfied with some of the order’s core elements (and even when one is playing to a home crowd, the world is listening on social media). Tunisia’s government is an example, seeking to channel domestic discontent with international bailout conditions by peddling conspiracy theories about global plots and the role of the IMF. The rhetoric of Senegal’s left-leaning administration is more grounded, but also highly critical of the order’s economic elements. Mexico’s government threatens to become a problem democrat (see the next category) but is certainly another critic of the order from the left, having expropriated numerous foreign investments in pursuit of its economic nationalist agenda. Morocco’s government seems to have brought the world around to its hard line on Western Sahara, but resentment of the conditions attached to Western bailouts means that anti-order rhetoric plays well to a home crowd.
The troubled democracies (sometimes support) Angola, Bangladesh, Ecuador, Peru Governments in this category support the order, but issues of democracy or human rights at home are sufficiently severe that this support could be jeopardized. Peru has sought OECD membership – traditionally the order’s inner circle – but has a problematic human rights record. Bangladesh depends on exports to the West, but the U.S. denounced the country’s January 2024 elections as neither free nor fair. Ecuador’s right-leaning government is a strong proponent of the order, large opposition protests notwithstanding. But Ecuador’s raid on the Mexican embassy in Quito, and militarized strategy towards criminal violence, could raise awkward issues. Angola’s government is a strong proponent of the order, but there are human rights concerns; as Oxford Analytica’s contributor notes, “authorities often use lethal force against the general population.”
The regional powers (sometimes support, sometimes seeking to reform) Ethiopia, Saudi Arabia, Turkey Governments in this category are pursuing regional ambitions, which could cause unpleasant friction with the order’s core principles. Turkey is a member of the OECD, NATO, and the Council of Europe, but its operations in Iraq and Syria have been executed without regard to the niceties of coalition building or the backing of UN Security Council. Ethiopia appears to be on the verge of exiting the order, possibly in dramatic fashion, if its leaders carry out their stated ambitions regarding coastal access via Eritrea or Somaliland. Saudi Arabia is pursuing a credible claim to be a dominant power in the Middle East, and was careful to reference UN Security Council resolutions when launching its intervention in Yemen. That said, regional aspirations always come with risks.
The rising new order (sometimes support, strongly seeking to reform) Brazil, China, India, South Africa Governments in this category wish to reform the order – but their proposed reforms are so drastic, and apparently unacceptable to the status quo powers, they could be taken as a challenge to the order itself. South Africa is an interesting case in this regard, harshly criticizing international financial institutions, and taking Israel before the International Court of Justice in a way the order’s founders surely did not anticipate. India supports many aspects of the rules-based order, particularly as a bulwark against a rising China, but is hedging its bets by supporting BRICS enlargement (and may eventually land in the problem-democrats category). Brazil could be a larger presence on the global stage, but is internally divided. The recently departed right-leaning government supported the economic aspects of the order and signed up Brazil as a non-NATO ally of the U.S. (Brazil’s traditional non-aligned status notwithstanding); the current left-leaning government wants to reform the Security Council and supports enlargement of the BRICS. (For the time being, it is only a question, but it is a fundamental question: could the BRICS become the basis of an alternative order?)
On that last topic, China’s relationship with the rules-based order is an essay unto itself.8 As a result of its efforts in the South China Sea, as well as the ample development assistance it provides outside the Paris Club, China could fit into the regional powers category, above. China has gone beyond the problem democrats; it espouses an entirely different governance model. And China’s dissatisfactions with the IMF and World Bank, coupled with its growing economic might, have led it to do more than any other country to create challenger institutions. At the same time, as a holder of a place on the UN Security Council, and committed international trader with competitive advantages in many sectors, China often acts as a defender of the status-quo order against the reform efforts of others.
Those on the sidelines (no active position) Cameroon, Indonesia, Mozambique, Thailand, Uzbekistan It is hard to have no opinion about a system as pervasive as the rules-based order. But having no opinion can be an advantage if one is hedging one’s bets. Uzbekistan’s authoritarian regime is cautiously emerging from isolationism and wishes to join the WTO – perhaps a future true believer (or problem democrat)? Cameroon and Mozambique are searching for the best and least exploitative deal. Cameroon has joined the Commonwealth (and flirted with Russia) in an effort to balance French influence; Mozambique bounces between Eastern and Western patrons (and is currently leaning West). Southeast Asia is where the next great game of global influence is taking place, with Myanmar showing the dangers and Vietnam illustrating what can be gained. Indonesia, traditionally and actively non-aligned, is so far maintaining that stance, although it is on a path to OECD membership. Thailand has historically been a U.S. ally, but a rising generation sees value in charting an independent path and the country has refused to countenance the use of ASEAN as a forum to pursue claims against China in the South China Sea.
The opponents (actively oppose) Iran, Russia Iran, North Korea, and arguably Cuba – only these three regimes have consistently defined themselves in opposition to the rules-based order (Cuba and North Korea are not covered in this Index; and Cuba did join institutions such as the WTO). Iran’s revolution had many fathers (and mothers) but the Islamic regime that took power sees itself as having liberated the country from Western imperialism (with some justification, given the West’s history of malign interference in Iran’s early efforts at democratic politics). Russia was, until 2014, a member of the G8, and until 2022, a candidate for OECD membership. Events since then have cemented the country’s position as one of the few hardcore opponents of the rules-based order.
1 Claire Provost and Matt Kennard, Silent Coup: How Corporations Overthrew Democracy , 2023
2 https://unctad.org/system/files/official-document/wir2023_en.pdf
3 The termination of intra-EU treaties accounts for roughly 70 percent of the decline; even without this factor, though, there is substantial decline. https://unctad.org/system/files/official-document/wir2023_en.pdf
4 Claire Provost and Matt Kennard, Silent Coup: How Corporations Overthrew Democracy , 2023
5 https://www.wtwco.com/en-us/insights/2021/10/the-coups-in-guinea-and-sudan-may-signal-broader-political-risk-trends
6 https://journals.sagepub.com/doi/abs/10.1177/0022343311426165
7 Claire Provost and Matt Kennard, Silent Coup: How Corporations Overthrew Democracy , 2023
8 https://interactives.lowyinstitute.org/features/china-rules-based-order/
