The Relationship between Global Governance and the Harmonization of International Standards - Essay Example

? The relationship between global governance and the harmonization of international standards The number and of the The term “global governance” was in the focus of extensive scientific debate mainly due to Willy Brandt’s and his colleagues’ from the UN Commission on Global Governance activities; this Commission was created to find solutions of global problems facing humanity nowadays: environmental pollution, poverty, infectious diseases etc. In 1995, the Commission presented its report, entitled “Our Global Neighborhood” (Kelly, 2005). The report was a justification of global governance importance, it pointed to the fact that its development is a part of the evolution of people’s efforts aimed at organizing their life on the planet rationally, and this process will continue forever. The necessity of building global governance in the world is based on the argument that humanity, after the era of global wars and global conflicts, will be provided with a unique opportunity to accept a "global civic ethics", which should be based on a set of fundamental values ??that can unite people of all cultural, political, religious and philosophical views. It is also noted that the governance should be based on democratic principles and implemented in accordance with established rules of law binding all without exception. Divisiveness and the ambiguity of the processes occurring in the world motivated a great many of scientists to create different futurological theories on global governance. However, in reality, none can argue that global governance in the new form is inevitable. At the moment there are only real prerequisites to its creation. There are several definitions of the term "global governance ". Before its appearance there was another term - "global government". The difference between these two concepts was analyzed in detail by J. Rosenau. The fact is that the English term “government” and “governance” represent the systems of governance, regulatory mechanisms, through which the power, aimed at preserving the unity of a particular political system and the goals’ implementation, is exercised. The difference is that government is commonly attributed to certain structures, while governance implies certain social functions and processes. To govern means to exercise power. And to have power means to have recognition from those on whom this power is distributed. This implies another difference. Governments have the power based on certain constitutional provisions, decrees, orders and other official documents (Rosenau, 1999). As for governance, the power is associated with processes that have arisen in the run of repeated practice, imperious by nature, but at the same time it is not necessarily constitutionally formalized. This is the main advantage of governance systems, the basis of which is government as a guarantee of the regulatory process. In the case of governance, there are no guarantees of performing duties. This is the main difficulty of global governance implementation. A. Najam, a professor of Boston University and the Fletcher School of Law and Diplomacy, suggests the following definition of global governance: governance of global processes without any global government. The third approach argues that global governance is not opposing the globalization and its ideological form. The purpose of creation of this ideology is to hide the negative effects of neoliberal economics on a global scale. According to some political economists, the concept of global governance, thus, suffered the same fate as the other originally progressive normative concepts did: it was intercepted by various social forces that liberated it from the anti-hegemonic content and redefined it in such a way that the concept, in fact, supported the further consolidation of the world capital dictatorship. According to T. Weiss “global governance is collective efforts to detecting, studying or solving world problems that are beyond the capabilities of their solutions at the state level” (Weiss, 2003). “Global Governance” is not a normative term for a qualitative assessment of its manifestation. It, rather, should be attributed to the specific agreements of cooperative character aimed at solving specific problems. Such arrangements can be formally enshrined in the form of laws or officially recognized institutions, which are capable of solving common problems through a variety of actors (states, intergovernmental and “non-governmental organizations, transnational corporations, private sector or civil society representatives, private individuals), but they may be informal (in the case of certain existing practices) or of limited duration (in the case of coalition building)” (Weisse, 2003) Thus, we can agree with the generalized definition of global governance, suggested by Thomas G. Weiss and Ramesh Thakur in “The UN and Global Governance: An Idea and its Prospects” (2003) define global governance as “the complex of formal and informal institutions, mechanisms, relationships, and processes between and among states, markets, citizens and organizations, both inter- and non-governmental, through which collective interests on the global plane are articulated, rights and obligations are established, and differences are mediated” (Weiss, 2003). Many states seek to become a part of the future system of global regulation through active participation in the work of international institutions, economic and political openness. Other states regard transference of their functions to global institutions as a threat to their security. And there is no unequivocal dividing into those who respond quickly to changes and are ready to being involved in global processes, and, to some extent, give part of their sovereignty to supranational bodies, and those who oppose both the idea of ??global governance, and its possible implementation. For many countries this is a very painful issue and it concerns a variety of development levels, because there are large European countries, as well small states, among the opponents of the global governance idea; there are also those states, which rightly feel fear because of the possible loss of their already insignificant influence. At the same time, that small states, some of which recently acquired the status of a sovereign state, are quite active and want to play a greater role in international politics. This is manifested in their quest to join lots of international institutions, blocs, alliances, to feel protected by those organizations associated with them. A number of small developing countries with low life, in general, do not participate in global processes, are not a part of international institutions, they only subject to global governance. In terms of global governance, harmonization of standards is crucial to expanding mutually beneficial exchange of goods (services), agreements on certification, development and expansion of industrial cooperation and joint solution of scientific and technical problems; such harmonization is to improve and ensure product quality, optimizing the costs of material and energy resources. UNECE, in its recommendations on the harmonization of standards, puts an emphasis on the following fundamentally important aspects affecting the efficiency of this process: a clear activities’ linkage of harmonization to international economic and scientific-technical cooperation, which should be considered when planning work of the bodies involved in standardization, the appropriate choice of instrument for the harmonization. ECE offers the following selection criteria: level degree of ensuring technical compatibility and interoperability of object standardization, and its impact on economic and technical efficiency of cooperation; the importance of standards for mutual recognition of test results and quality control; the influence of standards on other normative documents; the ability of the standard create a technical barrier to trade actually or potentially. Harmonization of standards promotes the participation of countries in organizations that develop international standards.Thus, in the context of global governance the problem of harmonization of international standards is in the spotlight nowadays. The latest changes in the INC were the result of global harmonization, reached in 2000 between representatives of various disciplines related to financial management, namely: investors and experts on the securities of IOSCO; accountants working in accordance with IAS, and supervisors of TEGoVA . In May 2000, after several years of approvals, IOSCO acknowledged it possible to resolve (for enter the securities markets, primarily by international emitters) the problem of possibility to present the financial reporting according to IFRS, rather than by US or British accounting standards (GAAP) (or any other national standards). By this time, changes were made in the IVS-2000 with an indication of its compliance with the newly modified IFRS. The IAS appropriateness was repeatedly stated in the individual sections of the European Valuation Standards (EVS), which were adopted in November 2000. The US has already managed to express their discontent with the accepted standards. The fact of the US repeated claims to hegemony is being mentioned in the contemporary scientific literature. It is noteworthy that proponents of the American hegemony in global governance sometimes refer to the theory of hegemonic stability. Suffice it to mention the Neoliberal Washington Consensus. Washington Agreement on neo-liberalism (neoliberal Washington consensus) is a market-oriented set of provisions developed by the United States and international financial institutions, located primarily under the control of the U.S. government and used in different ways in more vulnerable communities, or in the form of rigid structure forming applications. Their basic rules are in a nutshell - liberalization (removal of state regulation) of trade and finance, “the right to set market price (get prices right) to have zero inflation (macroeconomic stability), and the privatization process” (Haines, 1994). The neo-liberal policies are not shy away from taxes. For the working classes, they are increasing all the time, and for businesses are reduced. With the start of the 2008 world crisis, this course turned to be particularly acute. Taxation of employees has become a source of state compensation for private losses. In the commercial segment taxes are not distributed evenly or fairly. Progressive tax that increases in share value with higher incomes, eliminated or actively pushed as a relic of the "policy of social egalitarianism, nuisance, according to the ideologues of neo-conservatism, and economic development (Sklair, 2001). Indirect tax rests entirely on the shoulders of consumers. They seldom realize that they support the state by buying the necessary things. But the neo-liberal governments are perfectly aware of the fact why they introduce indirect taxes on consumer goods, disregarding the goods necessary for companies. Such product category of “business for business” has a tax privilege, in contrast to the category “business for people” because of reduced income taxes for the private sector. In some post-Soviet countries, contrary to some countries of Western Europe, business is spared from social security contributions for insurance of employees. According to the recent studies, the share of wages paid in black, during the period from 2008 to 2010, has risen sharply. According to the historian on diplomacy Gerald Haines, who also worked as a senior historian of the CIA after World War II, “the United States assumed, regardless of their own interests, the responsibility for the welfare of the entire world capitalist system” (Haines, 1994). In the studies, carried out in the mainstream of international political economy, the relationship between the stability of economic regime and the availability of a state leader was studied. According to researchers, a stable economic regime can be established only with the help of the hegemonic state, as the leader develops rules and standards of conduct accepted by other contributors as well. Global governance is based on the collective identification and resolution of problems. It assumes the cooperation between the public and the private sector; international organizations can perform a coordinating function in the architecture of global governance and promote a global means of resolving and considering various problems, due to this process it is possible to correct national narrow-mindedness of other players (Croucher, 2004). With regard to participants in international relations, realists consider the state as a chief actor in world politics, while recognizing the importance and the other players such as the World Bank and IMF. But according to the followers of the traditional paradigm, states are recognized as the only factors actually influencing the political process. Processes of globalization, occurring in the economic sphere, are explained not only from a position of state “blurring”, but also transforming the world into a single economy and compliance with national interests of each state. On the other hand, realists recognize the impact of transnational corporations (TNCs) and non-governmental human rights organizations (NGOs) and even claim that the state will not exist forever. States were created to solve certain problems, to ensure stability and order, thus, citizens, in exchange for these benefits, recognize the power of their states and promise to obey their laws. Following this logic, if the state ceases meeting the challenges of their citizens at some stage, they will disappear. Still, such turn of events, at least in the nearest future, seems to be unlikely. In fact, the realists are skeptical about the possibility of global governance providing in international relations. At the same time they mark progress in the global economy management, and believe that if a mechanism of global governance is created, it will be exactly in the economic sphere. Nevertheless, representatives of the school of realism, recognizing the important role of world trade, regard the activities of TNCs as insufficient to create more order in the modern international economic relations, assuming that it is extremely difficult for them to reverse the originally anarchic structure of the world. They were not able to create a supra authority that would control the behavior of self-centered states. According to the realists, there are three main control functions, which still belong exclusively to the states: release of the national currency, the function of taxation and provision of public and individual safety. Therefore, the question about the single currency of the European Union (EU) arises immediately. Realists’ arguments are as following: euro is so far the only example of a transfer of authority of minting coins to supranational body, and speaking about the results of this experiment seems to be premature. In addition, the EU will need greater political integration for the euro being quite stable. Due to problems with the adoption of a common European Union Constitution, last argument is particularly valid. Nonetheless, the EU goes on providing its standards, without paying attention at US discontent. After the crisis of 2008, it is extremely difficult for the USA to play the first fiddle in providing modifications to the international rules. “One reason for skepticism is the complicated politics of accountability within the US regulatory system, which hinders US leadership in revising the current suite of international standards” (Bhagwati, 2004). Globalization and internationalization of the world economy objectively led to the need of harmonizing all the disciplines and activities related to the economic dimensions: accounting and financial reporting, banking and investment analysis, valuation and corporate analysis. Harmonization was not and is not a desire to separate professional organizations - it is a necessary imperative of the new economy of the modern management. However, this harmonization was not provided at once - it took many years of evolution of the most separate areas and disciplines, constituents of the new economy contents. These changes occurred primarily in the International Valuation Standards (IVS). Substantive, conceptual changes in the IVS were directed at the deep international and interdisciplinary harmonization of valuation standards with other regulatory documents. The main result of international harmonization, which is achieved nowadays, lies in the fact that after the modifications ??to the IVS (so-called "White Book ") in 2003-2005 and to the European Valuation Standards (EVS) (so-called "Blue Book"), a common understanding of the fundamental principles of property valuation was developed, and that will be reflected in the new edition of the EVS. Almost all national organizations evaluators should follow these principles, including those, having formed their own standards of evaluation. The oldest and most authoritative organization in the world of appraisers - Royal Institute of Certified Surveyors (RICS, UK) in the new edition of its standards supported innovations of the International Valuation Standards Committee (IVSC) in terms of ratings the financial reporting and lending purposes. It should be noted that the evaluators in the U.S. have their special position on this issue. The main result of IVS interdisciplinary harmonization was the IVSC recognition of radical changes in the International Financial Reporting Standards (IFRS), which, in turn, were consistent with the international organization, uniting various national commissions of IOSCO securities. In 1995, the International Committee on Financial Reporting Standards signed an agreement on completion of the basic set of IFRS with IOSCO, which later became the basis for cross-registration of securities on stock exchanges throughout the world. In May 2000, IOSCO formally recognized the IVS as such basis, and in June 2000, the European Commission launched an appeal for all companies and firms to conduct their reports in accordance with IFRS. For the sake of fairness, it should be noted that the Commission on the Securities, as well as the US Exchange Commission insists on maintaining the practice of registering companies in the U.S. according to American accounting regulations, and not by the provisions of IFRS. The essence of the objection is the very fact that the U.S. does not recognize an agreement on fair value. Country’s assets are carried at amortized historical cost. Although the collapse of Enron and subsequent scandals has shaken the confidence of Americans, now we can expect convergence of American positions with IFRS. And although the use of the concept of fair value to some extent violates one of the accounting principles - namely, the comparability of reporting, still re-evaluation is necessary. Indeed, in the context of international globalization processes, it is obvious that the harmonization of international standards will open provide the countries with various possibilities at the global market. The harmonization helps to reveal the common interests of the actors, to resolve the problems, occurring in the course of cooperation and avoid some confusion in the sphere of record-keeping, clerical work. Although international recommendations on standardization are not mandatory for all states, however, the product conformity with international standards determines its value and competitiveness in the international market. Application of international quality standards provides ample opportunity for enterprises entering the international market. Standardization is a key factor in supporting a number of government policies, such as competition, innovation, removing trade barriers, trade expansion, consumer protection, environmental protection and many other areas. Standardization, combined with legislation, facilitates more efficient technical regulation at the state level. International standardization allows you to save time and money required for the development of national standards. Thus, the development of international Standardization predetermines the development of world trade. Nonetheless, as the experience of the recent years shows that there are lots of controversies around the given problem. Some influential states can not reach the consensus on playing the leading role in the issues of global governance, thus, the issue of harmonization of international standards remains open but no less valid. “The most fundamental of obstacles to harmonization are the size of the present differences between the accounting practices of different countries, lack of strong professional accountancy bodies in some countries, and the differences in political and economic systems. Nationalism also posses a threat to harmonization as countries are wary of ceding control of their accounting regulation to outsiders, especially if it is perceived as replacing their own accounting regulations with those of other countries” (Nobes & Parker, 2002). Global governance is at the intersection of national interests, power relations and the need for joint problem-solving, it is necessary to solve problems, which are beyond the individual states. Towards creating a system of global governance, we come across lots of questions about what way it should be established and whether it will be able to cope with a wide range of challenges currently facing the world community. In this sense, it is very interesting how various social issues will be resolved at the global level, and whether any decision-making has the legal basis or not. States, yielding some of its functions to other entities of international relations, must develop new mechanisms for effective governance. Globalization makes them face some new threats for which they are not always ready. These states’ future largely depends on how quickly they can adapt to these changes. References Baker, Andrew, 2008 'The Group of Seven', New Political Economy, 13:1,103 — 115. Bilton, T., K. Bonnett and P. Jones 1987. Introductory Sociology, 2nd edition. London: MacMillan. Bhagwati, Jagdish 2004, In Defense of Globalization. Oxford, New York: Oxford University Press. Croucher, Sheila 2004, Globalization and Belonging: The Politics of Identity in a Changing World. Rowman & Littlefield. Graz, J-C. 2003, ‘How Powerful are Transnational Elite Clubs? The Social Myth of the World Economic Forum’. New Political Economy, 8/3: 321-40. Heires, Marcel 2008, 'The International Organization for Standardization (ISO)', New Political Economy, 13:3, 357 —67. Hall, P.  and D. Soskice 2001 eds. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. 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