REALIGNING THE GOVERNANCE ARCHITECTURE AFTER COVID-19: CITY DIPLOMACY AND MULTILATERAL INSTITUTIONS.

• Author: Birch, Eugenie

INTRODUCTION

The COVID-19 pandemic has led governments at all levels into intense fiscal stress and reports of significant drops in their respective economies. International organizations including the G20, IMF, UN, and World Bank, have responded with aggressive moves to support national economies. Within two weeks of WHO's March 11, 2020 declaration of COVID-19 as a global pandemic, national governments and international organizations devised massive recovery programs. For example, that year, the G20 rallied an extraordinary leaders' meeting on March 24 to issue an Action Plan that in broad strokes pledged to pour more than $5 trillion into the global economy. G20 leaders tasked the G20 finance ministers and central bank governors to detail a plan within a month. And in October, the finance ministers, working with health ministers, updated the plan with new commitments in response to the growing magnitude of the crisis. By the time the leaders met in November, they had received two progress reports on the plan and the additional initiatives to soften the pandemic's health, economic, and social effects. (1) So too, the multilateral development banks, led by the World Bank, offered $200 million in loans. The IMF both postponed interest payments on outstanding loans and provided some debt forgiveness to the poorest countries. While far from perfect, the institutions tasked with global economic governance responded quickly and boldly to the challenge. The following year, as the pandemic continued, vaccine policy, recovery, and pandemic preparedness dominated the G20 communique. (2)

In its first year, one critical piece of the responses to the pandemic were, however, missing: the key institutions of global economic governance paid scant--if any--attention to the economic plight facing cities. Neither the G20's 2020 Action Plan nor Declaration mentioned local impacts, economies, or recovery efforts. And, by February 2021, only 14 percent of the funding provided by the G20 plus ten other major economies had focused directly on cities. (3) This occurred despite the fact that cities were especially hard hit by COVID-19 and are widely understood to be critical to global economic recovery and future growth. Indeed, 90 percent of global COVID-19 cases have been reported in urban areas. As producers of 80 percent of world GDP, cities were devastated by the 3.5 percent decline in global GDP in 2020. (4) Many cities are still facing a "scissor effect": averaging a 15-25 percent loss in tax revenues while being forced to spend significantly more on health and social services. (5) Government lockdowns put millions of urban workers, especially youth, women, and those in the informal economies into the ranks of the unemployed. Local economies based on services, tourism, and export-based manufacturing have slumped. As time went on, the pandemic also affected rural areas where health institutions were poorly equipped to deal with the patient load. But key elements of urban economies, including hospitality and in-person services, continued to face deep losses that would affect national economies more heavilv than the 2008 financial crisis/'

The institutional architecture of global economic governance proved impervious to powerful urban advocacy, largely neglected cities as the most severely impacted governance entities, and overlooked the potential cities offer for economic recovery. The question, and the focus of this essay, is why global institutional responses failed to recognize the importance of cities in both crisis and recovery.

The cynical answer, of course, is that organizations led bv national leaders were reluctant to give political space or economic resources to local leaders who might present a political threat--and who may or may not belong to the same political party--and therefore left it to respective national governments to allocate resources domestically. The response to COVID-19, however, offers a more nuanced explanation that rests in the state-based structure of these organizations that largely blinds them to subnational challenges or solutions. Multilateral institutions are accustomed to respond to global crises related to conflict or financial failure with multilateral solutions that coordinate the policies of nation-states. They are neither designed nor equipped to directly engage subnational governments, even where, as is the case with COVID-19, city and provincial governments are essential to both the challenge and its solution. Even as cities are becoming more central actors in responding to transnational challenges from climate change to human migration, international law and institutions are struggling to adapt and, as a result, missing significant opportunities to improve coordinated global responses.

In this essay, we offer an understanding of why the global economic governance response to COVID-19 has overlooked cities as relevant governance units for pandemic response and economic recovery. By exploring the history of subnational stakeholder engagement with key global economic governance institutions such as the G20 and the responses of these institutions to the COVID-19 crisis, we show that this failure has two root causes. First, the legacy structures of international institutions and international law are so focused on nation-state cooperation that they fail to see the roles and potentials of subnational governance in crisis response. Second, the expanding networks of city governments focused on global issues (such as the C40 and U20) are sufficiently insular and inward looking that they fail to effectively engage, align with, and influence traditional international institutions. Ultimately, the misalignment between the work of traditional international institutions and emergent subnational diplomacy has resulted in a less effective response to the crisis and missed opportunities for economic recovery. We conclude with potential remedies to better align these two critical layers of global governance in responding to transnational challenges.

ADVOCATES FOR URBAN ISSUES: THE EMERGENCE OF CITY STAKEHOLDERS IN INTERNATIONAL ORGANIZATIONS

International organizations, such as the UN, the IMF, World Bank, and OECD, are fundamentally the product of nation states and are designed as fora to facilitate cooperation among nation-states. They operate under international legal agreements dating from the post-World War II period that define their membership, structures, and purposes around nation states as the fundamental units of international governance. (7) As Philip Jessup explained in 1948: "The world today is organized on the co-existence of States, and that fundamental changes will take place only through state action, whether affirmative or negative." (8) This mindset has fundamentally informed the structure of international law and multilateral governance. In 1927, at the height of international legal positivism, the Permanent Court of International Justice observed in the SS Lotus case: "Since the Law of Nations is based on the common consent of individual states, and not of individual human beings, States solely and exclusively are the subjects of International Law." (9)

Even more recent additions to the international institutional architecture such as the G20 are likewise centered around nation states. The G20, when formed in 1999, was designed to serve as "a new mechanism for informal dialogue in the framework of the Bretton Woods institutional system..." (10) For its first few years, the G20 focused on bringing finance ministers together. However, in the face of the 2008 financial crisis, its operations were elevated to the head-of-state level, becoming "the premier forum for international economic cooperation." (11) Annual national leaders' meetings are preceded by a year of negotiation by sherpas, key government ministers, and engagement groups. While the G20 and other key institutions of global governance have remained nation-state focused, the involvement of engagement groups and other stakeholders from beyond national governments themselves has opened the door to the inclusion of urban issues and city voices. Simultaneously, issues of urban concern have made their way onto the global stage, being recognized as relevant to a host of global challenges from economic development to climate change.

Cities and Urbanization in Global Affairs

Cities as a subject of global affairs came on the international scene in the 1970s with the first UN Conference on Human Settlements (Habitat I, 1976), followed by two others held at twenty-year intervals (Habitat II, 1996; and Habitat III, 2016). While these meetings of nation-state leaders drew attention to urban growth, they also reflected a changing attitude towards it. In 1976, most UN member states considered urbanization a negative force to be arrested. By 2016, however, they asserted that wellplanned and managed cities were critical engines of sustainable development. Structurally, the UN created the UN Centre for Human Settlements in 1978, subsequently elevating it to a full-fledged program in 2000. Paralleling these discussions, urban interests began to creep into UN policies related to sustainable development (Sustainable Development Goal 11), climate change (reference to cities' contributions), disaster risk reduction (focus on urban planning), food security, drug-related crime, and others. While the UN has remained an organization of sovereign states, more active city engagement both within and beyond the UN Habitat programs has facilitated some integration of urban affairs into the deliberations within and outputs from the organization.

At the World Bank, attention to cities grew over the past two decades via the inclusion of urban development in the Bank's array of global practices, first as part of the Social, Urban, Rural Global Practice, and after a World Bank reorganization in 2014, as part of the Urban, Disaster Risk...