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7 June 2018

Trump's Trade Wars Will Overshadow The G7 Meeting

Written by: Naheed Mehta MBE, Senior Advisor-International Affairs at Edelman

Government Affairs

The intended themes of this year’s G7 meeting in Charlevoix, Quebec on 8 & 9 June are: gender equality; women’s empowerment; clean energy and global economic growth. It’s an ambitious agenda and all are important issues, but will anyone really notice?

The challenge for this year’s G7 Chair – the Canadian PM Justin Trudeau – will not be getting these issues aired and raised, but in preventing President Trump from hijacking the meeting for a second successive year. President Trump’s steel and aluminium tariffs and the threat of global trade war they carry with them, not to mention his Singapore summit with the maverick North Korean dictator Kim Jong-un just three days after the Quebec meeting have already taken the focus away from the G7.

The behaviour of the US president – the Disrupter-in-Chief – will be a constant source of anxiety for the leaders of the other six nations represented by Canada, France, Germany, Italy, Japan, the United Kingdom, plus the EU in an observer role. At what is supposed to be an embodiment of unity among the world’s most powerful democracies, they find themselves united principally by one thing: distrust of their most powerful partner, the US. Mr Trump’s antics against his allies are pushing the world towards a trade war from which, ultimately, we will all lose. Jobs will be lost, food and goods prices will increase, and in some cases, there could even be shortages of resources.

This is not the opening chapter of a dystopian novel, but reality. Mr Trudeau will need to show leadership and true grit if he wants his version of a G7 summit to remain relevant and current.

Last year, President Trump caused a storm during Italy’s Presidency when he criticised fellow G7 members at their annual gathering. He openly attacked Germany for their high level of car exports to the US and intimated that he would pull out of the Paris Climate Agreement; a threat that he subsequently fulfilled.

This was not the behaviour that the G7 were used to. These meetings have always been highly choregraphed in the past to demonstrate togetherness. However, the other world leaders need to show strength by holding together against this internal threat. President Trump’s lack of diplomacy, his disdain for political correctness and his ‘America First’ policies may need to be addressed before the leaders can get down to the minutiae of the agenda.

The G7 themselves have been have been criticised as outdated and out of touch. Since their formation in 1975 as a response to the oil crisis two years earlier, the most economically advanced countries have tried to address similar world issues. Mostly, they have failed. The meetings have traditionally been informal and happen annually, with a few rare exceptions.

In 1997, President Clinton invited a reformed Russia to the table, and the G7 became the G8. But in 2014, Russia returned to its formerly unneighbourly self and was expelled after annexing the Crimea. Many would argue that to truly reflect the world’s largest economies China should be a member, but even Russia was a democracy when it gained membership of the group and in the current political climate an invitation to President Xi Jinping is an unlikely scenario.

Ironically, perhaps G7 leaders could see 2018 as being truly their time. They need to show the world that they do want to create a better, fairer world. This is the first time, for instance, that the G7 have linked gender equality to economic growth. Yet while the idea of international policy co-ordination is a noble one and would certainly heap benefits on us all, we have to question whether the G7 is up to the challenge. The reality is that no decisions are taken by this group; it is simply an opportunity for them to air ideas and there is no binding declaration at the end. Can the world, arguably at crisis point, afford the luxury of these empty meetings? Can it afford not to hold them?

Perhaps we all need to play our part in creating a better economic climate in the world. However, the truth is that Keynes’s Paradox of Thrift has taken over: put simply, it means that too many people want to save and too few want to spend. In developed countries this leads to weak growth, deflation, persistently low interest rates and, for those emerging nations who find themselves on the receiving end of savings outflows from elsewhere, financial bubbles and subsequent busts.

There will be the usual backdrop of protests that have become all too familiar at these events, but they will be held away from where the leaders meet in their isolated venue. No degree of isolation, however, will prevent the international focus penetrating them and all eyes will be on how Mr Trudeau will handle this, and what deals will be struck, or whether any of the topics on his agenda will even be discussed.

It’s anyone guess who will be tamed and who will be uncooperative, but it is a fair guess that if Mr Trudeau cannot get all his G7 partners on board, we will all be the losers.

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