The group is weaker for the undermining strategy of the US, but still has a role to playby George Magnus / June 11, 2018 / Leave a comment
It was facetiously called the G6 +1, highlighting the isolation of the United States at the G7 summit in Quebec, which has just concluded. But to all intents and purposes the G7 group of advanced economies has become the G6. The US has, for now at least, checked out. Donald Trump, who left Quebec early to fly to Singapore for the summit with Kim Jong-un on Tuesday, refused in a fit of pique to endorse the otherwise agreed communique covering a broad range of policy goals. With US leadership and sponsorship going awol, is it time, finally, to bury the G7?
In 18 months, Trump has pulled the US out of the Paris climate treaty, the Trans-Pacific Partnership and the Iran nuclear deal. He is threatening to pull out of the North American Free Trade Association and deems the World Trade Organisation the “worst deal ever.” He has imposed steel and aluminium tariffs on allies under the preposterous veil of national security, and is considering a similar move for the economically far more important automobiles and parts industry. Book-ended by typically inappropriate Trumpian tweets about his G7 peers, and a personal pitch to re-admit Russia to the group (thrown out after the annexation of Crimea in 2014), the G7 summit was never going to do anything but sow discord. And so it proved to be.
The G7 was a response to the rise and power of OPEC in the early 1970s. For a couple of decades or so, it played an important role in addressing and formulating economic and exchange rate issues, and implementing policy co-ordination. But its significance gradually waned. It became more of a scripted jamboree, featuring photo opportunities and bland communiques, and even anachronistic as China and other major economies emerged. Its share of world GDP dropped towards the bottom of a 60-70 per cent range between 1980 and 2000. By 2017, it had fallen to 46 per cent, or even lower—30.5 per cent—according to the different measurement of purchasing power parity. As things stand, this erosion will continue.
It has become sufficiently irrelevant that even the fabled G7 protestors stay away nowadays. Yet, the key issue today is that there is no substitute for the US…