The group is weaker for the undermining strategy of the US, but still has a role to playby / 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 at the table of global leadership, and Trump’s America is simply not interested. If the US, the creator and champion of a rules-based global order, is now mistrusted by its allies and hailed as unreliable, even a bit of a pariah, is the G7 not the geopolitical equivalent of Monty Python’s dead parrot?
Er, not so fast.
Given the political shocks rumbling around the world and the actions of Russia, China and other authoritarian governments, there should be some purpose, Trump notwithstanding, for the G7.In spite of trade rows and disagreements over other key topics, G7 countries remain key to a broad range of commercial, climate and energy, technology and political and international relations processes and outcomes. According to Jake Sullivan of the Carnegie Endowment for International Peace, global institutions—and the G7 is certainly one—exist to establish norms and partnerships to help manage disputes, mobilise action and govern international conduct. The Quebec communique makes this clear. The G7 is weaker for the undermining strategy of the US, but not necessarily redundant.
In fact, Sullivan advances the argument that the global order may be more resilient than many feel it is, thanks in large measure to the fact that other countries mostly choose to follow rules and principles. At the margin, moreover, Trump may not always get his way with a restive Congress, which could move away from him in the November elections.
US domination in the world system was always going to fade. The issue now is whether, in the face of the US abrogation of leadership, its allies can summon the capacity to stick with a rules-based system for commerce and climate change and so on, and make their own free trade agreements. For now at least, it is also helpful that China shows no willingness to turn the global system upside down. The Belt and Road is unequivocally a China strategy designed to benefit China, but at the same time China is working within the existing order, including in its sponsorship and leadership in new institutions in Asia.
There is, however, a limit to how far this line of reasoning can be stretched.
Trump’s corrosive playground behaviour on the world stage can only go on, and be absorbed, for so long. The omens for a course correction are not great. He shows no signs of wanting to reach an understanding with allies, has a proclivity to cosy up to authoritarian adversaries, and is adamant that bilateral deals in which the US can “win” are the only game in town. His top economic adviser Larry Kudlow, himself a free trader, was quoted before the Quebec summit as saying that the WTO was ineffective and that the US wasn’t going to be bound by international multilateral organisations.
The non-US members of the G7 have no choice but to carry on regardless, trying to keep their heads while the US is losing its own. For a while, this may be an unsatisfactory but workable stop-gap outcome. But if Trump’s White House hasn’t seen the light or been brought to heel by the time of the next presidential elections in 2020, and Trump were to be re-elected for a second term, a profoundly worrying multilateral disorder would prevail. It would be a G-zero world.