Stockholm (Ekonamik) – The Group of Seven (G7) nations summit slated from August 24 to August 26 in Biarritz, France will feature talks concerning trade relationships, IMF succession and digital challenges against the backdrop of a looming possible global recession. Moreover, leaders of France, Germany, Canada, Italy, Japan, the United States and the United Kingdom will meet amid what is again likely to be a fractious atmosphere, not least considering half the attendees were elected on nationalist political platforms.
Topics at the G7 traditionally address efforts to stop protectionism in global trade, boost inflation-free growth, and find solutions on climate and energy, all areas in which the G7 is now clearly divided. Specific issues on the agenda in 2019 are expected to be:
- The U.S.-China and U.S.-EU trade relationships
- The succession of Christine Lagarde at the International Monetary Fund
- Facebook’s new Libra cryptocurrency
- International taxation of digital companies
Host nation France has picked the theme of “fighting inequality” for this year’s G7 summit, with French President Emmanuel Macron declaring that “the time when a club of rich countries could alone define the world’s balances is long gone” at the UN General Assembly last September. The meeting will include Australia, Chile, India and South Africa as “major partners” alongside a number of partnering African countries.
The summit, conventionally a measure of the effectiveness of the partnerships managing the global economy, will have to contend with three of its participants (U.S., U.K., Italy) being, for sometimes different but converging reasons, at the centre of uncertainty causing stock markets to wobble, if not outright panic. Meanwhile, both Germany’s and the U.K.’s economies are beginning to contract. Some analysts are not expecting anything concrete to emerge from the meeting.
“Everybody knows there’s a climate right now which is difficult with Trump’s designation of China as a currency manipulator and the trade situation… there is no meeting of minds presumably in the Group of Seven on the most important issues of the day. So I’m not expecting anything big or particularly constructive from the meeting,” said Nicolas Véron, an economist at the Peterson Institute for International Economics.
Mr Trump, who is growing increasingly jittery about the health of the U.S. economy ahead of an election year where he will be judged on the economic impact of his policies – such as his trade war with China – could choose to double down and escalate the potential trade conflict with Europe as well as for domestic political consumption. (He has already threatened to retaliate against France for its tax on large U.S. technology corporations, and the EU more broadly). The lack of IMF and G7 support for Mr Trump’s labelling of China as a currency manipulator is likely to contribute to tensions.
In addition, Mr Trump looks set to meet with new U.K. Prime Minister Boris Johnson ahead of the meeting, which is to say, ahead of other Europeans. This would amount to an endorsement of Mr Johnson’s intent to take the U.K. out of the EU without an agreement. Mr Trump may offer fast trade deals to offset the loss of British access to European markets. Mr Johnson, for his part, will have to navigate his positioning on the U.S.-China trade war, the European-backed Iranian nuclear deal which Mr Trump opposes and, with China watching, refrain from rocking the boat on the situation on Hong Kong at his first appearance on the world stage.
In addition, a leaked German Finance Ministry memo has referred to the “high likelihood” of a disorderly Brexit on October 31, suggesting that a change in Mr Johnson’s negotiating position is unlikely and that he may use the G7 summit to announce a “breakthrough or collapse” in talks with Brussels, according to the German daily Handelsblatt.
Add to the equation the presence of Italian Prime Minister Guiseppe Conte, who is facing a political revolt (or rather, coup) from his nationalist coalition partners at home and representing an economy in dire straits, and the three leaders may choose to make common cause politically, further dividing the G7. They could, for example, unite to oppose Europe’s candidate to succeed Christine Lagarde at the IMF, World Bank chief executive Kristalina Georgieva.
Meanwhile, Facebook’s Libra will be under discussion in light of France’s plans to create a task force to investigate money laundering and consumer protection issues in relation to cryptocurrencies, while discussion on the international taxation on digital companies is likely following an agreement reached by G7 Finance Ministers in July, which will likely also inspire Mr Trump’s personal wrath.
Few will forget last year’s lack of an official communiqué of intent, after Mr Trump disavowed it. The G7 might this year opt not to issue one at all.
Image from Wikicommons