G7 Biarritz: What did we learn?
The G7, made up of leaders from France, Germany, the UK, Italy, Japan, Canada and the US, like many other global governance institutions, is not and has never been perfect. However, under the current global circumstances, like many of the other institutions, it may have moved beyond imperfect to no longer fit for purpose.
The recently concluded G7 summit hosted in Biarritz by French President Emmanuel Macron had, as these summits often do, an impressive agenda of global issues. France identified five objectives for the Summit: fighting inequality of opportunity, particularly gender, access to education, and high quality health services; protecting the planet; strengthening the social dimension of globalisation through fairer trade, tax, and development policies; action against security and terror threats; and tapping into the opportunities offered by digital technology and artificial intelligence (AI).
Observers have noted some areas in which progress was made.
Reportedly, robust discussions were held about difficult issues, including between the US and France over France’s 3 percent digital services tax approved in July, to which US President Trump responded that he would take “substantial reciprocal action” (tariffs on French wine). At the end of the summit, President Macron announced that he and President Trump had “a deal to overcome the difficulties between us” in which companies that pay the tax can deduct the amount once a new international deal on how to tax digital companies is found.
The Iranian Foreign Minister paid a surprise visit arranged by President Macron, demonstrating the collective commitment of the EU to peaceful resolution of the Iran nuclear issue, and President Trump agreed to meet with Iran’s President within the next few weeks. This is no mean feat, given the level of tensions between the two countries since Trump pulled out of the 2015 nuclear agreement and reimposed sanctions on Iran. It would be the first time US and Iranian leaders have met since the Tehran hostage crisis of 1979.
Issues of great concern such as Libya, North Korea, the US-China trade war, and WTO reform were discussed. The group called for a peaceful resolution to events in Hong Kong. It was agreed to provide funding to battle the fires raging in the Amazon.
In a highlight for Australia, Prime Minister Scott Morrison was invited to be a guest for the first time, allowing him to press his agenda – namely securing a commercially meaningful trade agreement with the EU, as well as post-Brexit UK, and reminding President Trump of the broader implications of the US-China trade war on American friends and allies not to mention the rest of the world. He left optimistic about the impact of his conversations.
But the truth is that a great deal of the diplomatic energy that went into this G7 went not into robust discussions and bold decisions about making the world a better place for all, but into just making the thing function as it is supposed to. Indeed, so that leaders could put aside concerns about actually agreeing on anything, the long-held tradition of coming together in a joint communique was abandoned, replaced by a ‘Declaration’. The vision for success was reduced to just trying to keep participants on track and not actually upsetting proceedings with the kinds of personal attacks of other leaders – namely the host – that occurred at the Canada 2018 G7.
In addition, the ‘wins’ are not particularly substantial. For example, the funding agreed for the Amazon – rejected by Brazilian President Jair Bolsonaro as reflecting a colonialist mindset – is less than the cost of holding the conference, far less than the US$600 billion the Brazilian government takes in in revenue per annum, and vastly less than what is required to make a meaningful contribution to saving the lungs of the planet. At the time of writing it is not clear whether Brazil would accept the funding and under what conditions. The much publicised Iran-US meeting may well go the way of North Korea-US bilateral: one side says “yes we’ll meet, when you lift the sanctions” while the other side says, “we’ll lift the sanctions once we’ve met”.
The last two summits show that the G7 is riddled with the malaise that is also gnawing away at the G20, the WTO, and other global institutions. It is not entirely, as some suggest, because of the US President’s disregard for global norms — although this has certainly not helped. What we are seeing is a much deeper shift in how the international system works. Around the world, the perception that the golden age of wellbeing and wealth for all that globalisation was expected to deliver is increasingly seen as an ephemeral dream. Trust in international norms and institutions is eroding. Rather than working on the belief that a rising tide lifts all boats, the current mindset of many of the leaders who set the rules for the system is that your boat is your lookout and yours alone
In a global environment that is the most dynamic and unpredictable that it has been for decades, at least, summits that are founded on the premise of shared interests, values, and a political will to cooperate for the benefit of all — simply cannot be anything more than what Macron’s vision for G7 2019 success set out: if no one kicks over the table it’s not a bad outcome. It is time to set aside the no-longer functional assumption that ‘like-minded’ or even ‘democracies’ will somehow share similar views of what the world should like and how it should work across a broad spectrum of issue areas. Rather, we need to create new models of international diplomacy and cooperation. One possibility could be move from ‘club’ to ‘network’ diplomacy which brings leaders together according to shared positions on certain interest areas, instead of assuming everyone above a certain level of GDP shares the same views.
Issues like climate change make finding a more effective approach not just a nice idea but an existential necessity
Next year, the US hosts.
This first appeared in KPMG Tax Now.