21 July 2018

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SEVEN TO BECOME SIX?

Failed attempts to resolve contradictions between the US and G-7

Author:

15.06.2018

“There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door,” US Trade Adviser Peter Navarro said slamming Canadian Prime Minister Justin Trudeau over his remarks on trade at the press conference following the summit of G-7 leaders held on June 9, 2018. Seven leading economies of the world represent more than 62% of the global net wealth worth $280 trillion.

Speaking at the press conference as the host of the summit, Trudeau told reporters that all the members of the club (USA, Canada, Great Britain, Japan, Germany, France, and Italy) signed the final communique reflecting a common approach to solving global issues.

“What we did this weekend was come together, roll up our sleeves and figure out consensus language that we could all agree to on a broad range of issues..,” said Trudeau underlining that the G-7 is determined to defend democratic systems from external threats and strive to “build a safer world”. According to Trudeau, the final communique includes a provision recognising “free, transparent and mutually beneficial trade as a key parameter of growth and employment”, as well as the rejection of protectionism.

In addition, the final document reflects a number of other problems. For example, the leaders urged Moscow “to cease its destabilising behaviour to undermine democratic systems and its support of the Syrian regime”. They also declared their commitment to permanently ensuring that Iran’s nuclear program remains peaceful and the refusal of the US to sign the Paris Agreement on climate change. In addition, G-7 members raised $2.9b to finance the education of girls and women in the world's poorest countries.

It seemed that the most difficult negotiations in the club’s history ended without scandals and open confrontation. After all, a couple of days before the summit in the Canadian resort city of La Malbaie, some have nicknamed it ‘G6+1’ hinting at serious disagreements between the US president and the rest of the member states.

When Trump left the G-7 meeting for Singapore to meet with North Korean leader Kim Jong-un, it was clear that the allies “were still looking for ways to negotiate with the unpredictable US president,” wrote the Washington Post.

However, just one and a half hours after Trudeau's press conference, Trump blew apart the prevailing cheerful mood of the summit on his way to Singapore by ordering the US representatives not to endorse the final communique.

“PM Justin Trudeau of Canada acted so meek and mild during our G-7 meetings only to give a news conference after I left saying that ‘US Tariffs were kind of insulting’ and he ‘will not be pushed around’. Very dishonest and weak,” Trump said in his tweet.

So, what did infuriate the American president so badly that he cancelled all the accomplishments reached together with the other G-7 members with the ‘sleeves rolled up’? According to Trump, it was the following statement by Trudeau: “I highlighted directly to the President [Trump] that Canadians did not take it lightly that the United States has moved forward with significant tariffs on our steel and aluminium industry. Particularly, [we] did not take lightly the fact that [this decision] is based on a national security reason that for Canadians, who either themselves or whose parents or community members have stood shoulder-to-shoulder with American soldiers in far-off lands and conflicts from the First World War onwards, is kind of insulting… [I highlighted that] it would be with regret but it would be with absolute certainty and firmness that we move forward with retaliatory measures on July 1st… Canadians are polite and reasonable but we also will not be pushed around.”

 

Alarming expectations

Preparation for the G-7 summit was not an easy one. The ministers of economy, who met a week before the event, had different ideas about free trade and could not sign the final document.

Shortly before the meeting in Charlevoix, the European Union and Canada complained to the World Trade Organisation (WTO) against the unilateral introduction by the US of customs duties on steel and aluminium and stated that in response, they would impose tariffs of up to 25% on various American products effective from June 20 and July 1, respectively.

However, the differences between Trump and the other six leaders go far beyond trade, including issues on climate change, relations with Iran and the Israeli-Palestinian conflict.

French President Emmanuel Macron stated that he would not sign the final document if Trump insisted on his protectionist measures. German Chancellor Angela Merkel argued that it would be fairer to talk about these disagreements openly instead of pretending that they did not exist.

Understanding the unpleasant atmosphere of the expected summit, the US president tried to limit communication with his allies to a minimum. In order to somehow reduce imminent pressure because of trade barriers, he made an unexpected statement just before his flight to Canada that it was necessary to return Russia to the G-8. Perhaps he wished to redirect all the energy of his opponents to this topic.

Trump arrived to La Malbaie with an hour and a half delay. The next morning, he was late to the breakfast meeting between G-7 leaders and the Gender Equality Advisory Council, and at 10.30, he left for Singapore ignoring meetings on environment and global climate change. Also, after Mr. Trump’s advance notice about his decision to reduce the period of his stay in Canada, he received yet another portion of negative remarks from his colleagues in the negotiations.

Emmanuel Macron, upset by Mr. Trump’s gesture of “evil will”, twitted the following: “The American President may not mind being isolated, but neither do we mind signing a six-country agreement if need be. Because these six countries represent values, an economic market which has the weight of history behind it and which is now a true international force.”

 

Warm meeting with cold end

Contrary to forecasts, the meetings with Trump took place in a friendly atmosphere - with smiles, strong handshakes and mischievous winks.

Of course, there were serious discussions, and Trump's colleagues armed with statistical data were trying to explain to him that he was not entirely right in announcing the astronomical imbalance in foreign trade.

For example, although the US trade deficit with Canada in 2017 was $17.5b, the surplus in services was $26b. Hence the total surplus of the US-Canadian trade reaching $8.5b. Trade relations with other countries display a similar trend, for if the trade balance remains negative, it does not reach the level stated by the American president.

In addition, American experts warned the president that for each new workplace in the steel and aluminium sectors, which will appear due to new tariffs policy, 16 people will lose jobs in other industries, as higher steel costs will slow the development of the national economy. As a result, the US economic growth will decrease by almost $37b (0.2%) in a single year.

However, Trump did not change his position, stating that the situation when the United States ‘looked like a piggy bank that everybody’s robbing’ was over.

And just before his departure, he dumbfounded everyone with a proposal to turn the G-7 group into a duty-free zone, removing all tariffs, non-tariff barriers to trade and government subsidies. This proposal confused the partners who were trying to understand what he could have meant and whether it was worth taking seriously.

Europeans note that by proposing the cancelation of all the tariffs, Trump does not take into account a complex range of regulatory and other issues. Theoretically, they are ready to support this initiative. But in fact they do not believe that it is a serious proposal by the American president. In fact, according to one of the major European officials, Trump continued with his populist statements at the G-7 summit designed for the domestic American audience, not realising that he was communicating with experienced leaders who are well versed in world politics.

Mr. Trump’s decision not to endorse the final communique of the summit just shows that he is not interested in maintaining cooperation between the United States and its closest partners, whom he always calls “the so-called allies.”

By stating that trade wars are easy to win, it seems it’s only Mr. Trump who believes in this. Perhaps that is why he reacts so painfully to other opinions. In his desire to impose his will on all, he is ready to go to extreme measures, even to the complete cessation of economic cooperation with individual countries, including “the so-called allies.”

Normally, the US president needs the consent of the Congress to realise this measure. However, Trump found a loophole, which allows the president to make unilateral decisions based on a national security reason. Legislators once granted the president this right, which they can also take away from him. It is rumoured that the US Congress is planning to do this soon.

“To our allies: bipartisan majorities of Americans remain pro-free trade, pro-globalization and supportive of alliances based on 70 years of shared values. Americans stand with you, even if our president doesn’t,” the Republican senator John McCain tweeted immediately after Mr. Trump's decision not to endorse the final G-7 communique.

So, we may still hear statements like “a special place in hell” and “stabbing in the back” but they will be used in domestic political debates.



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