With the UK no closer to reaching a deal in the run-up to leaving the European Union at the end of October 2019, trade economist Rebecca Harding notes that while G7 members discuss trade tensions and the wildfires of the Amazon in France, the ability to talk a common language when cooperation is need more than ever remains elusive
The G7 has historically been a gathering of like-minded leaders from allied countries who gather together to agree violently about the importance of economic growth and globalisation. Until 2018, the summits were barely newsworthy in themselves and served principally to reinforce the commitment of the largest capitalist economies in the world to globalisation and free trade. However, by the time they gathered in Biarritz at the end of August 2019, the discussions had become anything but routine.
Populism and economic nationalism
According to Coriolis Technologies data, the G7 economies between them accounted for just under 40% of world exports in 2018 which compares to over 45% in 2007 just before the Global Financial Crisis.1 The reason why the proportion has fallen is, of course, because of China whose share of world exports over the same time period has grown from 14% to nearly 20%. In theory, at least, this should not present a challenge to the G7. The past 30 years have been characterised by free flowing capital, labour, ideas and technologies with the result that South Korea and China have also benefited from the growth that previously had been the preserve of the more advanced nations. The multilateralism that went with globalisation should have ensured that the interests of the world were aligned around a central and mutually reinforcing belief in the benefits of economic growth and free trade.
This model has become stale. Inequality across the world, but particularly in the developed nations, has triggered populism. With this has come economic nationalism; the 2019 G7 meeting had as its backdrop a trade war between China and the US and Brexit. This sets them directly in conflict with the institutions of the state, or even the institutions of multilateralism that the G7 represents. It is riven apart by trade at present.
Take the UK as an example. The G7 group is important but the US is its largest trading partner with exports that were some US$16bn more than the next largest partner, Germany at more than US$61bn in 2018.2 There has been a decline over the last five years in its exports to the US at an annualised rate of over 1% a year and shrinking export markets are potentially a big incentive for wanting to develop robust trade relations outside of a multilateral framework with its main export partner.