This week, G7 leaders meet in Ise-Shima, Japan for the forty-second G7 summit. To learn more about the G7’s relevance, the importance of diplomatic engagements taking place before the summit, and key issues that will be discussed in Ise-Shima, we speak to CIGI global economy expert Thomas A. Bernes and global security expert Benoit Hardy-Chartrand.
CIGI: What are the main themes you expect to see at this year’s G7 summit?
Benoit Hardy-Chartrand: As is usually the case with the G7, this summit will revolve in part around issues of global economic growth and trade. I also expect foreign policy and security issues to be prominent in the discussions as well as the final communique. As host of the summit, Japan has a greater degree of control over the agenda, and it will want to include the South China Sea issue, where China’s land reclamation and territorial claims have encountered opposition from neighbouring states. However, China reacted angrily in April when the G7 foreign ministers issued a statement condemning land reclamation, so the statement may be slightly more circumspect on this issue.
CIGI: Reports are noting that austerity versus stimulus, fiscal policy and “Brexit” will be central concerns among G7 leaders in Japan. With that said, has this global summitry — the G7 or G20 for that matter — really been able to accomplish much for the global economy since the financial crisis? And what do you expect to be achieved in Japan on the aforementioned topics (or any other global economic issues not mentioned, such as tax havens, terrorist financing etc.)?
Thomas Bernes: It is inevitable that G7 leaders will informally discuss the state of the global economy and the risks it faces — including slow growth, high unemployment and geopolitical threats including terrorism and Brexit. That being said, such discussions are unlikely to lead to any firm commitments as the G20 is now the premier forum for economic cooperation and the G7 just does not have the right membership to come to important decisions on the world economy and implement them. While issues such as terrorist financing and tax havens may find some reflection in the communique, these are now firmly embedded in the G20 work program. As such, any new initiatives would be surprising. Reference to such issues serves instead to underlie the political importance that the G7 attaches to further progress on these.
CIGI: Prior to the G7 summit, Canadian Prime Minister Justin Trudeau was in Japan for bilateral talks with Japanese Prime Minister Shinzō Abe and US President Barack Obama made what was described as a historic visit to Vietnam. What was the relevance, purpose and predicted outcome of these diplomatic engagements?
Hardy-Chartrand: The main purpose of Prime Minister Trudeau’s bilateral talks with Prime Minister Abe was to reinvigorate trade ties between Canada and Japan. Merely 15 years ago, Japan was Canada’s second trading partner after the United States, but it is now the fifth, behind the United States, China, Mexico and the United Kingdom. Although bilateral relations are generally excellent, trade can certainly be bolstered in certain key sectors. The talks did not focus solely on trade however. The Japanese Prime Minister is looking to Canada to take a stronger stance against Chinese actions in the South China Sea. However, given Prime Minister Trudeau’s positive interactions with Chinese President Xi Jinping and the importance of the Chinese market for Canada, I would be surprised if he suddenly changed course and wholeheartedly supported Japan’s position on this issue.
Vietnam, despite being ruled by a communist party that continues to suppress dissent and human rights, is increasingly seen as a partner in the Southeast Asian region by the United States. This rapprochement is driven in part by the intensifying Sino-American rivalry. Vietnam is locked in its own territorial dispute with China over islands in the South China Sea and, along with the Philippines, has looked to the United States to oppose Chinese actions in the body of water. Conversely, Washington views Hanoi as an ally in opposing the influence of China. During President Obama’s visit, he announced that the United States was fully lifting the decades-old embargo on arms sales to Vietnam. Although President Obama said the move was not related to China, there is no doubt that it is based on more than commercial considerations. It constitutes another move on the geopolitical chess game that is playing out in the region.
CIGI: A Reuters report has suggested that G7 finance leaders have “probably failed to agree on concrete steps to bolster stagnant global growth.” In turn, G7 economies will likely agree on a “go-your-own-way” approach, where no “one-size-fits-all” approach fits, to address risks in the global economy. What does this disagreement mean for cohesion among G7 economies and are there inherent risks in this approach or is it wise at this moment in time?
Bernes: Again, the G7 is not the forum where significant progress on bolstering economic growth should be expected. It is not the right membership as over half of global growth comes from the emerging markets which are not represented. This being said, this meeting is a step on the road to the G20 Leaders’ Summit scheduled for September on China. Leaders will no doubt want to reiterate the importance they attach to stronger growth. Finance ministers have endorsed the approach articulated by the International Monetary Fund (IMF) calling for action on fiscal policies by those whose situation allows this, such as Canada. Such spending should emphasize infrastructure investment which can hold both short and long term benefits. Stronger progress on structural reforms is also called for. Monetary policy should continue to be supportive. The G20 track record on economic progress has been weak since its success in addressing the financial crisis. The Brisbane Action Plan agreed almost 18 months ago (during the Australian Summit) to stimulate global growth has fizzled. That is why additional action is called for. Country circumstances differ and what each country should do therefore differs as well. However, by acting together, the result can be stronger growth for all. Cohesion does not mean the same actions — it means acting together. The IMF has identified the need for stronger action by G20 countries. The G7 can provide a sign of whether they are heeding this call responsibly.
CIGI: Given the geographic proximity of this year’s summit, can we expect North Korea to be a topic of discussion?
Hardy-Chartrand: Japan will include North Korea in the discussions, as it is the G7 member that is most directly threatened by Pyongyang’s actions. However, beyond issuing a strong condemnation of North Korea’s nuclear and missiles tests, there is little the G7 can do. Above all, I expect that Japan, along with the United States, will work to ensure that the other G7 members support recent moves to isolate North Korea and impose strong sanctions. I suspect Tokyo and Washington may also enjoin other members to exert pressure on China so that it enforces sanctions on its neighbour, which has been an issue in the past.