The US is back at the G7. The trade and finance ministers’ meetings ahead of the coming summit confirm – and overwhelmingly reflect – current US thinking on international issues. European Union and United Kingdom governments may want to think about how these tally with their own objectives, writes David Henig.
The new United States President will be travelling to Europe in the coming days for the first time in this role for G7, NATO and EU summits. Joe Biden does so as his international relations honeymoon seems to be coming to an end, and as the EU in particular wants to know when so many issues that have been under review will see progress.
There is much that various European countries would like to see tackled at G7 level, be it the revival of the WTO or the resumption of UK-US free trade agreement talks. Both the UK and EU are hoping for progress on the question of Airbus – Boeing subsidies and Section 232 tariffs on steel and aluminium.
Four C’s top US agenda
But none of these are considered first-order issues by the Biden administration. If there are lessons to be drawn from recent meetings of G7 ministers for trade and for finance, US international priorities lie elsewhere. These can be referred to as the ‘Four C’s’: China, Corporation Tax, COVID-19, and Climate Change, in roughly that order.
This doesn’t mean that no other issues will be considered by Washington. Indeed it even seems an EU-US Trade and Technology Council – a major EU ask – may be announced at the EU-US summit on 15 June. There are also indications the US will commit to concluding a settlement on Airbus and Boeing and to eventually removing metals tariffs. However such issues will have to fit US priorities.
EU and US positions on relations with China have been converging since their difficult start in the early days of the Biden administration caused by the EU’s conclusion of the Comprehensive Agreement on Investment in December 2020. China’s imposition of sanctions on individuals from around the EU in response to sanctions imposed over treatment of Uyghur Muslims ended any immediate prospect of CAI ratification, and brought a much harder edge in general to EU-China relations.
Nonetheless in the context of numerous global policy challenges it is remarkable the extent to which China dominated the communiqué of the G7 trade ministers. After a couple of opening paragraphs, the next two sections, on market-distorting policies and transparency, are clearly directed at China.
Yet at a time of increased industrial intervention by the EU and US, the condemnation of harmful industrial subsidies rings particularly hollow.
European priorities get short thrift
WTO dispute settlement is, in contrast, dealt with in one short paragraph describing “frank and constructive discussions.” The communiqué then returns to the subject of China, this time in pointing out that Special and Differential Treatment “is aimed at helping the poorest and least integrated WTO members” and calling on “advanced WTO members claiming developing country status to undertake full commitments in ongoing and future WTO negotiations.”
The final China paragraphs, which come after a section on plurilateral agreements at the WTO, concern forced labour. In seeking “recommendations to prevent, identify, and eliminate forced labour in global supply chains” they set the scene for likely future interventions by G7 members.
In total, by word count, one third of the communiqué is devoted to China. That count does not include the word ‘China’, though the subject is obvious.
Reading a communiqué from a formal summit is often as much about what is excluded than what is included. Thus while ‘Trade and the Environment’ is clearly prioritised with six paragraphs, four of these concern deforestation. There is no mention of significant initiatives at the WTO, or more controversially the EU’s proposed Carbon Border Adjustment Mechanism.
There is a similarly lengthy section on ‘Trade and Health’ focusing on COVID-19 and economic recovery, which delicately steers round the known US-EU disagreement on intellectual property in saying only “we will prioritise discussions and support work at WTO in identifying solutions to expand global vaccine production and distribution.”
There is a paragraph on seeking to limit trade restrictive COVID-19 related measures, but as previously noted, no recognition of the successes of global trade in fighting the pandemic.
There are other short sections on fisheries subsidies, women’s economic empowerment, and digital trade. However the overwhelming impression from the communiqué, notwithstanding warm words, is that G7 trade ministers don’t really believe in global free trade.
G7 corporation tax breakthrough also reflects US priorities
A week after the meeting of G7 trade ministers came the similar meeting of finance ministers, and the announcement of an agreement on corporation tax. As previously featured in this column, this had been a US priority, with the aim of ending what was seen as unfair tax competition and thus returning economic activity to the United States.
The G7 finance ministers’ communiqué similarly features COVID-19 and climate change, before focusing on the much-touted corporation tax agreement. This would see a global minimum corporation tax of 15%, as well as a way of allocating national tax revenues. However this needs further agreement, with the next stage being the G20 finance ministers meeting in July.
Summit announcements are not always implemented, and certainly not quickly. There are many complex issues to be resolved on corporation tax, and it is even less clear what will happen on relations between G7 countries and China.
It seems likely that the UK deliberately crafted US-friendly outcomes, and the EU were prepared to go along with them even if they didn’t fully reflect policy differences.
Nonetheless at the very least we have confirmation of US thinking on international issues. EU and UK governments may want to think about how these tally with their own objectives, and in particular about how to persuade the US that a united front on China means resolving some of their own long-standing disagreements.
David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.
Views expressed by columnists at Borderlex are strictly their own.