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The Pillars of the Italian G7 Presidency

Chiara Oldani, University of Viterbo and G7 Research Group
February 11, 2017

The Italian government recently launched the official web page of the 2017 G7 Taormina Summit, declaring the three pillars of its presidency. Prime Minister Paolo Gentiloni also confirmed that Russia will not be invited to join the summit. The goals of the Italian presidency hardly match with the priorities of the new U.S. administration, although they do match more with the priorities of the other G7 countries. As France will elect its new president on May 7, the road to Taormina is very steep.

Italy's three pillars are "Citizen Safety"; "Economic, Environmental and Social Sustainability and a Reduction of the Inequality Gap" and "Innovation, Skills and Labor in the Age of the New Production Revolution."

The Italian government's choices stem from the fact that "citizens are increasingly skeptical of their governments' ability to deliver on issues ranging from security to environmental and social sustainability to economic well-being." It will therefore focus on these three priorities, in the context of the G7's "core business": foreign policy, the global economy and international trade.

The first pillar, "Citizen Safety," will seek to assuage citizens' concerns in a time of geopolitical instability, widespread terrorism and uncontrolled immigration. Italy's G7 will focus on Sub-Saharan Africa and the Middle East and North Africa, in particular Libya, Syria and Iraq, and on the fight against terrorist organizations, as well as on preventing extremism and radicalization. It will also deal with the phenomenon of human mobility, in terms of both refugees and migrants.

The Taormina Summit will be the first global occasion for U.S. president Donald Trump to deal directly with the situation in Syria. He will probably confirm his intention to stop the flows of migrants, a position likely to be supported by Japan, but in contrast to Canada and Europe, which for different reasons are not willing to close their borders to refugees or migrants. The possible election of Marine Le Pen in France will put it on the same side as the United States and Japan. The different and un-coordinated immigration policies among G7 countries will have certain negative economic consequences. Commodity prices will be more volatile and trade will divert from current trends.

The second pillar, "Economic, Environmental and Social Sustainability and a Reduction of the Inequality Gap," includes ¬†implementing the goals laid out in the 2030 Agenda for Sustainable Development on matters such as climate change, energy policy, the Paris Agreement on Climate Change, food security, health care, the empowerment of women, and education. The G7 will pay particular attention to inequality — "not just in wealth, but in terms of gender, ethnicity, and access to health services and education."

These priorities are relevant for the European members of the G7 (France, Italy, Germany and the United Kingdom) as well as for Canada and Japan but do not find any room in the Trump administration's program. The discussions to come up with a common statement on equality, health care and the empowerment of women will be especially tough.

The third pillar, "Innovation, Skills and Labor in the Age of the New Production Revolution," will focus on innovation as an engine for growth in advanced economies. Industry 4.0, with its automation, data exchange, cloud computing and new production models, can increase productivity and competitiveness, spread new skills, and also improve welfare systems and labour policy so everyone benefits from the digital revolution.

European countries in the G7 have common policies for innovation and research and development, and the policies discussed at the Taormina Summit will bring new strength to these fundamental components of their economies. Japan is a longstanding business partner for the new production revolution.

Trump's "America First" will probably mean a reduction in the freedom of American businesses to relocate outside their country, and a reduction in the immigration of workers. After January 20, 2017, high tech firms in Silicon Valley started a high-level legal battle against the U.S. administration order to limit migration, and shows no sign of letting go.

The relocation of high tech firms outside the United States is not as challenging as for other industries, as the value of those firms is their workforce skills and an environment prone to new technology and innovation. The other G7 members can also favour the relocation of U.S. firms, similarly to the relocation of British financial firms after Brexit. This trend will have detrimental effects on global trade equilibrium and will reduce competitiveness.

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Chiara OldaniChiara Oldani is professor of monetary economics at the University of Viterbo and director of the G7 Research Group's Rome office. She is a member of the scientific committee of the Fondazione Ugo La Malfa, a research associate at the Centre for Applied Macroeconomic Analysis at Australian National University and the director of research at the Rome-based Assonebb. She was a visiting scholar at CIGI in 2014, the Cambridge Endowment for Research in Finance at the University of Cambridge in 2007 and the Wharton School at the University of Pennsylvania in 2005. She has taught at Luiss Guido Carli University and the Italian Society for International Organization in Rome. Chiara's research currently focuses on over-the-counter financial derivatives and the complex web of counterparty risk, widely considered a major precipitating factor of the global financial crisis. She has published dozens of academic papers and book chapters, both in English and Italian, on topics including Greek sovereign risk, derivatives and fiscal policy, and the global financial crisis. She has a Ph.D. in monetary and financial economics from Tor Vergata University and an M.Sc. in economics from the University of Warwick

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