Trump's Trade Protectionism, G7's Charlevoix Success
John Kirton, Director, G7 Research Group
June 2, 2018
On May 31, 2018, U.S. president Donald Trump unilaterally imposed on Canada and the European Union tariffs of 20% on the steel and 10% on the aluminum they export to the United States, as he had on fellow G7 partner Japan shortly before. Many instantly concluded that this single issue would hijack the carefully prepared agenda for the G7 meeting of finance and development ministers in Whistler, British Columbia, on May 31-June 1, and the G7 summit itself in Charlevoix, Quebec, on June 8-9. Some said this U.S. assault would infect the entire summit agenda, with disunity and failure the necessary result. Others asserted that Trump would not or should not attend, and the prominent German newsmagazine Der Spiegel suggested that the summit itself be postponed or cancelled outright. The last assertion was reminiscent of that of Alberta premier Ralph Klein, who had asked that Canada's G7 Kananaskis Summit in 2002 be moved or cancelled due to the deadly al Qaeda terrorist attack on the United States on September 11, 2001, and the prospect of a repeat that would kill Albertans at the G7 summit itself.
Such reactions from casual observers of G7 summitry were understandable, given the mounting frustrations with Donald Trump's unilateral withdrawal from the Trans-Pacific Partnership, the Paris Agreement on climate change and, most recently, the Iranian nuclear deal. However, close observers of the G7 at its previous 43 regular annual summits, and its progress for its 44th at Charlevoix, could easily conclude that the causal chain worked the other way around. A single outburst of unilateralism trade protectionism by a single G7 member would not destroy the unifying dynamics of the summit across the broad political-security, social-sustainability and finance-economic agenda it has always had. Rather, the distinctive dynamics of the G7 club would make all its leaders "hang together" to successfully address the broad array of far more serious challenges that they alone could solve, as first detailed in the classic book on G7 summitry by Robert Putnam and Nicholas Bayne in 1984 (see Hanging Together: Co-operation and Conflict in the Seven-Power Summit).
To be sure, trade was central to the one failed summit in G7 history, that at Versailles in 1982. The Europeans were eager to buy gas from the Soviet Union, their powerful Cold War enemy, while U.S. Republican president Ronald Reagan, at his second summit, thought this would render them economically and thus politically dependent on their foe. He threatened to impose trade sanctions on them if they went ahead. The summit produced a fragile consensus that contained a communiqué, and that immediately unravelled. But a year later, at the G7's Williamsburg Summit that Reagan hosted in 1983, unity was restored, in a strong and effective way that soon led to G7 victory in the long Cold War and the end of the Soviet Union itself.
At the G7's Bonn Summit in 1985, trade disagreements had threated to end G7 summitry as a whole. Most G7 leaders wished politically to launch a new round of multilateral trade negotiations at the General Agreement on Tariffs and Trade, to follow the Tokyo Round they had successfully concluded in 1979. French president Fran¸ois Mitterrand resisted, implying he would walk out and never return if they went ahead. So they waited a year and then, at their Tokyo Summit in 1986, they launched the Uruguay Round that was successfully concluded in 1994 and created the World Trade Organization that operates today.
The current U.S. tariffs on steel and aluminum are miniscule in their economic and political magnitude to the trade and other issues that the G7 summit has confronted and triumphed over in the past, and that it faces at Charlevoix now. Trade was always part of the agenda, as an integral part of the summit's first priority of inclusive economic growth and its third, uniquely mainstreamed priority of gender equality and women's empowerment. Here all leaders are unified in their determination to make today's globalization work for their workers and those who want to work, lest they be thrown out of office by their voters who fear that they and their children will lose their jobs and income due to forces they do not understand and cannot control. While some blame foreign imports or immigrants, most point to the robots. Thus all G7 leaders will come together to address and advance Charlevoix's second priority — preparing for the jobs of the future in a digital age.
Most leaders and their publics also care about another summit priority — climate change, oceans and clean energy — and have just shown how this can be advanced by new, progressive, full free trade agreements that are socially and ecologically fair as well. The recently concluded Canada–European Union Comprehensive Economic and Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership among Canada, Japan and others, and then the Japan-EU agreement to complete the triangle have brought full free and fairer trade to the G7, with only the United States left out. But due to the North American Free Trade Agreement, now being modernized, the U.S. is similarly connected to the others through Canada, the only G7 member so linked to every member of the G7 club. So all G7 members have constructed insurance policies against U.S. protectionism in their partners big markets, but wish to extend this real protection to their U.S. ally also facing from Russia and China much bigger trade, and geopolitical assaults. On the latter they will focus at Charlevoix, for the summit's fifth priority is peace and security in a world where both a non-democratic Russia and China seem to be on the rise.
With so much at stake in their global common cause, why would any one expect or want the most powerful leaders of the world's most economically advanced democracies to throw this all away and not even talk to one another due to some small and perhaps temporary tariffs on two small sectors of G7 economies which are now experiencing robust growth? To paraphrase, it is not "about the economy stupid," for the G7 summit is ultimately about building a safer, more secure and democratic world.
Those preoccupied with unilateral protectionist moves by U.S. Republican presidents should recall the Sunday evening of August 15, 1971. Richard Nixon went on national television to tell his fellow Americans, in the epitome of self-constructed reality, that the U.S. had won the war in Vietnam, so its victorious troops were coming home and would jobs that had been stolen by unfair foreign competition, and that America would no longer fight with one hand tied behind its back. He thus imposed a 10% surcharge, not just on two small product sectors, but on all dutiable imports into the United States. Yet soon after those tariffs were gone, in 1974 Nixon was gone from the presidency, and in November 1975 G7 summitry was born. Today Trump's tariffs are much smaller and the G7 is much stronger, and still on track to produce at Charlevoix a summit of significant, synergistic success.
For more on the full G7 agenda for Charlevoix, including trade, see G7 Canada: The 2018 Charlevoix Summit.
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