G7 Summit Opportunities in 2018
Director, G7 Research Group
Co-director, G20 Research Group
Keynote Luncheon Address to the Converg-x Conference, Calgary
February 8, 2018
Just four months from now, on June 8–9, 2018, Canadian prime minister Justin Trudeau will host the most powerful leaders of the world's most powerful rich democracies at the Group of Seven (G7) summit in Charlevoix, Quebec. It will be the first time Canadians have the opportunity to welcome at home U.S. president Donald Trump, British prime minister Theresa May, French president Emmanuel Macron and the next Italian prime minister, and greet again Japan's Prime Minister Shinzo Abe and Germany's Chancellor Angela Merkel.
On their summit agenda will be all of the issues we are addressing at our Converg-x conference here.
Their first priority — inclusive economic growth — will cover free trade beyond borders, and Canada's pioneering economic partnership with the United States and Mexico under the North American Free Trade Agreement (NAFTA), with Europe under the Canada–European Union Comprehensive Economic and Trade Agreement (CETA) and with Asia and the Americas under the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as well as the infrastructure needed to make trade flow.
Their second priority — the future of work — centres on the rise of the robot and whether that technology will replace humans in the workforce or reinforce our ability to produce better lives for all.
Their third priority — gender equality — will focus on women in the workplace and help determine how your businesses will work to generate better profits and productivity in the economy as a whole.
Their fourth priority — climate change, oceans and clean energy — is critical for the evolution of clean and green renewables and environmental technology, tech innovation, the lives of Indigenous peoples and the Arctic north of 60.
Their fifth priority — peace and security — embraces cybersecurity, counterterrorism and the work of the Canadian military as a whole.
How the G7 leaders deal with these subjects could shape the business challenges you face and the opportunities you can seize.
So it is a good time to ask three questions:
First, what do these G7 summits do?
Second, what will this one do?
Third, what should this one do for you and the wider world?
Today I will answer the first two questions and ask you to help me answer the third. In doing so I shall focus on the priority of climate change, oceans and clean energy, for that is probably the most urgent and critical challenge of all.
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First, what do these G7 summits do? Are they just photo ops or global hot tub parties for politicians to enjoy at taxpayers' expense, as many citizens complain? They certainly are, but they are much more as well. In fact, they are the ultimate political executive retreats that change the world, in many better ways.
Since their start in 1975, these annual G7/8 summits have repeatedly reinforced the group's distinctive mission of protecting within its members and globally promoting open democracy, individual liberty and social advance. These values are being assaulted again today, as our colleagues in the Canadian military know all too well.
They also make the toughest decisions — the ones that cannot be taken at levels below. They have made more than 5,000 precise, future-oriented, politically binding collective decisions, across the economic, energy, ecological and security fields. Here energy ranks second with 433 commitments, terrorism fourth with 372, trade fifth with 333 and climate change sixth with 315.
Do these politicians comply with these commitments, any more when they keep the promises they make when they are home alone? This critical question has a clear answer. Yes they do — at a level of 76%. They are getting better, as their compliance has risen rather steadily from about 65% before the Cold War ended, to 82% the year after Russia, which had joined the G7 in 1998, was suspended for bad behaviour in Ukraine in 2014.
Among the countries, the gold medal for compliance goes to the United Kingdom, at 83%. Coming a close second for the silver is Canada at 82%. The bronze goes to the United States at 81%, with both Republican and Democratic presidents and Congresses in charge.
In fact, the G7 commitments made in the summer of 2016 by Barack Obama were complied with by Donald Trump's United States a year later at a level of 81%. Donald Trump's United States got the gold medal last year. On climate change U.S. compliance was 75%.
The G7 has also created the international institutions that the world relies on to this day. It created ministerial forums for finance, foreign affairs, trade, the environment, employment, terrorism, crime, development, health, culture and gender. Last year in 2017 13 separate G7 ministerial meetings were held, including one for science. None has ever been held for ministers of defence.
The summit itself has produced several stand-out successes to build a better world.
In 1979, in Tokyo, with Canada represented by Alberta's Joe Clark, the G7 produced the world's first regime to control climate change, producing the most ambitious and effective one to this day.
In 1988, at Toronto, it helped create the pioneering Canada-U.S. Free Trade Agreement. Most Canadians and Americans are glad they have it as an insurance policy, now that the fate of its NAFTA progeny is in doubt.
By 1989, in Paris, the G7 won the Cold War. Mikhail Gorbachev sent his surrender letter on behalf of the Soviet system and soon the whole Soviet Union, to the G7 leaders at their summit in Paris that year.
By 1994, in Naples, it helped create the World Trade Organization (WTO).
In 1999 it prevented another genocide in Europe, by going to war in Kosovo.
In 2002, at Calgary and Kananaskis, it rallied around a newly shell-shocked post-9/11 United States to combat terrorism of global reach. It also helped Russia disarm its weapons of mass destruction and assisted African development, in more gender equitable ways. It raised $50 billion in new money for such tasks.
In 2010, at Stephen Harper's Muskoka Summit, it raised $7.3 billion in new money for maternal, newborn and child health. Three months later, that sum rose to $40 billion at the United Nations.
In 2015, at Angela Merkel's Elmau Summit, leaders promised to "lift 500 million people out of hunger and malnutrition by 2030." They need new agricultural innovations to get this done.
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Based on this record of success, what is Canada's forthcoming Charlevoix Summit likely to do?
To answer we must first assess the current condition of those propellers of summit success that have worked in the past.
The first propeller is the set of shocks that make leaders aware of their shared vulnerability and need to "hang together" to effectively respond. For Charlevoix, several candidates stand out: new terrorist or cyber attacks, North Korean nuclear explosions or missile launches, extreme weather events or other ecological disasters, and new trade shocks from the United States or United Kingdom. A new infectious financial crisis could also erupt.
The second propeller is the failure of the multilateral organizations from the 1940s to cope with such shocks. Such failure is now pronounced. The United Nations Security Council has not stopped the North Korean threat nor the terrorist threat. On December 25, 2017, the UN budget was cut by almost 25%. Trump's United States is paralyzing the WTO by refusing to appoint judges to its highest court. Budget cuts have also afflicted the World Food Programme, creating more famine and deaths. Not surprisingly, in 2017 people in 25 countries gave the United Nations, World Bank and International Monetary Fund (IMF) lower approval ratings than the year before.
The third propeller is the ability of G7 members collectively to fill the gap and do so by fairly sharing the burden among themselves. Here things look good. In the hard power of military security, the G7 has a strong global lead. All G7 countries are finally enjoying rising economic growth and employment. But they also face rising inflation interest rates, fiscal deficits and debt, and healthcare and pensions costs as their populations age.
Moreover, their soft power is shrinking. Public views of U.S. positive influence has plunged 24% to only 40%, making it less popular than China at 49%, and the United Nations at 64%. Also sagging is highly ranked Germany at 67%, France at 59% and the United Kingdom at 57%. Alone at the top stands Canada at 81%, unchanged from the year before. Can the G7 at Charlevoix count on Canada alone to restore its image and influence in the world?
The fourth force is the G7 leaders' shared, unifying devotion to the principles of open democracy, individual liberty and social advance. These remain intact. But some doubt that Donald Trump shares such convictions, as least where an increasingly repressive and aggressive Russia is concerned.
The fifth propeller is the political cohesion and capital at home that lets leaders compromise to forge the desired agreements abroad. Here several problems arise. Donald Trump has historically low approval ratings and his party faces mid-term elections in November. Theresa May has a feuding, faction-ridden minority government. Angela Merkel leads an uninspiring coalition government and Italy's leader will have one too. Emmanuel Macron of France and Shinzo Abe of Japan are more secure. So is Justin Trudeau, whose still leads the public opinion polls. Moreover, 46% of his citizens are open to one another and the world, compared to only 30% who feel economically and culturally insecure. Can Trudeau convince his domestically constrained G7 colleagues to share Canadians welcoming view of the world where trade, climate change control and migrants are concerned?
Maybe he can. The sixth propeller of summit success is the informal, personal dynamic within the private G7 club that the leaders cherish as their own. For them, it is often a lonely hearts' club — the only place where they can commiserate with their peers and learn from them how to do a better job. Its magic worked on trade at Taormina in Italy last year. It can again at Charlevoix, especially if the conference hotel and surrounding golf courses are up to the standards Donald Trump expects at his own. It helps that the leaders will be left alone together, far from the madding and maddening crowd. As at Canada's Calgary-Kananaskis Summit in 2002, the media and protestors will be kept in Quebec City, many kilometres away.
These propellers should push the Charlevoix Summit to success, above all on security, the economy, jobs and gender.
On security, success should be easy. All leaders will agree to act more strongly against terrorism, especially returning ISIS fighters, and cyber radicalization and recruitment through firms that hide behind the arguments of free speech, privacy and property rights. Russia and North Korea will be sanctioned. China will be discussed and perhaps admonished by name in the communiqué. Myanmar and Venezuela will be scolded for violating democracy and human rights, but little else will be done. The Middle East, North Africa and Afghanistan will be treated in a similar way.
On the economy, leaders will again endorse the need for "free and fair" trade, a modernized WTO and trade sanctions against Russia and North Korea. They will act against China's dumping and against discriminatory intellectual property, technology transfer and investment regimes. They may even say encouraging things about the ongoing NAFTA negotiations and the new CPTPP that Donald Trump has just suggested he might rejoin. They will promise to forego and to raise their interest rates in a careful, even coordinated way to contain the cost of the capital. They will enthusiastically endorse the need for infrastructure investment, to boost productivity, trade and jobs.
On jobs, all leaders want more secure, better paying jobs for their workers. All will agree that workers need to be educated to survive and thrive in the new digital economy. What solutions can you offer here? Each can offer policies that have worked at home for the others to adopt. The divisive issue of getting jobs for immigrants will be sidestepped, for only Justin Trudeau's Canadians believe that this is a good thing.
On gender, the status of women in the workplace will be reinforced. Leaders will heartily endorse the reports of the new women's advisory council that Trudeau announced at Davos in January. It will be harder to meet his ambitious desire to mainstream gender equality everywhere, by, for example, having monetary policy, climate policy and security policy work credibly for women. It is doubtful if robust language endorsing sexual and reproductive rights, gender identity and the me-too movement" will appear. But a pitch for government funding will be better received if it shows how it helps women advance in science, technology, engineering and mathematics and other fields.
At the moment there will be no $50 billion or $40 billion in new money to finance any of these goals. There should be and could be as the Charlevoix Summit comes near.
Climate change, oceans and clean energy will be the most difficult issue. It could define the overall success of the summit, especially if an energy or ecological disaster erupts on the summit's eve. The memories of recent hurricanes hammering the United States, or fires destroying Fort McMurray and Californian vineyards could easily be reawakened by smaller disasters that climate change makes more likely by the day.
The climate threat has become compellingly clear. The past three years were the world's warmest ever. The oceans are steadily warning, reducing their value as sinks that absorb carbon from the atmosphere. The world's forests are shrinking, turning this carbon sink to a carbon source as they are burned and cleared. Even the U.S. military has just said that half its global bases are already harmed by climate change, including those not on the coasts. The Canadian military is probably similarly exposed in the Arctic above all. The latest Global Risks Report prepared for the World Economic Forum in Davos in January placed climate change and its consequences as by far the greatest risk to the world. It is what the global big business community is most scared about. If you have solutions, they might have the finance to support your work.
So how should businesses and citizens respond, before it is too late? It is impossible to stop the threat by acting home alone, for the problem of soaring emissions and shrinking sinks is overwhelming produced on a global scale. Nor can Canada duck, hide and take a free ride, for it is a major emitter and geographically the second largest country in the world.
Some might hope that the United Nations can solve the problem, but it is now clear that it cannot. At its last summit in Paris in December 2015, UN members agreed to limit post industrial revolution warming to 1.5°C. But they offered actions that, even if fully implemented, were not nearly enough. They agreed to wait for five years before they even tried to do a better job. If we leave it to the United Nations, we could all fry and die.
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So what could and should the G7's Charlevoix Summit do for you and the world?
Let me offer a few thoughts on the critical issue of climate change about initiatives percolating in the thinking of G7 governance now. Then I will ask for your ideas.
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