Belt and Road may be a wise initiative for G7
That leaders from the world’s leading industrialized countries — Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — are expected to discuss “building the foundations of renewed trust” in Sicily, Italy, on Friday and Saturday offers a glimpse of the challenges facing the G7 amid growing concerns over global governance.
Established in 1975 by “the world’s six major industrialized democracies” before Canada joined it a year later, the G7 seems to have passed the baton of international economic coordination to the G20 after the 2008 financial crisis. The G7 still accounts for more than 40 percent of the world’s economy, but their combined contribution to global growth is not equal to that of China alone. And given the continuing currency and trade disputes, it is only natural for the G7 to yield place to the more inclusive G20 to build the foundations of renewed trust.
The founding of the G20, which comprises the G7 as well as BRICS (Brazil, Russia, India, China and South Africa) and other major economies, also poses a challenge to the G7’s legitimacy. The co-existence of concerting mechanisms upheld by different regional economic blocs, to some extent, could deal another blow to the G7’s once-dominant role now that the G20 enjoys more international credibility.
The major hindrance to the G7’s ambitions is the waning coordination between the US and the European Union after Donald Trump was sworn in as the US president and leader of the world’s largest economy. Trump’s “America First” slogan, strident comments on the role of NATO, and his decision to pull the US out of the Trans-Pacific Partnership agreement have added to the US-Europe disparities over free trade, multilateralism and global governance. And many observers say he could face headwinds at the ongoing NATO summit in Brussels and the G7 summit in Sicily.
The G7 also needs to deal with the global security challenges and better manage its relations with China and Russia, which was suspended from the erstwhile G8 in 2014. Without Washington leading the way, the sevenmember bloc will likely become a supplement to bilateral negotiations between the US and other G7 members like Japan and Canada. And after the EU-Canada and EU-Japan free trade agreements came into effect, however, Brussels seems to expect less from Washington.
More important, the major issues haunting some G7 economies, such as Italy’s debt crisis, raise questions on the bloc’s credentials in economic governance. The group’s ambitions of reducing inequalities, safeguarding cyber security, closing the financing channels of terrorists and dealing with the tax challenges of a digital economy are laudable. But it will take more than seven countries to find a fundamental solution to the problems, not least because Trump’s recent moves suggest something different from the previous G7 consensus on fighting protectionism and climate change.
Whether the G7 summit will raise an alert over competitive depreciation should be closely watched given the possibility of the new US administration undermining the consistency of the G20 economies’ global monetary policy.
Seeking closer cooperation with China and taking part in the Belt and Road Initiative could be a wise choice for the G7 members aiming to build solidarity and efficient global governance. The two-day Belt and Road Forum for International Cooperation in Beijing, which ended on May 15, was attended by representatives of both developing and emerging countries, as well as the G7 countries. That is evidence of the difference the inclusive, reciprocal initiative can make to the international community and regional groups.