Trade Expected to Top Hefty Agenda as G7 Leaders Arrive in Charlevoix

7 June 2018

Leaders from the G7 coalition of advanced economies are due to arrive in Charlevoix, Canada, on Friday 8 June for two days of meetings that are expected to focus heavily on trade.

This year’s summit, hosted under the Canadian presidency, is meant to cover five main themes, dealing with inclusive growth; future job trends; gender and women’s economic empowerment; peace and security; and climate change, energy, and ocean conservation and preservation issues.

Despite this busy agenda, trade is expected to have a particularly high-profile role during this weekend’s talks, after a meeting of G7 finance ministers and central bank governors from 31 May to 2 June ultimately ended with six of the seven members asking US Treasury Secretary Steve Mnuchin to convey their frustrations with recent US tariffs on steel and aluminium.

“Concerns were expressed that the tariffs imposed by the United States on its friends and allies, on the grounds of national security, undermine open trade and confidence in the global economy,” said a chair’s summary of the discussions.

The tariffs were imposed following a Section 232 investigation, a provision of the 1962 Trade Expansion Act that involves examining whether imports are having an adverse impact on the US’ national security prospects. The steel probe looked at, for example, whether the flow of these imports into the US was limiting the US’ ability to ensure that its domestic producers can meet its national defence or critical infrastructure needs.

However, the use of this type of investigation, and subsequent tariffs, has drawn harsh criticism from US trading partners. Prior to these recent probes, Section 232 investigations had not been used since the early 2000s, and was mostly used in the 1980s and 1990s. Several countries have argued, both at the WTO and elsewhere, that the use of national security justifications for setting import duties or curbs could set a risky precedent.

“Ministers and Governors had a frank exchange on the benefits of an open rules-based trading system and many highlighted the negative impact of unilateral trade actions by the United States. Ministers and Governors agreed that this discussion should continue at the Leaders’ Summit in Charlevoix, where decisive action is needed,” the G7 finance chair’s summary said last week.

The G7 consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The EU is also represented, specifically via the presidents of the European Commission and Council, along with officials from the European Central Bank and Eurogroup.

While some countries were exempted from the steel and aluminium duties, usually in exchange for agreeing to a quota on their exports of these metals to the US, none of the G7 members were among those excluded.

Some of the G7 members, namely Canada and the EU, learned late last week that they would ultimately be facing the duties, after having been granted additional time to negotiate. Mexico, which is not a G7 member, was also among those who had been given more time but ultimately did not receive an exemption.

“Friends sometimes disagree. The results of our discussions are proof the G7 can bring progress on important issues to our citizens and help grow our economies for the benefit of everyone. But this progress is only possible when we work together. Unfortunately the actions of the United States this week risk undermining the very values that traditionally have bound us together,” said Canadian Finance Minister Bill Morneau.

Trade tensions, international forums

The current trade context has taken centre stage during a series of high-level meetings in multiple forums in recent weeks, including during an annual trade ministers’ gathering at the Organisation for Economic Co-operation (OECD) headquarters in Paris last week, along with high-level meetings in Brussels between the EU and China. (For more on the EU-China meetings, see related story, this edition)

The OECD trade ministers’ meeting, for example, referred to a “consensus minus one among members” on a statement which referred to the “importance of multilateralism” as a form of both cooperation and a way of ensuring “peace and prosperity.” That statement, not backed by the US but endorsed by the remaining ministers, also included a detailed section on trade and investment’s respective roles in supporting “strong and inclusive growth,” covering topics ranging from digital trade to industrial overcapacity.

Meanwhile, the fall-out from the Section 232 steel and aluminium tariffs continues at the bilateral level, with many of the countries affected confirming their plans to respond with their own tariffs on select American products. Several countries have notified the WTO of their plans to suspend concessions on US goods, in some cases within a few weeks, in response to the metal tariffs. In some cases, those members plan to suspend concessions to the tune of several million dollars’ worth of imports or more.

Among these members are the EU, China, Japan, Russia, and Turkey, who have referred to their rights under WTO safeguard rules in doing so. Canadian and Mexican officials have also confirmed their plans to impose their own tariffs on US products. The US has argued at the WTO that its Section 232 tariffs are not actually safeguard measures, which are temporary import curbs to protect an industry from an import surge that is or could cause them economic damage.

Wider G7 agenda

While trade has largely dominated international headlines about the upcoming G7 meeting, the overall agenda for the two-day gathering in Charlevoix also covers a series of areas, many with sustainable development implications.

Ministerial level meetings have been held or are planned for all five of the above-mentioned theme areas, namely gender equality, peace and security, climate and environment, the future of work, and inclusive growth. There have also been “public engagement papers” prepared for each of these areas.

Along with reviewing recent developments in these areas, G7 members are also expected to see how they are doing on past commitments, such as phasing out fossil fuel subsidy use within a set timeframe, and stakeholders will be looking to see whether these are upheld, expanded upon, or scaled back in the leaders’ final communiqué. (For more on fossil fuel subsidy reform, see related story, this edition)

“As G7 partners, we share a responsibility to ensure that all citizens benefit from our global economy, and that we leave a healthier, more peaceful, and more secure world for our children and grandchildren,” said Canadian Prime Minister Justin Trudeau in a statement outlining the themes. On gender, this year’s G7 host has launched a “Gender Equality Advisory Council” aimed at mainstreaming this issue across other work areas, rather than being siloed.

ICTSD reporting.

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