This week’s three-day meeting of the G7 group of countries in Cornwall on Britain’s southwest coast was strikingly different in character to recent precedents. At earlier meetings of the group, the gulf between the participants on some crucial issues seemed wider than the Atlantic. The 2019 summit ended without a joint statement because of the inability of members of the G7 group to reach a consensus on any major issue of concern to world trade. This was in remarkable contrast to this week’s meeting, where the participants agreed on various common commitments.
The G7 dates to the height of the Cold War. Its purpose then was to coordinate policies towards the former Soviet Union and the Eastern bloc and to promote economic cooperation and joint action to offset the effects of recession, rampant inflation, and skyrocketing oil prices after the oil embargo that the oil-producing group of countries in OPEC declared during the 1973 Arab-Israeli War. The G7 started in 1975 with six members, namely the US, France, the UK, Japan, Italy, and West Germany. Canada joined the following year, and the EU began to participate in meetings in 1981.
At the time the group was founded, its members, described as the world’s major industrialised countries, controlled more than 70 per cent of the global economy. That figure has now shrunk to 45 per cent due to the rising shares of China, India, and other countries of the South and the emerging markets. In terms of purchasing power, the G7 group of countries’ share of global production is now only around 30 per cent. Although they are still described as industrial, the industrial sector’s contribution to their economies has steadily declined — to only 19 per cent in the case of the UK, the host country of this year’s G7 summit.
Democratic principles now bind these countries more than economic clout, as British economist Jim O’Neill has pointed out. In 2001, he coined the term BRICS, an acronym made up from the first letters of the four rapidly growing economies of Brazil, Russia, India, and China that he predicted would play an increasingly central role in the global economy. His prediction has proven true to varying degrees, and it is certainly the case with China, which is now the second-largest economy in the world and the top country in terms of trade and attracting investment.
So, what we are left with is a shift from the seven major capitalist industrial states versus the Eastern Communist camp to a group of democratic nations versus states described by the G7 as authoritarian and autocratic.
This year’s G7 summit had a distinctly upbeat and almost celebratory atmosphere. It was a welcome back for the high profile presence by the US, and it ended with collective commitments on several crucial global issues. Above all, the participants pledged to donate vaccines to poorer countries and to jack up their efforts to fight Covid-19 at a global level, to grapple with climate change and environmental protection, and to boost the global economic recovery.
Covid-19: The G7 countries pledged to donate a billion doses of Covid-19 vaccine to Third World countries. While this may seem a lot, it falls far short of the amount needed, however. The World Health Organisation (WHO) estimates that it will take 11 billion doses of the vaccine to bring the virus under control. The 18-month delivery time the G7 mentioned for the vaccines is also too long to meet the international health authorities’ target of immunising 40 per cent of the world’s population by the end of this year and 60 per cent by the middle of next year.
The longer it takes to distribute and administer the vaccines, the greater the rates of transmission, the numbers of the dead, and the strain on healthcare systems will be. There is also the higher risk that strains of the virus will mutate into variants that might not be as susceptible to the vaccines that have been developed as earlier ones. The longer the global inoculation takes, the longer the resumption of economic activities and normal life in general will be kept on hold. All this could jeopardise the relative progress the G7 members themselves have shown in their health and economic recovery indicators.
Conspicuous for its absence in the G7 statements in this regard was any mention of a temporary exemption to restrictions on intellectual property rights so as to facilitate the manufacture of vaccines in developing nations, thereby making them more rapidly and more inexpensively available.
It is important to underscore the point made by Mark Lowcock, UN under-secretary general for humanitarian affairs and emergency relief coordinator, that when developed nations assist others in fighting the pandemic, this is not just out of a spirit of humanitarian philanthropy, but if they do not do what they should, it could be an act of self-harm.
Climate change: The return by the US to the 2015 Paris Agreement on Climate Change gives a much-needed boost to the international community’s efforts to reduce greenhouse-gas emissions and mitigate the adverse impacts of climate change.
However, observers had expected the G7 summit to furnish more support to ensure the success of the UN Climate Change Conference that will be held in Glasgow, Scotland, in November 2021. Nothing new came out of the summit with regard to the G7 countries’ pledge, unfulfilled since their summit in Copenhagen in 2010, to provide $100 billion a year to developing countries to finance projects in energy, infrastructure, water resource management, agriculture, transportation and industry to promote environmental compliance and counter climate change.
Meanwhile, the G7 summit participants reflected their continued inability to appreciate in practical terms the interdependence of sustainability in the management of the climate and the handling of questions of biodiversity and pollution in the framework of sustainable development. This means that the achievement of climate-change goals will continue to elude the world as a whole until more serious attention is given to fighting poverty, the inequitable distribution of income, and mounting unemployment.
The “Big Read” article in the UK Financial Times earlier this month cautioned that failure to observe the principle of equitability in carbon pricing in any European emissions trading scheme would adversely affect the poor in EU countries. This further testifies to the need to reconcile any unwarranted conflict between sustainable development goals and climate-change targets by means of a carefully designed framework for public policies with adequate financing.
On the question of the global economic recovery after the Covid-19 pandemic, the World Bank and International Monetary Fund (IMF) have predicted 5.6 to six per cent economic growth this year, after the disappointing l 3.3 of negative growth last year. But this growth will be uneven and will bring greater disparities in income and wealth. It will not generate enough job opportunities to compensate for the spike in unemployment due to the pandemic.
Economic Recovery: Among the areas where the G7 summit performed relatively well are the following. First, they endorsed their economy ministers’ plan to boost global finance with a $650 billion allocation for the IMF’s Special Drawing Rights (SDRs). Second, they pledged to back the allocation of IMF resources to the low-income countries. Third, they gave the green light to create a new fund dedicated to supporting economic recovery, resilience, and sustainability in middle-income countries. And fourth, they supported a global minimum tax on corporates of 15 per cent, requiring companies to pay taxes in each country they operate in rather than in the country in which they are headquartered. This is an important first step in coordinated efforts to halt the diversion of funds from developed nations to tax havens and to curb the flow of wealth from poorer to wealthier nations.
On the other hand, the summit disappointed those who had hoped it would give more concrete support to the global trading system. The participants confined themselves to general statements and rhetoric regarding fair trade and deferred the details the forthcoming meeting of ministers of trade in November in the World Trade Organisation (WTO) framework. Nor did the summit produce an initiative to address the problem of dangerously mounting international debt, whether through supporting the debt relief, debt restructuring programmes, or effective debt resolution mechanisms.
Regardless of the reactions to this year’s G7 summit, the outcomes shared a central trait of resolutions from previous summits, being finely worded but for the most part not backed up by practical actions, financial commitments, or follow-through mechanisms. Ultimately, this means that the burden of correcting the imbalances and discrepancies in vaccination delivery, the economic recovery, and balancing the burdens of combating climate change will fall on individual countries.
The latter will have to be kept to their word on mobilising domestic as well as external resources towards these ends, whether in conjunction with the G7 or other sources.
*An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.
*A version of this article appears in print in the 17 June, 2021 edition of Al-Ahram Weekly