Although the UK’s G7 presidency is featuring a dedicated trade track for the first time because there are key factors which make 2021 a particularly opportune moment to develop one, this new approach must not become a one-off. Establishing the G7 trade track as a meaningful format for coordinating positions on global trade among a small group of advanced industrial economies should be a key aim for the UK’s presidency.
Germany’s upcoming G7 presidency in 2022 and Japan’s in 2023 means two major advocates of global trade are in prime position to continue the separate trade track, but currently it is not self-evident that they will.
At this week’s meeting, G7 leaders are likely to set out a broad vision for global trade in the context of the pandemic – by focusing on the role trade can play in the economic recovery and strengthening resilience – and in the wake of Donald Trump’s presidency – by reaffirming their commitment to the multilateral trade system.
While joint statements at the highest political level are worthwhile, it is in the interest of the UK to make the 2021 G7 trade track as substantive as possible and for it to have specific initiatives to work on long-term so it can continue beyond 2021.
Scope for action on WTO reform
Four priority issues have been identified for the 2021 trade track – reforming the World Trade Organization (WTO), trade and health, digital trade, plus trade and climate policy. But with the last three issues already being closely linked to other G7 tracks, the major focus of the trade track should be WTO reform.
Since the WTO operates on the principle of consensus, it is questionable how much meaningful progress a small and relatively homogenous group such as the G7 can make on issues which ultimately need to be agreed upon by all 164 WTO members.
Nonetheless, the G7 can be a useful forum to advance plurilateral negotiations among a subgroup of WTO members, such as ongoing e-commerce negotiations. In addition, under the UK’s leadership, G7 countries can throw political support behind the services trade liberalization agenda at the WTO.
Fixing the WTO’s dispute settlement system will also undoubtedly come up when G7 leaders meet, but a breakthrough on this is unlikely in the short-term, especially as the new US administration is still considering its stance.
However, the G7 does offer a valuable platform for members to exchange views and identify potential pathways in advance of the next WTO Ministerial Conference at the end of November, and so WTO reform should be the central topic at the next G7 trade ministers’ meeting in October.
Consensus around shared concerns regarding China
In addition to WTO reform, a second – albeit related – area for a dedicated trade track to have the biggest impact, both this year and in the long-term, is tackling market-distorting trade policies and practices. The UK and the forthcoming G7 presidencies can use the format to build a consensus around shared concerns and a joint strategy to deal with industrial subsidies, forced labour, and the issue of ‘special and differential treatment’ for developing countries at the WTO.
Even though these topics are mainly linked to China, the G7 countries are almost certain to adopt a more ambiguous approach and ‘actor-agnostic’ language in 2021 and beyond. Liz Truss, the UK secretary of state for international trade, singled out Beijing in the UK’s G7 push for tougher measures, but the 28 May communiqué from G7 trade ministers does not refer to China directly because other members – particularly Germany – are reluctant to antagonize Beijing.
To drive forward a shared agenda of tackling market-distorting trade policies, the UK could launch an initiative on greater understanding and transparency concerning the types and scale of non-market behaviours. And G7 members also stand a better chance of success by bringing in other democratic nations, such as Australia, India, South Africa, and South Korea – all guest countries at the 2021 G7.
There is also an opportunity to link the issue of market-distorting policies and practices to the discussions on creating a ‘level playing field’ at the G20 – which does include China. With Italy hosting the 2021 G20 Summit at the end of October and holding the G7 presidency in 2024, there is a chance to better align policy agendas of the G7 and G20.
Coordination is much-needed
Although other groupings certainly exist for industrial democracies to exchange different perspectives and coordinate action on the key trade challenges, these formats have noticeable gaps. The US-EU-Japan trilateral initiative was launched to counter market-distorting economic behaviour, but does not currently include the UK and Canada.
Meanwhile, the Canada-led Ottawa group of 14 WTO members – Australia, Brazil, Canada, Chile, the EU, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea, Switzerland and the UK – is advancing WTO reform efforts and an initiative on trade and health, but with no US involvement.
At a time when the global economy needs free and fair trade and a modernized WTO more than ever, a G7 trade track can play an important role. Moreover, with trade being central to the UK’s ambitions for ‘Global Britain’, a dedicated ministerial track is one obvious way to mark global trade as a key priority. It is now up to the UK to prove the format is worth keeping beyond 2021.
This article is part of the Chatham House Global Trade Policy Forum, promoting research and policy recommendations on the future of global trade.