Why Markets and Political Scientists Disagree on the G7
Contrary to the warnings of some political analysts, even after the recent debacle in Canada, the G7 can and will play a role – albeit a less important one – on the global stage. But that does not mean that the summit's failure was cost-free.
WASHINGTON, DC – To say that this month’s summit of G7 leaders in Canada was an unusual one would be an understatement. A traditionally friendly and predictable gathering of like-minded countries was marred by finger-pointing and disagreement, resulting in an inability to achieve consensus on a final communiqué. But, while political analysts were quick to declare the end of the G7’s coherence, integrity, and usefulness, markets were unfazed. In fact, the longer-term outcome may well prove markets right, albeit with some important qualifications.
Participants at the G7 summit reportedly clashed over issues like climate change and the possibility of readmitting Russia. But the highly publicized discord was fueled mainly by disagreements over the effects of trade among the members. Those disagreements – amplified by persistent differences on basic facts – impeded progress in other areas where greater consensus might have been possible, including Iran, some other Middle East issues, North Korea, migration, and refugee relief.
Representatives of the United States accused the other G7 members of “unfair trade practices,” which they claim have disproportionately harmed the US economy and its workers. The rest of the G7 – all traditional US allies – confronted President Donald Trump with data that they hoped would prove that trade had been highly beneficial to all countries.