Authored by Bob Hormats, EGA Advisory Board member
Of the many G7 Summits I have played a role in, from their inception in 1975 in Rambouillet, France until now, this one posed the greatest number of challenges to Western nations represented there, both individually and collectively, compared to any other: Russia’s brutal and unprovoked war against Ukraine; the continued rise of China as an economic, political, military and technological power and its growing role in the global economic and political order; a deepening world food and energy crisis; high inflation and growing prospects for a major economic slowdown or perhaps even a recession in some countries; a wide range of climate threats; the Covid pandemic and possibly others in the future; and the rising threat to democracies and democratic values within member countries and the concurrent threat to unity among them. I will attempt in the paragraphs that follow to cover most if not all if these that were discussed at the G7 Summit.
A QUICK REVIEW OF PAST G7 SUMMITS
Leaders of the Group of Seven countries, plus a few invited heads of state from other nations, held their annual summit in late June in the Bavarian Alps of Germany. These annual meetings began in 1975 at Rambouillet, France in the wake of the 1973 global oil crisis and the inflation and high unemployment that emerged afterwards. Then, they were labeled Economic Summits because most of the agenda was devoted to economic issues. While squarely in the midst of the Cold War at the time, the leaders decided to leave political and security matters to NATO to avoid overlap. Over the years, however, as the interaction between global economic, political and security matters became increasingly intertwined, these Summits have taken on more and more economic subjects directly linked to significant political ones. Sanctions is one example. Strengthening trade and investment ties with developing countries that are seeing increased Chinese political as well as economic influence is another. Over time the G7 and NATO Summits have taken parallel and mutually supportive actions, as occurred in the recent Summits in Bavaria and then Madrid.
As a young economic advisor to Henry Kissinger on the White House National Security Council Staff in the 1970s, I was given the task, and the thrill, of serving as the American G7 Summit “sherpa.” Each country has one sherpa (supported by several of what were know an “sous sherpas”). Our role was to be economic advisor on Summit matters to our head of state or government. Our mission was to advise our leaders on various Summit issues, work together to plan the Summit agenda, sit in on and take notes during the meetings, and prepare drafts of the joint communique to be reviewed and finalized by the leaders themselves.
I played this role for several years under three presidents – Ford, Carter and Reagan – and later served as sous-sherpa under President Obama. I saw the nature of the agenda evolve and the character of the discussion shift from an informal exchange of views aimed at very general outcomes (which was the original intention) to a more structured discussion aimed at very specific results, and from being primarily economic in nature to far more politically oriented conversations about such matters as developments in the Middle East, Russia and China.
THEMES OF RECENT G7 SUMMITS
The recent meeting in Germany, like most others since 1975, combined a series of economic and political issues. But there were certain similarities between the early Summits and the one in Bavaria. Like the G7 summits of the 1970s, this one placed great emphasis on energy—addressing Western vulnerability to energy cutoffs. Then, these were executed by OPEC producers, now by the Russians. But in the 1970s, the climate issue was not a point of focus of the energy discussion. This year it was a major one, addressing the need to promote “alternative fuels.” However, the recent Summit also, as in 1975, underscored the importance of investing in more traditional fuels and reserves, and building up other methods to bolster energy output, security and resilience. This took on an added urgency because of the need to reduce the inflation that plagues most member nations and numerous others, and in which oil and natural gas disruptions and shortages play a major role.
The recent Summit also addressed an underlying theme that originally brought this group together in the first place and broadly underscored the need for Western collaboration for nearly five decades: what the first communique (known as the Rambouillet Declaration) referred to as “shared beliefs and shared responsibilities.” The leaders at Rambouillet stressed their common responsibility for maintaining an “open democratic society, dedicated to individual liberty and social advancement.” And they voiced confidence that “their success will strengthen, and indeed was essential to, democratic societies everywhere.” The discussions there emphasized that, facing the threat from the Soviet Union during the Cold War, Western leaders should stick together to deal not only with economic crises at home but also to counter Moscow’s threats to global stability and its support for Soviet client states threatening western interests in various parts of the world.
The leaders were aware that if their systems at home failed to address serious internal challenges, the attraction of the “Soviet model” and Russian influence would grow in various parts of the world – and divisions among the Western Democracies would make resistance to this more problematic.
THE 2022 SUMMIT
Fast forward to 2022, the Group this year focused on two new, compelling geopolitical challenges.
First was Russia’s brutal and unprovided war in Ukraine, along with potential threats to other parts of Europe and NATO as a whole.
Second, was the rise of China (never mentioned in the 1975 Declaration or discussed in the Summit conversations) as a strategic power, primarily in the Pacific region. There was also broad recognition of China’s desire to demonstrate the superiority and successes of its own government dominated and party led political and economic model vis-a-vis the liberal Western democratic political order and market system. Summit leaders were doubtless keenly aware of Beijing’s frequent assertion that China’s rise should encourage other nations to see it as the new leader of the fast changing global economic and political order while the West, if unable to resolve its domestic problems and work together, would be steadily on the decline, as would its ability and credibility to exercise global leadership.
A CHANGING WORLD ORDER
The underlying backdrop to the G7 discussions was that the world was changing and unless the western democracies could demonstrate their ability to address numerous problems and challenges at home, plus exercise constructive international economic leadership in areas such as infrastructure, the pandemic, food shortages, and sharply increased energy price, their leadership and influence would be a less compelling and attractive one to numerous other countries. Otherwise, new challenges for global leadership, and new models of governance—China’s being clearly in their minds and in their discussions—would become more attractive and a united West would see the world order it had built after World War II weaken or disintegrate. Hence the Summit commitment to collectively pursue fundamental common values and better address global economic issues was seen as vital to avoid this.
In response to these considerations, this Summit struck a chord similar to that in 1975, but in considerably greater detail. And with far more formal follow-up mechanisms. It agreed on a 2022 Resilient Democracies Statement aimed at “equitable and sustainable solutions” to crises such as Covid and climate change. It emphasized the need to strengthen the “rules based” order and democratic principles, encourage domestic public debate, support independent media, and respect freedom of expression. It also emphasized the need to counter disinformation and use of new social media and other tools to threaten the integrity of public discourse.
RUSSIA AND UKRAINE
On the geopolitical front, the contrast between the first Summits and the most recent one on the matter of the Soviet Union/Russia was stark. The Rambouillet Declaration focused on détente and improving relations with the USSR: “We look to an orderly and fruitful increase in our economic relations with socialist nations as an important element in progress in détente (with the USSR)…” Hopes were high that Moscow and the West could find constructive ways of working together and in time the USSR could become a part of the “Western-centered economic order.” Years later Russia actually did become a member of the G7 (then expanded to the G8). That was from 1997 to 2014; I was sous-sherpa at the time and worked closely with the experienced diplomat Moscow had designated to represent it. In 2014, however, Russia was expelled for its annexation of Crimea.
How the world has changed on such matters!! Russia is now the target of numerous and stringent economic sanctions from all members of the G7. Support for Ukraine by the G7 at this summit was seen as a collective G7 and overall geopolitical imperative—a theme underscored by President Zelensky, who met virtually with the group of leaders. A considerable amount of time was devoted to ways to further tighten sanctions, including imposing price caps on Russian oil sales to reduce the revenues on which Moscow depends to finance the war, while lowering world oil prices. If implemented successfully, this would benefit G7 consumers plus citizens of a multitude of other nations – although there was considerable debate over how to implement it and whether it would work.
The major military/political conversations were left to the upcoming NATO Summit in Madrid, which, of course, included all leaders of all the G7 countries except for Japan. Leaving the economic details of toughening sanctions to the G7, the discussions in Madrid reflected a broader and more strategic tone, which bolstered the G7’s efforts, in their communique: “We will stand with Ukraine for as long as it takes, providing the needed financial, humanitarian, military and diplomatic support in its courageous defense of its sovereignty and territorial integrity.”
One biproduct of the Russian war on Ukraine (other than energy noted above) received special attention: the world food crisis, which has been triggered by a sharp drop in food and fertilizer exports from Ukraine and Russia. To emphasize the seriousness with which it viewed the matter, the G7 Summit issued a separate statement on Global Food Security and created a Global Alliance for Food Security to help threatened countries, especially in Africa. Leaders also promised $4.5 billion this year to increase the availability of fertilizers to emerging countries. NATO, for its part, discussed ways to open Black Sea shipping lanes to permit large Ukrainian food stocks, now bottled up in storage bins because of Russia’s blockade and military threats to exports from Odessa, to flow, particularly to needy countries in hard hit food regions such as the Middle East and parts of Africa. Several countries in these areas are on the verge of famine and prospects for serious political and social instability due both to food and energy shortages are growing.
THE PARTNERSHIP FOR GLOBAL INFRASTRUCTURE AND INVESTMENT
In light of earlier noted expressed concerns by some leaders at the Summit about growing Chinese influence over global infrastructure, advanced technologies, and supply chains, the group focused on Beijing’s extensive and historic Bent and Road Initiative (BRI). The leaders announced establishment of The Partnership for Global Infrastructure and Investment (PGII) to “mobilize” $600 billion over five years for infrastructure projects in the emerging economies. This money would come from several sources: Summit governments, the private sector, and multilateral institutions. President Biden identified a number of projects already underway involving American companies that would fit into this framework. These include: telecommunications, enhanced health facilities, those bolstering energy security based on clean energy technologies, and efforts to support projects that emphasized gender equity. Bearing in mind one of his key objectives of creating more jobs in the U.S., President Biden emphasized that there is significant potential for American companies to receive contracts for worthy projects under this initiative in order to enhance employment opportunities at home in these and other sectors.
From a geopolitical perspective, the contrast with BRI was clear. Last year at the G7 Summit at Cornwell, England a similar initiative was launched called the “Build Back Better World.” Its goal was to mobilize $300 billion for infrastructure projects by 2027. However, it failed to get off the ground. This year’s initiative was aimed squarely by Summit leaders at serving as an alternative to BRI in many developing countries. Especially featured by the leaders in Bavaria was the emphasis on “transparency” in PGII projects and the need to avoid recipients incurring unpayable debts.
Having been engaged with this Summit process for many years, I have witnessed numerous initiatives that sound good in communiques and are well intentioned, but founder due to poor implementation or difficulties in generating funding. Last year’s Cornwall Initiative was one such example, but hardly the only one. Support for many Middle Eastern countries after the Arab Spring was another.
The key now is successful implementation of this initiative. Failure here would weaken the credibility of what is intended to be a revitalized G7 Summit process and of individual summit members. Raising large sums in the U.S. Congress for domestic infrastructure has proved difficult of late for the Administration. Can it now muster substantial Congressional support for infrastructure projects abroad? Many other countries face similar problems as well. Most G7 countries also have budgetary problems and are upping their spending on their militaries in light of Russia’s war on Ukraine and the need to strengthen their security to counter future threats from Russia or other countries. Can they also generate political and legislative support for more appropriations for infrastructure projects abroad?
Here private sector companies in the U.S. and other countries in the West that have experience in emerging economies have an opportunity. Will they be willing to work with key domestic agencies to figure out how funds can be raised in financial markets for additional projects in emerging economies? Will they collaborate with federal agencies and Congress to help raise government funds to support such projects? In the current economic and budgetary environment, these may turn out to be heavy lifts.
Moreover, while the funds and the projects they support, plus the projected transparency and attractive terms the initiative features will be highly welcomed in other countries, the prospect of PGII countering BRI – as opposed to competing with it – is questionable. A lot of countries have benefitted from BRI not only in East and Central Asia but elsewhere in the world. And China sees BRI as one important component of its desire to increase and broaden its political as well as economic influence in the emerging markets in many parts of the world. Many countries will be happy to have infrastructure financing from both Beijing and the West. Moreover, if this initiative takes-off, China will likely do its best to adjust its terms to compete; indeed, that could be a positive biproduct of this initiative for some developing countries.
THE CONTINUING RISE OF CHINA AS A GREAT POWER
In addition, China’s main economic attraction for many emerging countries, as well as for many industrialized ones, is the size and growth of its market. China is the world’s second largest economic power and an enormously dynamic trading nation – the largest trading partner for a great many nations. Moreover, it has expanded regional market opportunities further by a host of regional trade agreements: it has recently participated in the Regional Comprehensive Economic Partnership (RCEP) with 14 other regional countries, including a number of U.S. allies. (The U.S. has finally gotten back into the game with the Indo-Pacific Economic Framework with a number of Asian partners, though this is not a trade agreement per se, focusing mainly on rules for the digital economy, supply chains and decarbonization.) And for several decades the growing size of China’s market has acted as a magnet to draw other countries closer to it on geo-economic and geopolitical issues. This is likely to continue whether such countries are large recipients of BRI funds or not.
Whether China continues as an increasingly important regional and global economic and political power—as I suspect it will—should not deter the G7 and other likeminded countries, multilateral institutions and the private sector from pursuing PGII. The goal cannot realistically be to contain China, which will remain a great world economic, and military/political power for foreseeable future. But if properly funded and managed, PGII can provide valuable funding for certain projects for some countries and underpin closer diplomatic ties. However, this will require a full throated, determined, and common effort by the G7, its friends and allies, and numerous liked-minded countries, for several years, in order to have a marked geo-economic or geopolitical affect. More broadly, in time, the G7 will have to seriously consider ways to work with China in finding ways to shape the Global Order of the first half of this century—PGII will not eliminate that need, however successful it may be.
THE WEST’S CHALLENGE
All told, the challenge many Western leaders face is more at home than abroad. It is to maintain the strength of their democracies, economies and societies domestically and their commitment to these objectives collectively. In parallel is their urgent need to address together, through such groups as NATO, the plethora of formidable external issues they face that threaten their common values and interests. Here the war in Ukraine stands out. The coming months and years will be a major test for our democracies and the role they will play in shaping the global economic and political order of the future. So the words written in the G7 Communique cannot be just words. They need to be followed by wise and bold actions that member nations take, working together, and for which they can mobilize strong internal support to sustain. We should all be watching, but, because it has been said many times “Democracy is not a spectator sport,” each country, even if they do not agree on all points, needs to contribute in a constructive way. Future G7s can play a key role in that process.
Authored by: Robert Hormats, EGA Advisory Board Member