By Sir Ronald Sanders

US President Donald Trump did not sign “The Charlevoix G7 Summit Communiqué” in Canada in early June. In not doing so, he demonstrated doubts about the Group in which the US participates with Britain, Canada, France, Germany, Italy, Japan and the Presidency of the European Union (EU). The presence of the EU, already represented by Britain, France, Germany and Italy, gives the EU an oversize and unwarranted voice.

From a developing countries’ perspective, President Trump is right to be dubious about the G7’s authority in the world and the actions that they collectively promote.

Part of his skepticism was evident even before the G7 meeting began when he publicly called for the inclusion of Russia. He said: “You know, whether you like it or not, and it may not be politically correct, but we have a world to run and the G7, which used to be the G8, they threw Russia out, they can let Russia come back in, because we should have Russia at the negotiating table.”

There is compelling good sense in President Trump’s call for the inclusion of Russia in bargaining on issues that are global in their scope.

While EU countries wish to punish Russia for events in Ukraine over Crimea, excluding it from major discussions does not encourage dialogue and diplomacy to address concerns over Crimea. And, it certainly does nothing to facilitate international cooperation on crucial matters that threaten global peace and stability.

For decades, the G7 has dictated global economic, finance and trade rules even as the importance of many of its members has long since dwindled, and other countries such as China, India and Brazil have overtaken them.

Jim O’Neill, who assumes the chairmanship of the Royal Institute of International Affairs in July, recently observed: “The G7 still comprises the seven Western democracies with the largest economies, but barely so. At this point, Canada’s economy is not much bigger than Australia’s, and Italy’s is only slightly bigger than Spain’s. The G7 is an artefact of a bygone era.”

O’Neill points out that China’s gross domestic product (GDP) is projected to overtake the entire eurozone this year; India’s GDP is already larger than Italy’s, and Brazil is not far behind. Eighty-five percent of the increase in world GDP (in US dollars) since 2010 has come from the US and China, and nearly 50 percent from China alone. Another six percent has come from India, while the dollar value of the Japanese and EU economies has declined.

Despite all this, the G7 has held on to a dominant policy-making role (only because of US membership) without meaningful consultation with developing countries that are affected by them. Certainly, the G7 has invited selected developing countries to meetings, but their participation has been window-dressing at best; no significant change in thinking or policy has resulted from their appearance.

At the Canada meeting, President Trump was deeply concerned about the balance of trade deficit that the US suffers with many countries of the world, including all the other G7 members; he is also concerned with high tariffs placed on US exports by these countries.

Caribbean countries don’t have high tariffs on imported US goods and, with one exception, they are among the few countries in the world with which the US enjoys an annual trade surplus that gives it revenues and employment. Last year the US trade surplus with the Caribbean was more than US$6 billion.

On the wider trade scene, Caribbean countries were coerced, individually, in October 2008 by the European Commission to sign an Economic Partnership Agreement with the 28 EU countries collectively. The disadvantage of what is essentially an uneven trade arrangement between Caribbean mice and the EU elephant was occasioned by a threat by Peter Mandelson, the EU Commissioner at the time, to sign or else face the imposition of unfavorable treatment for Caribbean goods.

With no regard to historical European exploitation and underdevelopment of the region, Mandelson records in his biography that he regarded the Caribbean’s capitulation to his threat as the only bright spot in his “lack of progress” in re-negotiating the trade arrangements between the EU and the African, Caribbean and Pacific group for which the latter had fought hard.

President Trump’s shaking-up of the G7 should be generally welcomed. His desire to include Russia at the table of global negotiation should now move to include other more relevant and significant countries.

There is another vital area to which the Caribbean should hope he turns attention. And, that is what is happening with financial services globally.

The G7 created the Organization for Economic Cooperation and Development (OECD) and the Financial Action Task Force (FATF) which set rules and regulations that are imposed on the rest of the world. Those rules and regulations have gone far beyond their original intention to fight money laundering and the financing of terrorism. They have succeeded in crippling, if not emasculating, the financial services industry in many developing countries, including the Caribbean.

The OECD and EU’s blacklisting of countries as “tax havens” bear much of the blame for the policies of major international banks to ‘de-risk’ and withdraw correspondent banking relationships from banks in the Caribbean that dim the region’s economic prospects.

On May 15, the EU declared that it would put the US on a blacklist if, by June 2019, it does not agree to provide details of bank accounts held by foreigners. The EU also said that it would investigate whether tax laws, introduced last year by the Trump administration and approved by the US Congress, makes the US “a tax haven”.

President Trump is most unlikely to tolerate any actions by the EU that is injurious to the US. Serious retaliation should be expected.

If the US president shakes-up the unfair control of global rule-making and imposition of financial and tax rules as he has done over trade, there may be an inkling of light for Caribbean countries at the end of a long tunnel in which they have been trapped for two decades.

President Trump would be seen by many in the Caribbean in a more benign and pleasing light.

SOURCE: http://www.sirronaldsanders.com/viewarticle.aspx?ID=654