G7 performance on trade

The G7 leaders are performing well below average on their trade commitments, but implementing low-cost accountability measures could help to get them back on track

At its 2023 Hiroshima Summit, the G7 faces significant security, economic, environmental, social and health challenges. With the world in the grip of polycrises, the threat of trade fragmentation and protectionism is rising. G7 leaders are looking towards trade diversification and building new alliances with like-minded partners. With staggering inflation and looming recession in many countries, trade should be given more prominence as a solution. Thus Japan has put trade on the G7’s agenda as a priority.

Supply chain disruptions caused by the pandemic and labour shortages persist. Security tensions between the United States and China plus geopolitical shocks, such as the war in Ukraine, exacerbate an already unstable environment. At Hiroshima it is important that the G7 leaders commit to keeping trade channels open and fostering free and fair trade as important instruments for global economic recovery and stability.

Conclusions

Since G7 leaders first met in 1975, trade has appeared in their statements from every summit. On average, 1,120 words, or 15% at each summit, have been dedicated to trade. Throughout, G7 leaders have consistently supported free, open and fair trade.

 This started in 1975, with 39% of the communiqué on trade. The highest portion on trade came in these early years – in 1979 with 45%. But the highest number of words on trade came later, in 2009 with 3,122 words, but taking only 10%. It has since declined to its lowest levels: 2% in 2017 and 1% in 2018.

However, a new phase of significant increase began in 2021 with 14% (2,895 words) and 2022 with 16% (3,099 words).

Commitments

From 1975 to 2022, G7 leaders made 382 trade commitments, accounting for 6% of all commitments. The highest number of trade commitments was 24 (11%) in 2013. The second highest was 21 (38%) in 1977 and 21 again in 2021 (5%). The period between 2013 and 2017 produced numbers of commitments in the double digits (between 3% and 11% per summit), spurring great strides in trade liberalisation.

The number fell to five each in 2018 (2%) and 2019 (7%), as the United States opposed any anti-protectionist promises. In 2020, the G7 made three trade commitments (12%). However, as the leaders met again in person and there was a change in US leadership, the number jumped back to 21 in 2021 (5%) and 18 (3%) in 2022.

Compliance

The G7 Research Group has assessed compliance with 52 trade commitments made between 1975 and 2022. G7 compliance averaged 68%, well below the 76% average across all subjects. The highest compliance of 100% came on commitments made at the 2000 and 2020 summits.

The first phase, from 1975 until 2003, saw low average compliance of 49%. The lowest compliance came on a 1983 commitment on resolving current trade issues, which saw no country even partially comply. However, the highest was 100% from 2000.

In the second phase, from 2004 to 2020, average trade compliance increased to 74%. A commitment made in 2021 had 88%. But by January 2023, compliance on a trade commitment made at the 2022 summit averaged 69%.

Compliance through to 2020 was led by the European Union with 86%, followed by Canada at 78% and the United Kingdom at 74%.

Corrections

G7 leaders can use low-cost accountability measures to improve compliance with their trade commitments.

First, a trade ministerial held during the summit year decreases compliance with the leaders’ trade commitments. Between 1982 and 1999, when the trade ministers of the United States, Japan, Canada and the EU met annually, average trade compliance was only 38%. Most recently, however, the UK and Germany, during their 2021 and 2022 presidencies, held four G7 trade ministerial meetings each. The 2021 summit had 88% compliance on trade.

Second, through to 2019, commitments that referred to the World Trade Organization had higher compliance, at 73%, than those that did not, which averaged 64%.

Third, through to 2019, setting a one-year timeline in commitments coincided with increased compliance averaging 74%, while including a multi-year timeline averaged only 58%, decreasing compliance by 16%.