The 50th G7 summit was held in Italy from 13-15 June. The seven major industrialised economies discussed an ambitious agenda, which included climate change, migration, artificial intelligence, energy, economic security, the situation in the Middle East, the Russian war of aggression on Ukraine, Africa and the Indo-Pacific region. Following tradition, the meeting ended with a communiqué from the heads of state and government.

G7: Industrialised nations with dwindling economic importance

In the wake of the 1975 oil and economic crisis, the heads of state and government of the six major industrialised countries US, Japan, Germany, France, UK and Italy first met at a global economic summit. Canada joined in 1976. Originally, these meetings only dealt with economic issues.

Today, these seven industrialised economies account for around 30% of global economic output, measured by gross domestic product in US dollars purchasing power parity. The concept of purchasing power parity takes account of the fact that one US dollar can buy significantly fewer goods in a high-price country, such as Switzerland, than in countries with low prices.

2023 g7 chart

At first glance, 30% percent for seven countries is a high share. But in 1980 according to the earliest available data from the International Monetary Fund the figure was 50%.

chart G7 countries economic power

The declining economic power of the G7 states is problematic when it comes to asserting their values and interests at a global level. Economic strength is a decisive basis for political power.

Therefore, it is reasonable for the G7 to try and form closer ties with other countries. Ideally, these countries should share the values of the G7, especially democratic, constitutional and market economy principles. The EU is taking part in these summits, represented by the President of the European Council and the President of the European Commission. Numerous guests attended on the second day of the summit, including 10 other heads of state and for the first time in the history of the summits the Pope.

A number of resolutions were recorded in a communiqué published on 14 June. I will briefly address three selected areas.

  • Long-term support for Ukraine

In my view, the most far-reaching resolutions relate to support for Ukraine. A central project is to introduce Extraordinary Revenue Acceleration (ERA) loans for Ukraine by the end of 2024. This is intended to provide around US$50 billion in additional financial support for Ukraine.

The repayment is to be made from the future revenues flowing from frozen Russian sovereign assets held in the EU and other relevant jurisdictions.

Other resolutions concern the expansion of production and supply capacities to support Ukraine’s self-defence. Ukraine will be supported to modernise its armed forces and improve its own defence industry. In addition, sanctions against Russia will be strengthened and circumvention of these sanctions made more difficult.

In parallel, the US and Ukraine concluded a long-term security agreement on the sidelines of the summit. The 10-year agreement provides military aid, arms industry cooperation and the exchange of intelligence information.

The long-term nature of this agreement and the US$50 billion loan are likely motivated by the need to take precautions for a possible Trump election victory in November. If Trump returns to the White House, US support for Ukraine is likely to diminish noticeably.

  • Equal partnerships with Africa

The immediate aim of supporting local economic value creation in Africa is to improve local and regional food security, infrastructure, trade and agricultural productivity. This will contribute to the economic and political stabilisation across the continent. In addition, improved prosperity in Africa offers new sales opportunities for the companies from G7 countries.

Furthermore, economic progress in Africa can help to reduce migration pressure.

If infrastructure for renewable energy production and raw material extraction is promoted, this can improve the security of energy and raw material supply for G7 countries.

And by providing financial and technological support, the G7 states can bind the African countries more closely to the G7, thus increasing the geopolitical weight of the G7.

  • Economic security and supply chain resilience

In the face of rising protectionism, geopolitical tensions and more frequent supply chain disruptions, the G7 countries have a strong interest in economic security. Supporting Africa to secure the supply of raw materials and energy from Africa is one measure aimed at helping to address these compounding challenges.

More common ground should be established within the G7 in regard to dependency on imports and supply chain resilience for strategic goods. This includes the joint identification of critical goods and strategic sectors where appropriate precautionary measures should be taken by the G7.

The communiqué deals with further developing suitable measures to increase the economic security of the G7. The aim is to strengthen the multilateral and rules-based trade order. This includes cooperation in the context of harmful market distortions and dealing with global overcapacities. The latter is likely related to Chinese overcapacity above all and the fear that many Chinese products are being offered at dumping prices in G7 countries.

Regarding import dependency on China, a clear commitment not to rely on a strategy of decoupling or isolation from China to increase one’s own economic security has been expressed. The Chinese economy is too large and important for this. Instead, the focus is on de-risking and diversifying supply chains a strategy that supports the commitment of the G7 countries to strengthening Africa’s economy.

Other resolutions

As well as the three resolutions regarding Ukraine, Africa and economic resilience, the final communiqué covers

  • the conflict in Gaza;
  • Iran’s destabilising actions;
  • global food security;
  • climate and environmental protection;
  • science, technology and innovation with a focus on artificial intelligence;
  • cyber security;
  • decent working conditions;
  • cooperation with Indo-Pacific countries;
  • a more stable and fairer international tax system;
  • support for low- and middle-income countries that are at risk of becoming over-indebted because of rising debts;
  • healthcare, gender equality;
  • inclusion;
  • disarmament;
  • combating terrorism;
  • violent extremism;
  • cross-border organised crime and corruption and –  last, but not least migration.

The communiqué takes a three-pronged approach to migration. Firstly, this includes combating the fundamental causes of irregular migration through measures to develop economies in the countries of origin. Secondly, it includes activities to protect borders and combat the smuggling of migrants and human trafficking. And thirdly, it discusses the issue of safe and regular pathways for migration.

Conclusion and outlook

In my view, the final communiqué can certainly be seen as positive. Above all, the concrete financial pledge of a US$50 billion loan to Ukraine is a result that other international alliances, such as the G20, would not have achieved. There are member countries of the G20 that do not want to take such a massive action against the Russian aggressor.

Sharing important values, such as democracy, the rule of law, freedom, human rights and multilateralism is a strength of the G7, which allows the alliance to remain capable of acting despite its decreasing economic power, when compared internationally.

Regarding the resolutions on financial and technological support for less developed countries, particularly in Africa, it remains to be seen what support will result from these specific sums of money.

There are certainly voices among the individual G7 countries that would prefer to use these funds for their own people, but these are nevertheless worthwhile investments. Spending this money can contribute to stabilising the economic relations of the G7 countries and, at the same time, expand their geopolitical power. Both are key prerequisites for democratic industrialised nations to be able to maintain and strengthen the basic principles of democratic market economies on an international level.

About the author

Thieß Petersen is Senior Advisor at the Bertelsmann Stiftung, specialising in macro-economic studies and economics. His focus is on the causes and effects of financial and economic crises, as well as the chances and risks of globalisation. He has worked on the effects of carbon pricing and the benefits of a potential global climate club.

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