East and South Mediterranean will get little attention at G7 and G20
The turmoil, not to say chaos and uncertainty that bedevil southern and eastern Mediterranean countries will not top the agenda at the Group of Seven (G7) meeting of the world’s largest trading powers, scheduled for this month in Sicily; indeed, it will likely not even be mentioned.
The summit is the stage for US President Donald Trump’s first big international meeting with European and Asian leaders. Southern rim Mediterranean leaders, with the exception of Tunisian President Beji Caid Essebsi and the prime minister of Morocco, will not even have a walk-on part in the meeting. For the Group of 20 (G20), which is set for early July in Hamburg, Germany, the king of Saudi Arabia is the only Arab leader to be invited.
For Tunisia, North Africa’s smallest country and the only Arab democracy, it will be important to impress those in Europe, Washington, the International Monetary Fund and the World Bank that it is making progress on the road of economic reform, if only because they hold the purse strings of the ever-larger sums Tunisia is borrowing. Support for Tunisia should be reaffirmed as leaders from Trump to newly elected French President Emmanuel Macron continue their commitment to fighting terrorism, a factor that certainly helps explain Tunisia’s slow pace in instilling economic reforms.
All the participants at the meeting in Sicily will be hoping for a breakthrough in economic diplomacy after financial officials from the world’s largest economic powers recently reached a deadlock in talks in the southern Italian city of Bari. Bank governors have watered down their promise to promote free trade as they face the US administration’s continued reluctance to commit to a full-throated defence of global trade.
“Working to strengthen the contribution of trade to our economies” offers a much weaker pledge than reached by G20 leaders last year, who promised to avoid protectionism in all its forms. The United States’ subsequent reluctance to condemn protectionism has thrown a major spanner into the works of global diplomacy.
Trump’s campaign platform included promises to boost exports and impose sanctions on some importers and the administration’s first trade negotiation with China belies recent fiery rhetoric. Billed as “Herculean” and “gigantic” by the administration, it marked a major de-escalation from the president’s bellicose campaign speeches.
Fears of a trade war have receded, although US Treasury Secretary Steven Mnuchin is reluctant to sign off on a policy domain that he says is the responsibility of the head of state. Business executives and former US officials who know China say the deal reached with China was a poor one. In their view, it raises questions about the Trump administration’s strategic wherewithal as well as the very negotiating muscle of which the president has so often boasted.
Meanwhile, the man chosen to be the undersecretary of the treasury, David Malpass, has yet to have his appointment confirmed. He would probably articulate a clearer policy on foreign trade than either the president or Mnuchin.
The pressure many in Europe and Asia put on Trump appears to be paying off. Unless, that is, the threats of trade wars were never intended to be real but simply to garner votes, which they certainly did in last November’s US election.
The Sicily meeting will be important because it follows on the heels of the first NATO summit Trump will attend in Brussels the day before and comes before the G20 but its importance has been declining in recent years.
By July, the leading trading countries in Europe, Asia and beyond will have become more accustomed to the ways of the new president. They might be in a better position to distinguish between endless boasts — a hallmark of the new US president — and real policy usually left to people such as Mnuchin.
Or they might not. Indeed, the monetary consequences of the looming largely unfunded mega tax-cutting package will trump all other issues in the months to come. As Europe maintains very low-interest rates and Japan a 0% long-term interest rate, economists are at a loss for what the world will look like a year from now.
Trump’s inconsistencies on free trade, protectionism and tax cuts make the future for investors even more cloudy than usual. The uncertainty this creates deters investment, especially in countries in the southern Mediterranean, which are hardly prized regions for foreign investment anyway.
The only reasonable conclusion leaders from such countries can draw from the current state of international economics and trade policy is that they should focus as much as possible on reforming their own economies and be mindful of the fact that very low interest rates are a form of currency manipulation that could lead to grief.