On June 8-9, 2018, the 44th G7 summit will be held in La Malbaie (Quebec, Canada). Even before the summit began, its participants seem to have certain differences, related, first of all, to the tariffs imposed by the US on steel and aluminium imports. Yaroslav Lissovolik, Managing Director of Research – Chief economist at the Eurasian Development Bank and Programme Director of the Valdai Discussion Club, shared his views on the political consequences of economic decisions and the US-Europe-China axis in an interview for valdaiclub.com.
There seem to be more and more points of disagreement between Europe and the US, concerning both political and economic spheres. A new and quite interesting tendency may appear within this context — more specifically, a certain dissonance in comments of the G7 participants, who used to sound almost in tune before. Such dissonance can be seen mostly on the issues of the world economy, but it can also affect the approaches to solving regional problems — considering that Europe and the US have some sort of frictions there as well.
Six countries of the G7 (i.e. all except the US) have already released a draft statement, expressing their discontent with the introduction of steel and aluminium import duties. Considering economic disputes, this fact once more underscores the difference in their approaches. In economic terms, it is likely to boil down to a trade confrontation, along with the delegation of disputes to the Dispute Settlement Body of the World Trade Organization.
Economically, such confrontation between Europe and the US may lead to problems with the implementation of meta-regional blocs, particularly the Transatlantic Trade and Investment Partnership. Looking at the China-EU-US triangle, one can say that strengthening of protectionism in any of these three directions can raise protectionist pressure in others.
The growing confrontation between Europe and the US, as we could see this year, has led to escalation of the US-China trade conflicts. In fact, we know this type of situations very well due to the past episodes of protectionist conflicts. China’s involvement in trade confrontation was partly concurrent with the Europe-US disagreements, and that is why the risks for economic growth in the context of the world economy are becoming even sharper.
The US-China axis accounts for a significant part of trade interaction in the world economy, influencing the situation in the neighbouring regions, including Southeast Asia, which is essential for the global economic growth.
One can say therefore that this triple trade confrontation is extremely dangerous for the global economic growth, and a lot will depend on whether negotiation processes will lead to minimizing the side effects, and if the WTO is able to regulate these trade confrontations.