Let me begin by once again thanking Chancellor Merkel and the people of Bavaria and Germany for their extraordinary hospitality here at the G Summit.
This evening, President Trump will be leaving Washington for southwest France.
We saw us at the G seven summits in the English county of Cornwall.
Mini hosts this year's summit of the Group of seven Wealthy st Economies.
Every year, the leaders of the Group of Seven nations get together to hash out some of the world's biggest problems. This year's summit is in Japan and it starts on Friday. But after all the talking and picture taking is over and everybody flies back home, will anything actually come of it? I'm West Kosova today on the Big Take Bloomberg's Rosalind Mathieson and Flavia kraus Jackson tell us what to watch
for at the G seven. Roz Flave certainly covered your share of G seven summits and actually, rous can you start just by reminding us which countries are in this Group of seven?
Well, the G seven actually used to be the G eight until some years ago, of course, when Russia was a member. But Russia was kicked out for its actions in crimea.
Russia is mobilizing tens of thousands of troops, and the US circling the wagons with other world powers. Once known as the Group of Eight, but now known as the Group of Seven G seven because Russia has been exiled.
So now it's the Group of Seven, which is really a bunch of more advanced industrialized economies. So you've got obviously the US in there, Japan is the only Asia member, and then you've got a bunch of European countries Italy, France, Germany and the UK and really sort of is kind of a G eight again because the European Union is
part of the meetings. They come along, their leadership comes and has those conversations, So in a way it's sort of a pseudo G eight really if you include the up Union in there.
And this year the meeting is in Japan in Hiroshima.
It's really evocative for Japan to host this summit in Hiroshima. Of course, for Japan the dying days of World War II, two nuclear weapons dropped on it to end the war, and of course since then for Japan the nuclear question has been really fundamental. You've got a country that has a pacifist constitution that it's army. Really it's called self defense force for a reason, and very much a deep
sense in Japan if we can't do this again. And so for Japan, hosting it in Hiroshima is meaningful because they're looking around saying, hang on, the nuclear architecture that we knew is fading. There's no monitoring systems in place anymore. The Russian president has threatened to use nuclear weapons on Ukraine. Our knee neighbor, North Korea is building their nuclear arsenal by the day. South Korea is talking about whether they should get nuclear weapons at some point to defend against
North Korea. We've got Japan sitting there saying we remember what happened to us at the end of World War II and we know what it's like. And hosting it Hiroshima the backtop of some of those buildings that were destroyed and are still there and having leaders meet there is a really really symbolic message for Japan.
Flavia When was the G seven started and how did they decide who is going to be in it?
It came together in nineteen seventy three, when there's the oil shop.
The oil producing countries of the Arab world decided to use their oil as a political weapon. They will reduce oil production by five percent a month until the Israelis withdrawal from occupied territories.
And it was actually the French who kind of said, listen, we need to kind of get together and work out collectively what to do. And at the time, these countries represented the riches, the most powerful, and part of the reason also, but obviously about bringing places like Germany and Italy and Japan into the tent is because they had suffered so much of the ravages of World War Two. But they're also on the recipient of a lot of money. To a great extent, Germany, Italy and Japan boomed after
World War Two. They didn't have develop their own armies. That was sort of part of the condition as well, you know, certainly for Germany and for Japan. And actually the sort of the technically the winners, places like the UK and France suffered the ravagers of the economy in the nineteen seventies. The UK suffered the humiliation of having to go to the International Monetary Fund and ask for
some money. When it all came together, you can really sort of see all the big players from World War Two, both the winners and the losers, and how they came together in this post World War II reality. And then what's particularly fascinating, of course, you've got the oil crisis
that brought it all to ahead. And then to Rossi's point is when Russia came in, and that was in the late nineteen nineties, nineteen ninety eight with Yelson, it's almost impossible to imagine that time, but at the time he had even been considering of joining the European Union. And look at where we are now. So the G seven really reflects some pretty seismic changes that the world has undergone, both in terms of its geopolitics, it's shifting power structure, and its economic prowess.
There are a lot of issues on the table for this summit, even more than we've seen in the past.
Well, that's right, and there are fundamentally two big issues that are on the table and neither of them are at the summit, and that's Russia and China. And so you've still got the fallout of Russia's invasion of Ukraine. You've got questions of how the Group of Seven and its affiliates will be there also how they can deal with that in terms of trying to constrain Russia's economy to the point that it might change Vladimir Putin's actions.
On the ground, You've got the reality of the actions taken so far to penalize this economy not really having the kind of effect they probably wanted, and so a lot of conversations on the ground about sort of closing those loopholes on sanctions, possibly a near total ban on exports to Russia. So what's worked so far to try and contain Russia, what hasn't, what else can be done? And then there's sort of the fundamental question of Russia
in the rest of the world. We've seen Vladimir Putin working to build relationships with countries outside the G seven, So how does the G seven counteract that. That's going to be a big topic at the summit. And then the other question again is China, which is also not there, but really these two big powers who are outside the orbit of the G seven, and how did the G seven member states deal with both of them, including the increasing economic and strategic influence of China around the world.
So there's sort of two big topics on the table and a lot of questions about how on earth the G seven can manage within a world where you've got those powers operating.
It's like almost what matters the most is what they don't talk about, what they talk behind closed doors. You're not going to expect Taiwan to be mentioned that that is such a divisive, toxic issue, and so increasingly what these summits are are about the optics, what kind of conversations are happening behind closed doors. Like a really good example that Roz and I lived through was in Cornwall
back in twenty twenty one. The G seven leaders hadn't seen each other in a while, COVID had happened, and this is a chance for all of them to get back together in a very evocative location, which was in a beach in Cornwall. Now, at the time there was a lot of headlines spent on this rather silly row over sausages and Brexit that consumed France and the UK, and Manuel Macron and Boris Johnson were not particularly friends and this sort of rather silly row kind of spilled
out in public. But something rather more important was happening behind closed doors. Boris Johnson had invited the Australian leader and what had happened had been that Biden and Johnson and Morrison had come together to make a secret deal about developing nuclear submarines, and this happened without Macron having any idea. Of course, this was humiliating for Macron because he thought he had his own deal with Scott Morrison, the Prime Minister of Australia.
Ras you mentioned Russia and China are two big issues. What are the sorts of conversations that will be happening behind the scenes, out of the line of state.
Well, the interesting conversations that the G seven in Japan may be the ones between G seven member states and the non G seven member states who are there because, of course, as is the way with these summits, the leaders get to invite a bunch of other countries, and Japan has invited a clutch of countries that you think of from the global South, or they like to call
them now sort of middle country. So you've got Vietnam, India, Brazil, the African Union representing the entirety of Africa and so on, and so you're going to have lots of conversations with those leaders behind the scenes, which is about trying to get them more in line with the G seven on issues surrounding both Russia and China. What these countries get pulled in by is the ability to trade, do investment,
and get money from China and Russia. And so you have the G seven countries trying to get in there but struggling, and so what they want to show is tangibly, we've got things that we can do with you economically to support you in your development. And what they need to stop doing, and these middle countries have said this clearly is stop lecturing them on values, stop coming at them about human rights, coming about them about the state of their democracy or not, and simply put money on
the table. And that's the thing that will help draw these countries back away from the orbit of Russia and China. So you can imagine lots of promises behind the scenes.
That's something that tangibly they're looking at doing. And then the other interesting thing that will happen away from that main conversation is, of course the leaders of South Korea and Australia are there and that's sort of part of that broadening kind of security alliance involving the US, the UK, also India, but Japan and Australia, and a lot of conversations again around sort of the safety of nuclear arsenals, what to do collectively to try and deal with the
activity of regimes like North Korea as well as Russia, but also other nuclear states that aren't really part of the global architecture. I mean, you're talking India, Pakistan, China and so on. And so there'll be a lot of sideline conversations about military cooperation potentially between those countries, and all of that will happen somewhat behind the scenes.
Yeah, And there's also this sort of uncomfortable feeling that the US are going to have to come to terms with is that they really have no ability to stop countries they consider bad guys from developing nuclear arsenals.
After the break, Europe's leaders wonder if they can still count down the US. All of these things that you're talking about here point to something else, which is a real change in the US's status in the world. Whereas before the US was very clearly the leader of the G seven and could kind of lost other countries around and this is the way it's going to be now. It seems that a lot of the conversation is the US asking other countries to please see things their way.
Well, certainly that's the kind of the fundamental takeaway really of the war in Ukraine, whatever happens in that terrible conflict on the ground. Beyond that, we are in a period of significant change in terms of global power dynamics. I mean, where we'll be in five, ten, fifteen, twenty years. We could debate that forever and flavy and I will no doubt debate that all the time, because we like
to discuss these things. But what we're seeing is the emergence of a multipolar system where the US is still a significant power, but perhaps a waning power, and you have China rising and bringing other countries into its orbit. You have Russia's arguably still a fading power despite the war in Ukrainean economically it's very small, but able to
create mischief in many countries around the world. And certainly there's an alliance of sorts between Russia and China at the moment, and you've got the US thinking, well, how
can we retain influence in these places? But even within the G seven, the US has had some torturous moments with Europe in recent years, and not just under the administration of Donald Trump, but also under Joe Biden, who is arguably even more of a protectionist than Trump, but just sort of in nicer clothing and saying it in
nicer ways than Donald Trump did. And so you've got those fractures potentially also emerging, and you can see that in some of the ways that they debate stuff at the summit between Europe and the US.
In terms of examples of that freed relationship transatlantic relationship between the US and its partners in Europe, very good recent example is a Manuel Macron who went to Beijing to see Shujingping of China and essentially sort of volunteered that China should take a central role in negotiating a piece in Ukraine. And that's really not a call that one would expect Macron to make or have your dacity
to do so. Now, on the one hand, you have a leader with a tremendous ego, but it's also pretty indicative of how several leaders really don't feel like they need to kiss the hand or the ring anymore.
So.
In Italy you have a new leader, Jarja Milauney, who is also trying to carve her own path in terms of how to manage that relationship. Do you have to pick sides? So you have to pick between us and China, And in so doing, what are the economic costs? And in Germany, of course, you have Olive Schultz, who is very much in the shadow of his predecessor, Angela Merkel, who had such an overarching, huge reputation, but whose reputation has recently been tarnished over her own relationship with Kutin.
And it's unclear how history will treat Merkle, whether she will be seen as someone who kind of kept Vladimir Putin at bay, or whether she was someone who essentially appeased him. So these are the questions that keep coming back over and over just in terms of this global South. A very good example is the new president in Brazil, Lula, who of course was president before and has come back and his second incarnation as president has made absolutely crystal
clear that he has no intention of picking sides. And Latin America is a very good example of a region that was originally seen as America's backyard, but increasingly now is perhaps being seen as China's backyard. And you see that very much reflected in the trade figures China will soon eclipse the US in terms of the biggest trade partner in the region.
The one thing on that also is that it didn't start with Joe Biden. He's obviously dealing with these fundamental shifts that we're seeing. But Flavia made this point also, is that if you look back through decades, you're talking about decades where the US just didn't see Africa as important, and didn't see parts of North Africa, perhaps in the Middle East as important, didn't see parts of Eastern Europe as important, certainly regarded Latin America as its backyard, but
equally didn't invest a lot in there. And so now is turning around saying, hey, we're here, we're present, we want to be involved, we want to hear you, we want to talk to you, and these countries saying, well, where have you been all this time? And so you really do see those countries. It's not so much that they're resisting the US, but they're saying the US, you were never here, and now you're trying to get our attention because you can see the way the world is
shifting and you want us on board with you. But it's a bit too late, and so you see a parade of US officials going through Africa recently, for example, None of that really seemed to get a lot of traction. Again, the one thing that probably will get their attention is simply the idea of greater investment and trade.
What does the US have to offer at this Group of Seven summit and beyond to other countries to say you should follow our leadership?
I would answer the question in terms of what Joe Biden specifically can do, And one of the things that he promised to do when he defeated Donald Trump back in twenty twenty was to say America is back, and America's ally have essentially been testing that theory. What does
it actually mean? Does it mean that you're not going to go around saying reckless things like hey, Germany, you need to take care of your own military and we're going to pull out, or similarly doing the same in Japan, Things that send shockwaves through the system of like hold on a second, is the US reliable? Can we hold it beholden? Two decades long promises? That sense of trust
I think has been broken. And as much as Joe Biden is seen as someone who is honest and decent and represents a type of America that I think allies are nostalgic for. The reality is that now allies look at the US democratic system and see it as pretty broken. They are baffled by these elections that go on forever. We're eighteen months away from an election, and you have all sorts of things that allies say, oh, this is crazy.
You have Ronda Santis, the Florida governor, who for a second we thought might be the Republican nominee, but whose star seems to have faded, but coming out and saying, well, well, you know, Ukraine is a territorial dispute. People in Ukraine and around Ukraine listen to that and think, Okay, what this means is that the US is literally not going to care about Ukraine in a couple of years, is going to be consumed by its own election. And all that Vladimir Putin has to do is essentially play the
long game and wait. And so I think it's important to sort of know that everything that not just the President says, but what people in Congress say. And the perception is that Congress in Washington has become increasingly radicalized, and you see that very much in the debt ceiling debate, where there's an assumption by markets and by allies that
somehow this will resolve itself, as it always has. But I think what they're increasingly beginning to see is that something has been broken and it's not a question of just putting it back together. So in answer to your question about what the US can do, I don't think
it can do very much. I think it can try definitely to stop lecturing countries about democracy, and I think that's to a certain degree stopped that It's become very very clear also that the US is increasingly sort of looking inside itself and is just focused singularly on China and things like TikTok and Ai and all those relationships have become transactional and subsumed to the degree of are you with us or.
Not with us?
What the G seven can and can't do about China's growing influence When we come back right, as you mentioned earlier, China is moving very strongly forward. Xi Jinping is offering China and the way it does business as a viable alternative to Western style democracy and appealing to other countries to go that way. What is the US argument to these countries not to move into China's or a bit.
The argument primarily is that be careful what you get into by beware in that getting into, especially financial relationships, economic relationships with China always come with a price tag, and it may not come for several years later, but it probably will come either you'll find yourself owing a lot of money to China that China may call in at some point when suits or China will want you to behave in a certain way. And you see that
in a variety of other groupings. You see that in Asia, which is the Association of Southeast Asian Nations, where countries like Cambodia, for example, have often been the block for policies that would be critical of China because of the economic relationship between Cambodia and China. So China essentially says to Campodia, we expect you to block these policies or these criticisms of us in that forum, and so the chips do tend to come China's way in the end.
And that's the argument from the US and others is that be careful what you get into. The other argument is China policy can change on a dime, and we've seen that domestically in recent years, there'll be a sudden clamp down on a sector out of the blue. There'll be sudden restrictions, there'll be a purge of certain companies
an investment. If you really bound yourself into China in that regard, you never know when you might be the company they decide to crack down on, or in the sector they decide that they're going for, and so it's very volatile and uncertain in terms of the reliability of
your investment in the long term. So those are two of the primary arguments that the US, but also European nations and other members of what you think of as the West, come at when they try to say these countries don't get too close into bed with China.
So a lot of issues on the table, a lot to discuss. We've talked about only some of them here. Coming out of this summit. What do we expect, What results do you think will come of it.
One of the things where we are expecting, possibly is an announcement on a near total bound on exports to Russia. So it means that anything that goes into Russia has to be given an exemption, and that's a flip of what it is now in terms of being able to send your goods in from a variety of countries. So there's that aspect of it that would involve the G
seven and the EU. That's one thing we're expecting, possibly a crackdown on the diamond trade out of Russia, which is quite lucrative for Russia also, And we're looking for some kind of language coordination around China. Even if they don't mention China by name in their statements, what do they do when they talk about economic coercion? That's a phrase they're using a lot for China at the moment.
So is there some kind of joint statement that touches on that issue, which is really a signal to China that they're going to sort of work together to try and manage China in terms of its economic policies. That's another thing you could see that may come out of it. But they're really on the China side, probably more statements of intent versus something tangible.
And I will say, I'm looking for optics and I think it's incredibly important to sort of see how all these leaders are relating to each other. Last year in the Alps in Germany, Biden wasn't seen very often. There were whisperings of like, well what is he doing? Is he too tired?
Is he old?
You know, the age thing is something that actually keeps coming back. It's showing in polls. It's something that allies notice. Is Joe Biden going to go and have a bunch of bilaterals which is what is expected. Everyone wants to meet the US president or not. You know, you're going to have Trudeau, who's the leader of Canada, who now is the elder statesman, which is you know, an extraordinary turn of events, but he's going to be the person
who have seen the most out of these summits. You want to see how Rishi Sunak Whu's are going to be making his debut as UK Prime Minister. There's been a lot of revolving doors in the UK. How does the new UK leader who's trying to steady the ship of the UK after the turmoil of the Brexit years, how is he going to make his debut on the world stage.
Roz Flavia, thanks so much for coming on the show. Thank you, thanks for listening to us. Here at the Big Take, It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Rgalina. Our senior producer is Catherine Fink. Federica Romanello
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