Nicholas Bayne: The 2013 G8 Summit: The Perspective of the Host

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The 2013 G8 Summit: The Perspective of the Host

Nicholas Bayne, LSE

Prepared for "Prospects and Possibilities for the 2013 G8 Lough Erne Summit:
Trade, Transparency, Tax and Terrorism"
June 14, 2013, Belfast
Organized by the School of Politics, International Studies and Philosophy, Queen's University Belfast
and the G8 Research Group, University of Toronto
with the support of the United Kingdom's Department for Employment and Learning, Newsdesk Media
and the Balsillie School of International Affairs
This conference was streamed live here. Watch the video here.
To find out more, please click here.

As David Cameron took office in 2010, the fate of the G8 summit looked uncertain. The G20 summit had held three productive meetings and was at the height of its reputation. Was the G8 still needed? Silvio Berlusconi, as chair of the 2009 L'Aquila summit, had the chance to give the G8 a new profile, distinct from the G20. But as he hesitated between an exclusive or an inclusive G8, L'Aquila became a muddle. This was Barack Obama's first G8 summit and he wondered if it was worth it.

When Nicolas Sarkozy announced ambitious plans for the Deauville G8 in 2011, Obama's doubts returned. Did he have to endure all that? Did he want to chair the summit in 2012? If he had decided against it, that would have been the end of the G8. It was saved by the Arab Spring. Obama saw that the G8 summit would be right for high-level exchanges on the political and economic developments in North Africa, while the G20 would not. So he went to Deauville and chaired his own summit at Camp David in 2012.

The G8 summit therefore survives, alongside the G20. In process terms, this is helpful. The G8 can shed its cumbersome apparatus, built up over the years. It can revert to a simpler format, in which the heads themselves can make a direct impact. This meshes well with the UK's approach to summitry. But the scope of the G8's activities remains to be defined. Issues requiring mixed political and economic treatment, like the Arab spring, do not happen every year. Foreign policy issues always require attention, like Syria this year; but political subjects alone cannot satisfy a summit created for economic reasons. If the G8 tries to lead on the mainstream economic issues handled by the G20 summit, the non-G7 members of the G20 will resist. If the G8 limits itself to minor economic topics outside the ambit of the G20, it will hardly be worth involving heads of government. David Cameron has to square this circle and find a durable economic role for the G8. His three-part agenda is chosen for this purpose.

In trade, the focus is on the bilateral and regional agreements being negotiated among G8 members: by the European Union with Canada, Japan and especially the United States for a Transatlantic Trade and Investment Partnership; and by the United States with Japan, Canada and others for a Trans-Pacific Partnership. The summit will aim to give momentum to the negotiations and to build up domestic support for them. These agreements should boost the economies of G8 members and make them more competitive, but only if trade barriers come down across a wide front. There are already demands to protect certain sectors, like farming or culture, and these must be resisted.

This strategy contains risks of friction with the G20 and especially with China. The Trans-Pacific Partnership appears to exclude China, though the US insists that it does not. The EU is raising barriers against Chinese solar panels, as the US has already done. More widely, these agreements seem to challenge the authority of the WTO, just as the new Brazilian Director-General is taking over. To prevent friction, the G8 members must act to remove obstacles to trade, not raise them. Their new agreements would respect existing WTO rules, and improve on them by setting new standards in neglected areas like services. On this basis the G8 members could regain some of the initiative they have lost since the financial crisis, without obstructing a revival of the WTO with the backing of the entire G20. This theme will need attention at later G8 summits, as the negotiations are bound to take longer than expected.

Taxation, the second item, first came to the G20 London Summit in 2009, for a fractious debate on whether tax havens provoked the financial crisis. It is back on the agenda for the St Petersburg summit this year for a different reason. Tax avoidance makes governments less able to correct their budget deficits, which aggravates the economic slowdown. The OECD is preparing a detailed report for the G20 and a multilateral convention is under discussion.

The British decision to treat tax avoidance at the Lough Erne summit may appear to challenge the primacy of the G20. Yet the G8 is concentrating on international firms that avoid paying tax and the banks that help them to do so. The big firms concerned mainly originate in G8 members and conduct most of their operations there. But they contrive to base themselves in other jurisdictions, to minimise their tax liability and conceal what they are up to.

At their summit the G8 members will aim to put their own house in order, on the basis of plenty of advance activity. The British government is disciplining tax havens under its control, both in the Caribbean and nearer home. The EU is requiring much greater openness from companies and banks and has persuaded secretive Luxemburg to open up. Pressure from the US has led to similar promises from Switzerland. All these measures should be welcome to the rest of the G20. Thus whatever is agreed at Lough Erne would enrich the conclusions that emerge from St Petersburg and would not cause conflict, provided the G8 members do not preserve loopholes for themselves.

Transparency, the third item, is a technique, rather than a policy area, and it is harder to know just what the summit will do. Yet transparency has strong attractions for countries pursuing open, liberal policies in a globalized economy. It is a key weapon in fighting against tax avoidance. It is important in determining beneficial ownership and other property rights. It helps to prevent abusive behaviour by western firms in developing countries, especially in extractive industries. It is also the vehicle for summit accountability, to which the UK is much attached. In my view, the G8 should endorse transparency as one of its fundamental principles, though Russia might find it hard to swallow.

To sum up, the British objective for the Lough Erne summit is to identify a distinctive economic role for the G8, which commands the attention of heads of government and can complement the G20 without clashing with it. The three agenda items serve this purpose in different ways. In tax avoidance, it is big western firms and banks that need to be disciplined. Thus substantial commitments by the G8 are needed to enrich the G20's conclusions and will thus be welcome to them. Transparency is valuable in many contexts and could usefully be made a distinctive principle of the G8. Some other members of the G20 could find it hard to endorse, but they can hardly attack it. The trade agenda is the most controversial and will need recurrent treatment. Yet if G8 members can conclude agreements among themselves that lower trade barriers across a wide front, they will boost their economies and their morale, while providing healthy competition to the G20.

If this summit makes progress on its three agenda items, it could begin the revival of the G8 as a serious economic actor.

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