G-7 Summit Gets Its Communique But Only Papers Over Trade Spats

(Bloomberg) -- Leaders of the Group of Seven rich nations who threatened to confront President Donald Trump for slapping them with tariffs ended their annual summit with a vague commitment to keep talking on trade, failing to secure major concessions from the U.S. leader.

G-7 leaders on Saturday struggled through two days of behind-the-scenes tension to secure the traditional release of a closing communique. That statement highlighted the crucial role of a rules-based trading system, which was important to Europe, while also underscoring the importance of free, fair and reciprocal trade -- borrowing vocabulary often used by Trump.

Trump headed into the G-7 talks in Canada having picked fights with some of his biggest allies, who vowed to confront him about new U.S. tariffs on steel and aluminum. Once on the ground in Quebec, though, he turned the tables on leaders who accuse the U.S. of protectionism.

Trump shook up the meeting on Saturday morning by proposing to eliminate all barriers to global trade, a surprise turnaround from his aggressive tone on tariffs before the summit.

“No tariffs, no barriers, that’s the way it should be, and no subsidies,” Trump said during a 30-minute press conference in La Malbaie. "I did suggest it and people were -- I guess they’re going to go back to the drawing board and check it out."

Trump complained repeatedly about Canada’s protected dairy sector, citing up to 300 percent tariffs that he said stand in the way of American farmers accessing that market.

Canadian Prime Minister Justin Trudeau and French President Emmanuel Macron had been especially vocal ahead of Trump’s arrival, with Macron threatening not to sign up to a communique unless Trump made concessions on his tariffs. They were the two leaders that Trump had individual meetings with on the sidelines of the summit.

Behind the scenes the discussions, which went late into the night and through Saturday morning, were tense and pointed. The European leaders sought to show unity against Trump and prod him into concessions on the tariffs, or at least an agreement to talk more about them.

Read more: A Guide to the G-7 Communique, How It’s Done and Why It Matters

But Trump’s gambit, which his economic adviser Larry Kudlow told reporters amounted to a "free trade proclamation," called the other leaders’ bluff -- if they’re so opposed to his new tariffs, he suggested, why not eliminate all tariffs?

Trump knew, of course, that other G-7 members don’t want to eliminate all tariffs, just the new U.S. ones they see as potentially damaging to their economies. He has long argued for reciprocal trade, meaning that U.S. tariff rates should be equal to other major trading partners’ duties.

“We’re like the piggy bank that everybody is robbing, and that ends,” said Trump.

Read more: G-7’s Iconic Photo Shows Its Success, Depending on the Angle

Trudeau described the closing statement as an “ambitious” agreement on a broad range of issues.

“If the expectation was that a weekend in beautiful Charlevoix surrounded by such lovely people was going to transform the president’s outlook on trade and the world, then we didn’t quite perhaps meet that bar,” he said on Saturday in his press conference to close out the summit.

Macron, meanwhile, made clear the disputes remained and bemoaned the lack of G-7 unity.

"I heard President Trump say he wants maximum trade and minimum tariffs for G-7 members. Be my guest!,” Macron told reporters on Saturday. “We need to be seven to dance that tango, and the next step needs to be made by the one who first took a step backward.’

The statement reflected the push-and-pull over language, adding a reference about fighting protectionism, phrasing the U.S. has often objected to since Trump was elected on an “America First” agenda. "Those who doubted our capacity to work together will have seen our ability to deliver,” Trudeau said of the communique.

‘Insulting Tariffs’

Trudeau said he told Trump in candid conversations he found the steel and aluminum tariffs imposed this month “insulting” and that Canada will move forward with counter-tariffs. Trump said that retaliation is a “mistake,” according to Trudeau.

Canada is “polite, we’re reasonable but we also will not be pushed around,” Trudeau added.

German Chancellor Angela Merkel said she agreed with Trump’s push for freer trade, adding talks over crucial changes to global trading rules will keep moving ahead.

"We also agreed that we want to reduce tariffs and remove trade barriers and also to reduce subsidies,” Merkel said at her closing press conference. “Many of the current discussions about trade, especially with the U.S., despite the common commitment, will continue.”

Merkel is proposing a forum -- a “shared evaluation mechanism" -- aimed at defusing the tensions with the U.S. The idea has the backing of other European members, though it’s unclear if it will get support from the Trump administration.

A German government official said the plan would see direct talks between the EU and the U.S. start straight away, and last around two weeks, focused on how much, or whether, EU trade policy endangers U.S. national security interests as Trump has claimed. It would include outside experts.

©2018 Bloomberg L.P.

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