A working session at the G-7 summit. (Source: PTI)

G-7 Officials Toiling at Summit to Paper Over Trade Differences

(Bloomberg) -- The leaders of the world’s richest countries have come together to smooth over their differences -- especially with U.S. President Donald Trump -- and to demonstrate they can still work together.

At the two-day meeting in La Malbaie, Quebec, the Group of Seven leaders are limping toward something that could look like a win, even if it comes far short of the broad communique signed by all attendees that typically comes out of their summits.

G-7 Officials Toiling at Summit to Paper Over Trade Differences

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

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. It would include outside experts.

Low expectations for the meeting which ends Saturday could allow leaders to cast any consensus as an achievement, especially given that Trump and most of the other G-7 leaders headed into the talks appearing ready to fight. Trump spent the days leading up to the meeting tweeting complaints about the summit’s "indignant" host, Canadian Prime Minister Justin Trudeau, and French President Emmanuel Macron, arguing that both leaders refused to budge on their trade positions.

By the time he sat face-to-face with Macron on Friday, though, Trump was publicly heralding "progress" on the very issues he’d been grousing about. Instead of fighting big battles with Trump, his counterparts were angling for a baseline of agreement that might be as low as an acknowledgment of the important role of the G-7.

There were also no more references to Trump’s off-the-cuff remark on Friday about the need to bring Russian President Vladimir Putin back into the fold of the international community. The G-8 was downgraded back to a G-7 following Putin’s annexation of Crimea in 2014.

The bid to gloss over the divide might see the reputation of the G-7 salvaged instead of becoming an unprecedented casualty of U.S. tariffs, disagreements over climate change and the future of the Iran deal. But it won’t solve the differences, particularly on trade, with the European Union moving toward retaliatory tariffs from July on key U.S. goods. The tit-for-tat risks a full blown trade war, something economists have said would be bad for all involved.

“For today, I think it’s much more important to convince our American partners to strengthen our format as guarantor of world order, than to look for something new, more challenging, more difficult,” EU President Donald Tusk said Friday.

The G-7 countries are working around the clock to craft a full communique to be signed by their leaders Saturday, a Canadian official said at the end of talks Friday. The official said disagreements remain, particularly with the U.S. on a number of issues, but the goal remains to reach agreement on all the big issues.

The leaders discussed trade in their afternoon group meeting, touching on the World Trade Organization, the North American Free Trade Agreement, and the steel and aluminum tariffs that Trump recently imposed on Canada and the EU, the Canadian official said.

The tariff standoff is a complicated issue for the EU -- each country is exposed to different sectors, and could be impacted differently in the event of an escalation. Trump, for instance, is considering imposing tariffs on auto imports on national security grounds, a move that would hurt major foreign auto producers like Germany.

A German official said that if Trump declines to sign a communique, it won’t be the end of the G-7, but it would be a worrisome signal.

“In a culture of open discussion, it’s possible that we don’t agree on all points," Merkel told reporters on Friday. But “it would be more honest to address the different viewpoints and to continue the work of overcoming these differences, rather than pretending that everything is in order."

©2018 Bloomberg L.P.