June 11, 2018–Before exiting early from the G7 Summit in Canada and withdrawing his endorsement for the joint communique, U.S. President Donald Trump negotiated an edit that has a major impact on the global economy.
Specifically, Trump’s team insisted on changing the phrase “the rules-based international order” to “a rules-based international trading system.”
While the edit may seem small, it may represent one of the most significant geopolitical shifts in 70 years.
The change from “the” to “a” indicates that Trump — and now also the other six signers of the 2018 communique — no longer support the rules-based international order that the United States and its allies put in place in the post-World War II world. Instead, they now support a theoretical system, however abstract or hypothetical it may be.
The Post-WWII International Order
It’s worth including some background on the current system.
The rules-based international order is an actual structure of international institutions and laws. It includes the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). Together, they provide the foundation for the world’s trade of good and services, support for monetary policies and international finance and currency exchange.
It derives from the 1947 General Agreement on Tariffs and Trade (GATT), signed by 23 countries in Geneva, to reduce or eliminate barriers to trade. The GATT agreement evolved into the WTO in 1995 and now regulates trade among its 164 members.
The rules-based international order, in essence, provides the stability our global economy runs on today.
Documenting the Edit: From ‘The’ to ‘A’
Larry Kudlow, Trump’s top economic adviser, said he personally negotiated the change in the language from “the” to “a.”
The 2018 G7 communiqué reads: “We, the Leaders of the G7, have come together in Charlevoix, Quebec, Canada on June 8–9, 2018, guided by our shared values of freedom, democracy, the rule of law and respect for human rights and our commitment to promote a rules-based international order.”
That contrasts with past communiqués from G7 and G20 meetings, which refer to the rules-based international order and multilateral trading system. See the communiqués from the 2017 G20 Summit in Hamburg, the 2017 G7 Summit in Italy, the 2016 G7 Summit in Japan, the 2015 G7 Summit in Germany, and so on.
A New Free Trade System?
So if the leaders of the G7 nations no longer support the international economic system, what is next?
The official 2018 G7 communiqué calls for:
- Changes to the WTO “to make it more fair as soon as possible.”
- Stronger international rules on market-distorting industrial subsidies and trade-distorting actions by state-owned enterprises.
- More protection of intellectual property rights.
None of that sounds too revolutionizing. But when you consider the change in language to an undefined rules-based system, it adds an element of the unknown.
According to Kudlow, Trump is “a trade reformer” who wants a new system with “no tariffs, no tariff barriers, no subsidies.” (See Kudlow’s CNN interview.) The Trump Administration has previously raised concerns about the viability of the WTO as the world’s trade authority. According to a trade agenda released earlier this year, the United States favors a more open process in WTO dispute settlement proceedings and more liberalization for industrial goods. (See prior GER coverage from March 12.)
The troubling part is that Trump appears ready to attempt to achieve a new order by literally destroying the old. “Sorry,” Trump wrote on Twitter early June 11 from Singapore, “We cannot let our friends, or enemies, take advantage of us on Trade anymore. We must put the American worker first!”
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