The dividers are divided

Forget bonding, it was the boxing bouts that stole the show at the recent G7 meeting in Canada. The tight-knit group of the US, UK, France, Germany, Italy, Japan and Canada appeared fractured and confused about the stance taken by US President Donald Trump.

The pact between these seven to control the world order is now threatened by Trump, who is no longer playing by the rules. Before considering the diminishing importance of G7, let us look at what the group has done to the world in the last few decades.

Collectively and individually, the group has grown mostly at the expense of the developing world. The entire construct of the World Trade Organization (WTO) was to ensure the opening up of emerging markets while maintaining high barriers in their own regimes. The US and the EU refused to allow competition for their agriculture markets even as they placed pressure on emerging markets like Brazil and India to ease imports by lowering duties. These countries created and ensured divisions between poor countries to maintain their influence and interest.

They were appalled to see the rise of China as a manufacturing giant, which slowly took away their capabilities. For all its flawed policies, China managed to show a mirror to the West. The ideal world that the G7 wants is where it manages to sell its products and services virtually unhindered.

For all its talk of helping poor countries, the G7 still sees the Latin American and African countries as markets for its products. It has only sneered at the possibilities of increased industrialisation in these countries. It is easy to imagine the impact of two or three countries in Africa or Latin America developing the manufacturing capabilities of China. The Western economies would struggle to stay afloat.

These countries can barely manage the rise of China and India. So, the creation of a few more economic giants will not be welcome by them. Consider how they are already reacting to India and China. The European Union is upset with India for encouraging domestic production and manufacturing. India imposed high tariffs on completely built cars in India. This led to the expansion and deepening of its domestic automobile industry. Cars and components made in India are sold across the world. European and American auto companies have invested billions to compete for a share of the Indian market. But if EU and the US had their way, India would still be importing cars rather than manufacturing them. Even now, the EU is trying to push for lower import duties on fully built used cars. EU would prefer that Indians buy used cars made in Europe. Similarly, the US has been haranguing India about its efforts to boost its own solar-manufacturing capabilities. It would prefer that India imports instead of manufactures. In May, the US filed a case against India for promoting its own exports through various schemes.

China and India are fighting back, too. India has also filed a case with the WTO against the US for increasing duties on imported steel.

China, of course, has been much stronger in its approach. It has refused to play by the rules set by the G7. India may be opposed to it for good reasons because the Belt and Road initiative of China is the same type of economic imperialism that the G7, especially the UK, had imposed on the world for centuries. Now that Asian countries have matured, the Western markets are facing the same policies that they had used to control much of the world.

The question then is whether India, China and other emerging markets can create a strong-enough strategy now to exploit the weakness of the Western countries.

This will require two important conditions. Improved relations between China and other emerging markets. China should realise that it bullying smaller countries will yield less results than the effective countering of G7. The second focus will have to be enhancing its own internal strengths to compete with economic giants. India needs internal reforms and so does China. The size of the population is not enough. For instance, India and China have to improve their judicial and educational systems. Internal governance capabilities require deep structural reforms.

At the multilateral level, the G20 grouping will be far more important than G7. Any group that tries to set the world order on economy or security won’t be successful unless it includes the BRICS countries. G20 has not been able to gather momentum as there is a visible divide between the old and emerging powers. Fora like the Shanghai Cooperation Organisation and the International Solar Alliance point to new possibilities of global leadership where Asian countries are the influencers.

As the West squabbles, Russia watches and China grows, the rise of Asia needs focused coordination.

The writer is an economic analyst and author of Kranti Nation: India and The Fourth Industrial Revolution.