By Bodo Ellmers
The G7 summit in Elmau was the highlight of the German G7 presidency in 2022. Contrary to the original intentions of the German government, security policy and geostrategy dominated the process, due to the conflict in Eastern Europe. By contrast, the G7 largely abandoned its claim to coordinate global economic issues. Financial commitments to third countries were made primarily in the areas of food and infrastructure. However, the former do not seem commensurate with the scale of the food crisis, and in the case of the latter, it is questionable whether any new and additional money is involved. The new "Climate Club" stands out as the most significant institutional innovation. But it is questionable what added value it is supposed to bring compared to the United Nations climate process.
The G7 in times of geopolitical tension
Germany's new coalition government took over the G7 presidency only a few weeks after taking office. The priorities of the German presidency were therefore not communicated until January 2022, relatively late. The venue for the G7 summit was Schloss Elmau in the Bavarian Alps, the same location as seven years earlier.
Originally, the G7 process was to deal with economic recovery after the Corona crisis, and with sector issues such as climate and health. In differentiation from geopolitical competitors, especially China, measures to strengthen democracy and civil liberties were also on the agenda.
Surprisingly in retrospect, the German presidency's priorities paper titles a subheading "Strengthening the G7´s role as bridge-builder and mediator for peace and security". It states there:
"On the basis of their shared values, the democratic G7 countries can adopt a clear stance with respect to international crises. Firmly embedded in the multilateral rules-based order, especially in the framework of the United Nations, we want to outline solutions for crisis situations and global challenges with common initiatives and work to implement them together with the international community. Closely coordinating our efforts with partners around the world and advocating for our positions are at the core of the G7’s work in this context."
With the invasion of Ukraine by Russian troops in March 2022, it became clear that the security agenda would play the dominant role in this year's G7 process. However, it also quickly became apparent that the political West could not count on the full support of the entire global community in taking sides with Ukraine. A UN resolution condemning the Russian invasion could be adopted in the UN General Assembly, but only with numerous abstentions. The UN Security Council cannot take hard measures against one of its five permanent members with veto power - in this case Russia - and is thus reduced to the role of a forum for dialogue in the ongoing conflict.
The G7 therefore focused in Elmau on coalition building outside the rules-based order of the UN. It was already visible at last year's summit that the G7 are increasingly relying on Western plurilateralism instead of universal multilateralism. In addition to China, Russia has now emerged as a geopolitical adversary.
Thus, an obvious goal of the Elmau summit was also to court strategic partners for the Western coalition. From the second day on, the leaders of Argentina, India, Indonesia, Senegal, and South Africa attended. Indonesia currently holds the G20 presidency, Senegal that of the African Union, and the other three are considered swing states to be won over to the Western coalition. The irony is that just the previous week, India's Prime Minister Modi and South Africa's President Ramaphosa had sat with Vladimir Putin at the virtual BRICS summit, chaired by China. The new Third World doesn't seem to want to settle on a bloc that quickly.
The results of the G7 summit
As usual, the G7 summit concluded with a communiqué from the heads of state and government. In addition, this time there were separate agreements on priority issues such as the new climate club, global food security, resilient democracies, the just transition to climate neutrality, and of course support for Ukraine.
Adding to the complexity, eleven meetings of the various line ministers have already taken place in the lead-up to the summit, each ending with their own declarations. Five more will follow before the end of the year under the German presidency.
One point of criticism of the G7 process is that parallel governance is increasingly taking place, which now encompasses virtually all policy areas, but is exclusively agreed in advance by the G7 countries, only to be presented to the other 186 countries in the UN as a fait accompli in a second step. For example, at the G7 Summit in Cornwall, the G7 had a pre-agreement on corporate taxes, which was then presented to the OECD's Inclusive Framework for sign-off. Tax justice activists therefore described the process and its outcome as illegitimate, as the countries of the Global South and their needs were left out.
Financial commitments primarily for infrastructure
As in previous years, this G7 summit was a moment for announcing big numbers to the public. The highlight on the very first day of the summit was the announcement that the G7 countries intend to collectively mobilize US$600 billion for infrastructure financing in developing countries over the next five years. The EU is to contribute 300 billion to the so-called "G7 Partnership for Global Infrastructure and Investment (PGII)", with 200 billion coming from the USA.
This does not seem to be fresh and additional funds, where should they come from in view of shrinking development assistance budgets in donor countries and fully utilized development banks. The EU's 300 billion pledge is primarily a recycling of the Global Gateway package. When it comes to the U.S. president's 200 billion pledge, it is uncertain whether Congress and the Senate will go along with it. The U.S. government´s full-throated pledge last summer to reallocate a sizable portion of the U.S. share of the new IMF Special Drawing Rights has not yet received the necessary support from the House.
The G7's announcement of a new partnership for infrastructure finance is clearly motivated by geostrategic competition with China, an alternative to China's Belt and Road Initiative. Beyond that, there is no need for new governance structures in this area. The infrastructure sector is already characterized by excessive fragmentation and proliferation of institutions and funds, creating duplication and unnecessary transaction costs, and making effective use of funds in line with internationally agreed aid effectiveness principles impossible.
More concrete is the numerically clearly moderate G7 pledge to provide an additional US$4.5 billion for global food security. However, this is only a drop in the bucket. Only recently, UN-OCHA announced that the funding gap for humanitarian aid currently amounts to 37 billion U.S. dollars - the rapidly rising food prices weigh heavily. In the run-up to the summit, Welthungerhilfe had demanded 13 billion annually from the G7 for the sector.
The area of hunger in particular makes it clear that the G7 has an accountability problem and that figures presented in G7 communiqués should be treated with caution. At the last Elmau summit, in 2015, the G7 had announced the goal of freeing 500 million people from hunger by 2030. In reality, the number of people suffering from malnutrition has risen by 150 million since then, criticized ONE, for example.
The G7 has also not covered itself with glory in the rechannelling of IMF special drawing rights. The 100 billion target confirmed at the last summit is a long way off. This year's summit communiqué skirts around the issue by no longer giving concrete figures for the state of play, and only speaks of "significant progress" in rechannelling. Even that is exaggerated when looking at the official IMF data.
Of little relevance at the Elmau summit was the coordination of global economic issues - the original raison d'être of the G7 since they were founded in the 1970s as an informal forum of the then largest economies. This is all the more astonishing given that the G7 central banks recently initiated the monetary policy turnaround. Rapidly rising interest rates have started to triggering upheavals both in their own countries and around the world.
With no more cheap money coming in, asset bubbles are currently deflating. Stock markets valuations around the world have fallen drastically and real estate prices may follow, which also poses risks to the stability of financial institutions worldwide. The worst affected by the turnaround in interest rates are highly indebted countries in the global South, which will have to spend even larger shares of their tax revenues on debt servicing, or face insolvency altogether. The IMF recently warned of a new wave of debt crises in developing countries.
The G7 - which once used their summits to announce far-reaching debt relief initiatives for highly indebted poor countries - merely confirmed existing and ineffective measures such as the "Common Framework" of the G20 in Elmau, criticized, among others, the debt relief specialists of Erlassjahr.de in a short message.
Also in the tax area there was nothing new at this year's summit. Only in one paragraph did the G7 repeat their "strong political commitment" to the early implementation of the OECD's new "Two Pillar Agreement" on the taxation of the digital economy. In practice, implementation is currently blocked in both the U.S. Congress and the European Council. Some developing countries see themselves disadvantaged by the OECD agreement anyway and refuse to join. However, tax justice activists welcome the passivity of the G7. In the future, the UN should be responsible for setting the rules.
Business and human rights
The area of business and human rights was prominently placed on the agenda by the German presidency. In the communiqué, the G7 declared that it would intensify its efforts to promote sustainable supply chains and combat child and forced labor. This is to be done through a mix of binding and voluntary measures. This marks a clear change of direction by the G7 countries, which had previously relied primarily on voluntary initiatives and recommendations to ensure that companies comply with human rights and environmental standards. The G7 also wants to work toward an international consensus on business and human rights in order to strengthen compliance with international standards.
The change of direction is based in particular on the interests of Germany and France, which already have corresponding legally binding regulations at national level in the form of the German Supply Chain Due Diligence Act and the French Loi de vigilance. In addition, the EU Commission presented a draft for a corresponding EU directive in February. Back in May, the G7 labor and social ministers declared at their meeting in Wolfsburg that they wanted to engage constructively in talks at UN and ILO level to explore ideas and options for a consensus-based, legally binding instrument at international level. If these plans are not to remain mere empty words, the European G7 members would have to make a concrete commitment to an EU negotiating mandate for the negotiations underway in the UN Human Rights Council on a Binding Treaty on Business and Human Rights.
Environment and climate
Environmental and climate issues were also overshadowed by the Ukraine conflict, but carried somewhat more weight at the summit and precision in the communiqué. One G7 decision at Elmau was to achieve net zero targets by 2050 for maritime and air transport. Concrete targets for electric and other zero-emission vehicles had also been negotiated for a long time. Ultimately, however, agreement was reached only on the vague declaration to significantly increase their share by 2030. In addition to this watering down, Greenpeace also criticized the lack of concrete decisions on phasing out coal and gas.
Possibly the most relevant institutional innovation of Elmau is the establishment of a climate club. According to the two-page communiqué on the subject, the climate club is to focus particularly on the industrial sector. Ambitious and transparent climate protection measures are to be promoted, and carbon leakage is to be prevented. In addition, markets for green industrial products are to be promoted. Complementary to climate policy, the G7 wants to expand Joint Energy Transition Partnerships, which support other countries in their transition away from fossil fuels. South Africa is a pilot country.
While these are undoubtedly important areas, the question arises as to why a separate climate club is needed and how it will be set up and operate in concrete terms. Obviously, there is no shortage of existing institutions in the climate field, and the UN climate process in particular, with its annual climate summits, provides considerable space to reach international agreements.
Civil society actions and reactions
Civil society again had a split view of the G7 process this year. On the one hand, there were groups that would have liked to see more ambition and reform zeal from the G7 and approached the German chairmanship with concrete demands. These were coordinated in the so-called C7, one of the numerous engagement groups of the G7 process. Back in May, at the C7 Summit in Berlin, they presented a detailed position paper to Chancellor Scholz and the German G7 negotiator (known as "Sherpa" in G7 jargon) Jörg Kukies. However, it was also stressed at the C7 Summit that the G7 should not build parallel structures to the UN, but should rather engage constructively and side by side with partner countries from the global South in UN processes.
During the summit itself, several demonstrations took place. The larger of these, in Munich, was supported by a broad alliance, including numerous environmental and development NGOs. Their slogan was "Climate crisis - species extinction - inequality. Fair goes differently". The second demonstration, in Garmisch, took place under the slogan "Stop G7 Elmau" and denied the G7 any legitimacy. Both remained peaceful. The extent of the mobilization this year remained below the expectations of the organizers.
The reaction of NGOs to the results of the summit was predominantly sobering. The NGO associations VENRO and Forum Environment & Development welcomed the financial pledges in the food and infrastructure sectors, but criticized the lack of progress on trade and other global structural policy issues.
Oxfam International had little praise even for the financial pledges. The pledged funds for food security would fill only a fraction of the current funding gap. The G7 had missed an opportunity at Elmau to advance debt relief, or to introduce an excess profits tax to skim off the excessive profits of private corporations benefitting from the Ukraine crisis. According to Oxfam Germany, the latter alone could bring US$430 billion.
On the international side, Jubilee USA at least welcomed that the US$ 200 billion in infrastructure funding from the U.S. may mean less debt from the global South, at least if it comes in the form of grants or low-interest loans.
The German church aid organizations Bread for the World and Misereor scandalized the G7's intention to allow new investment in gas production, contrary to the agreements reached at last year's UN climate summit in Glasgow. This, they said, was a historic step backward in the fight against climate change.
Indeed, the G7 summit was not the milestone for sustainable development that many had hoped for when the German government published its key issues paper earlier this year. A clear and stringent alignment with the 2030 Agenda is not evident in the G7 communiqué; in fact, it is dealt with in one paragraph rather than serving as a guideline throughout. Mainstreamed instead were geopolitical needs.
The most remarkable step of this year's summit was certainly the evolution of the G7 away from economic policy coordination of the formerly largest economic powers to geopolitical and security policy coordination of the seven most important military powers of the political West.