The United States: Odd One Out

As the Trump Administration prepares for the G7 meeting in Canada, the bulk of commentary in the press is focusing on how isolated the United States has become. The aluminium and steel tariffs, the renegotiation of the North Atlantic Free Trade Agreement (NAFTA), the withdrawal from the joint comprehensive plan of action (JCPOA) with respect to Iran, and the repudiation of the Paris accords all combine to create tension between the Trump Administration and its G7 partners. At the same time, the Trump Administration seems more interested in courting China, Russia, and North Korea than its traditional allies. Hence the question is not just what the Trump Administration hopes to achieve but also why it is bothering to attend at all. The answer is revealing both for what it says about the Trump Administration’s approach to global governance and what it reveals about the enduring legacies of U.S. leadership during the post-Second World War era.

The Trump Administration plans to attend the G7 because these big global summits are a good place both to do business and to be seen to do business. Treasury Secretary Steven Mnuchin came away from the pre-meeting summit of G7 finance ministers apparently unphased by the unprecedented joint condemnation he faces over U.S. trade policy from the other six partner countries. Instead of highlighting areas of conflict, Mnuchin insisted that there were significant areas of agreement. What he meant was that the bilateral meetings he held with individual finance ministers were productive. Mnuchin may not have come away from the meeting with any concrete deliverables but he did come away with a better sense of where the points of difference lie between the various G7 countries and how those differences can be used to extract concessions from America’s allies that are in U.S. interest.

This vision of the G7 is entirely consistent with the transactionalist approach that the Trump Administration has adopted since the beginning. It is also consistent with the Trump Administration’s determination to act unilateral when necessary to achieve its policy goals. Hence there is little likelihood that the Trump Administration will make concessions to the G7 partners collectively on any of the major issues that the summit will address – trade policy, migration, sanctions, environment – particularly if the principal incentive is to come away with a jointly-signed summit declaration. Whether Canadian Prime Minister Justin Trudeau can claim a successful G7 presidency is unimportant. On the contrary, President Trump and his team will use the opportunity to keep pushing forward its bilateral relations and to explore opportunities on a case-by-case basis. In the worst-case scenario, President Trump will come away from the meetings with a series of news images showing his willingness to defend American interests against the global elite. More likely, he will come home with at least something he can use to tout his negotiating prowess.

This assessment is meant to sound realistic and not cynical. The fact that it comes across as cynical despite that intention is what is revealing of the legacy of U.S. global leadership. Institutions like the G7 were originally promoted by the United States precisely because of their ability to bring countries together for coordinated action. Those institutions were less transactionalist than deliberative. They operated on the basis of shared norms and principles and they set policy with an eye to agreed, objective standards. Moreover, this was not a matter of idealism or naivety on the part of successive U.S. administrations; it was a preference for a particular style of bargaining. Researchers at the Harvard negotiation project refer to this pattern of bargaining as ‘principled’ as opposed to ‘positional’. The idea is to use deliberations to expand the possibilities for agreement so that everyone involved comes away with something. In turn, the win-win nature of the agreements made both the negotiating forums and the eventual transactions easier for all parties to perceive as legitimate.

Easier is not the same as inevitable. The Trump Administration came to power in large measure because of a growing belief among many American voters that both the deals made by previous administrations and the forums within which they were negotiated were working against the country’s national interest. Hence, the Trump Administration rejects the process as well as the policies. Its transactionalist approach is more than just a reflection of Trump’s self-perception as a deal-maker; it is a conscious attempt to shift the pattern of international negotiation from the ‘principled’ bargaining shaped by deliberative forums to the ‘positional’ bargaining more common in, among other things, real estate markets. This kind of positional bargaining is easier to manage in a bilateral context and on a case-by-case basis. That is why the Trump Administration seems to pay more attention to those countries that operate primarily outside big, multilateral institutions.

The implication of this new approach for summits like the G7 or for standing multilateral arrangements like NAFTA or the European Union (EU) are fundamental. That is why Trump Administration officials are openly asking questions about whether it continues to make sense to renegotiate NAFTA with Canada and Mexico at the same time; it is also why they are asking questions about whether U.S. support for European integration is in America’s self-interest. When the Trump Administration first approached the governments of Germany and France about negotiating bilateral trading deals it was easy to dismiss that as an expression of profound ignorance about how European commercial policy works; now that the Trump Administration is suggesting the imposition of tariffs that will fall disproportionately on German car exports to the United States, however, that push for bilateral negotiations appears less ignorant than aspirational. The question is whether the EU can hold together as a trading power under the pressure.

The Trump Administration’s unilateral tendencies have implications for the design and functioning of market infrastructures as well as international forums. This is where it is useful to shift attention from trade policy to the JCPOA. Once 180 days have lapsed from the Trump Administration’s decision to reimpose sanctions, European banks and firms will face penalties if they facilitate payments or specialized financial messaging that can be used to sponsor terrorism or to finance nuclear weapons development. The countries of Europe do not agree with this policy, but they will have a hard time pushing back against it – particularly while their firms are so deeply dependent upon access to U.S. markets. Hence the expectation within the Trump Administration is that the Europeans will complain but acquiesce, albeit perhaps resorting to use of the European blocking statute along the way.

There is one area, however, where the success of the Trump Administration’s sanctions will hinge on positive European action. The SWIFT financial messaging platform is a Belgian corporation. It cannot disconnect the Iranian banks without a European Council regulation requiring that action. And the Trump Administration cannot sanction SWIFT effectively or deprive it of access to U.S. markets without damaging the U.S. financial system both domestically and as it connects to the outside world. The strength of SWIFT as a messaging platform derives from the fact that it is inclusive. Managing such an infrastructure in turn depends upon multilateral deliberation. The Trump Administration may not like that form of bargaining, but Trump’s team cannot afford to avoid it altogether either. The G7 may turn out to be useful for the Trump Administration for more than just bilateral photo opportunities after all.

This piece was originally published on as part of a dossier on the G7 produced by the Istituto per gli studi di politica internazionale (IPSI). For the complete dossier including the edited version of this contribution, go here.