The Hindu Editorial Analysis- 19th June 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

New Dynamics

Why in News?

Welcoming leaders of 10 countries including Prime Minister Narendra Modi to the “G-7 Outreach” Summit, Italy’s Prime Minister Giorgia Meloni said it was important to step away from the old trope of the “West vs the Rest”.

What is the History behind the Establishment of G-7?

• The origins of the G-7 trace back to an informal meeting of the finance ministers from France, West Germany, the United States, Great Britain, and Japan (known as the Group of Five) following the 1973 oil crisis.
• In 1975, the French President invited the leaders of West Germany, the United States, Great Britain, Japan, and Italy to Rambouillet, France, to further discuss the global oil crisis.
• The Group of Six, consisting of France, West Germany, Italy, Japan, the United Kingdom, and the United States, was formed in 1975 to provide a platform for industrialized democracies to tackle urgent economic issues.
• In 1976, Canada was invited to join, making it the Group of Seven (G-7), and the first meeting including all seven nations was hosted by the United States in Puerto Rico.
• Since 1981, the European Union has fully participated in the G-7 as a "non-enumerated" member, represented by the presidents of the European Council and the European Commission.
• The G-7 became the G-8 in 1997 with the inclusion of Russia, signaling cooperation between East and West after the Soviet Union's collapse in 1991.
• The group reverted to the G-7 in 2014 after Russia was expelled due to its annexation of Crimea from Ukraine.
• There are no formal criteria for membership, but all participants are highly developed democracies.

How does the Summit Participation take place?

• Annual Summits: G-7 summits are held annually with hosting duties rotating among the member countries.
• Host Responsibilities: The host country holds the G-7 presidency for that year and is responsible for setting the agenda.
• Special Invitees: The host nation may invite leaders from other countries such as China, India, Mexico, and Brazil to participate in the summit.
• International Organizations: Leaders of key international organizations, including the European Union, IMF, World Bank, and the United Nations, are also invited to attend the summit.

Difference Between G-7 and G-20

• Origins and Purpose:
  • G-7: Focuses mainly on political issues; established in the mid-1970s to address pressing economic concerns of industrialized democracies.
  • G-20: Created in 1999 post-Asian financial crisis; initially a meeting of finance ministers and central bank governors, upgraded to head of state level in 2008 to address global financial issues.
• Membership:
  • G-7: Includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
  • G-20: Includes G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey.
• Focus:
  • G-7: Primarily political.
  • G-20: Broader focus on global economic issues, often called the "Summit on Financial Markets and the World Economy."
• Global Representation:
  • G-7: Represents a smaller, more homogeneous group.
  • G-20: Represents more than 80% of global GDP, including emerging economies.

How the G-7 Lost Power

• Shift in Influence:
  • In 2008, the G-8 (including Russia) focused on issues like food inflation but missed the 2008 global financial crisis.
  • The G-20 addressed the crisis effectively by calling for U.S. financial market regulation.
  • The G-20, with its emerging market members, proved essential for global initiatives.
• Impact:
  • The G-20's rise marked a shift from the old world order dominated by the G-7/G-8 to a more inclusive global leadership structure.
  • The G-7's decisions are non-binding, while the G-20's broader membership promotes more significant collective action.

Relation Between G-7 and FATF

• Establishment:
  • The Financial Action Task Force (FATF) was established by the G-7 in Paris in 1989 to combat money laundering.
• Mandate Expansion:
  • In 2001, its mandate was expanded to include terrorism financing.
• Objectives:
  • FATF aims to protect financial systems from money laundering, terrorism financing, and proliferation, thereby enhancing financial integrity and security.

G-7 Overview

• Origins: The G-7 originated from an informal meeting of finance ministers from France, West Germany, the U.S., Great Britain, and Japan (Group of Five) after the 1973 oil crisis.
• Formation:
  • In 1975, leaders from West Germany, the U.S., Great Britain, Japan, and Italy met in Rambouillet, France, to discuss the global oil crisis.
  • Formed as the Group of Six (France, West Germany, Italy, Japan, the UK, and the U.S.) in 1975 to address economic issues.
  • Canada joined in 1976, creating the G-7, with the first meeting held in Puerto Rico.
• EU Participation: The European Union has participated fully since 1981 as a "non-enumerated" member, represented by the European Council and the European Commission.
• G-8 and Russia:
  • Russia joined in 1997, making it the G-8, to signal cooperation post-Soviet Union collapse.
  • Expelled in 2014 after annexing Crimea, reverting the group to the G-7.
• Membership: No formal criteria; includes highly developed democracies.

Summit Participation

• Annual Summits: Hosted annually on a rotational basis by member countries.
• Host Responsibilities: Sets the agenda and holds the presidency for the year.
• Invitations: Host country may invite global leaders (e.g., China, India, Mexico, Brazil) and heads of international organizations like the EU, IMF, World Bank, and UN.
• Sherpas: Personal representatives or diplomatic staff who prepare summit groundwork and follow-up.

G-7 vs. G-20

• G-20 Origins:
  • Founded in 1999 after the Asian financial crisis.
  • Initially a meeting of finance ministers and central bank governors.
  • Upgraded to head of state level in 2008 in response to the financial crisis.
• Focus:
  • G-7: Mainly political issues.
  • G-20: Broader focus on global economic issues, known as the "Summit on Financial Markets and the World Economy."
• Membership:
  • G-7: Seven industrialized democracies.
  • G-20: Includes G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey.
• Global Influence:
  • G-7: Smaller, more homogeneous group.
  • G-20: Represents over 80% of global GDP, includes emerging economies.

How the G-7 Lost Power

• 2008 Financial Crisis:
  • G-8 focused on issues like food inflation, missing the financial crisis.
  • G-20 addressed the crisis, calling for U.S. financial market regulation.
  • Emerging markets in the G-20 proved crucial for global initiatives.
• Shift: G-20 summits superseded G-8 as the most important global meetings, marking a shift in global power dynamics.

G-7 and FATF

• Establishment: FATF was created by the G-7 in Paris in 1989 to combat money laundering.
• Expanded Mandate: In 2001, FATF's mandate included terrorism financing.
• Objective: Protect financial systems from money laundering, terrorism financing, and proliferation to enhance financial sector integrity and security.

Other Highlights of G-7 Summit

• PGII:
  • G-7 announced mobilizing $600 billion by 2027 under the Partnership for Global Infrastructure and Investment to support infrastructure in developing and middle-income countries.
• LiFE Campaign:
  • Indian Prime Minister promoted the Global Initiative for LiFE (Lifestyle for Environment) to encourage eco-friendly lifestyles.
• Russia-Ukraine Crisis:
  • Highlighted the impact on energy prices and emphasized the need for equitable energy distribution.
  • Called for an immediate end to hostilities through dialogue and diplomacy.