G-7 summit highlights deep divisions between U.S. and allies

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President Trump and the first lady will fly to France Friday for this weekend's G-7 summit. The annual meeting has highlighted divisions between the president and some of the strongest U.S. allies.

The Group of Seven (G-7) summit is set to end without a joint communique for the first time in its 44-year history, after French President Emmanuel Macron decided to abandon the tradition citing “a very deep crisis of democracy.”

It will be the first time since meetings began in 1975 that the forum has failed to end a summit without an agreed statement, laying bare the deepening rift between heads of state from seven of the world’s largest economies.

Speaking to reporters ahead of the G-7 meeting at a news conference in Paris on Wednesday, Macron said an attempt to produce a joint communique would most likely be a “pointless” exercise.

He referenced President Donald Trump’s decision to withdraw from a landmark climate agreement restricting global efforts to cut carbon as one example of why it would be difficult to display a united front.

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The annual summit brings together the leaders of Britain, Canada, France, Germany, Italy, Japan and the United States. It will be held in the seaside town of Biarritz in southwest France from Saturday through to Monday.

Securing an agreement at the annual summit has proved increasingly difficult in recent years, partly because the U.S. president has expressed a preference for bilateral trade pacts over multilateral agreements.

“It is impossible to predict what the U.S. will do — we might be in for some surprises from Trump,” Agathe Demarais, global forecasting director at the Economist Intelligence Unit (EIU), told CNBC via telephone.

“I’m not sure what he is going to do, maybe Trump doesn’t know either,” Demarais said, citing the U.S. as a notable exception in its approach to handling disputes.

Last year, at the G-7 summit in Ottawa, Canada, Trump threw typically stage-managed proceedings into disarray.

The U.S. president made an early exit from the meeting, refused to sign the collective final statement and engaged in personal insults over trade with Canadian Prime Minister Justin Trudeau.

The summit appeared to demonstrate fraying ties between the U.S. and its traditional allies, with one photo seemingly summing up divisions in the room.

The image, which appeared on German Chancellor Angela Merkel’s Instagram account, showed world leaders gathered around Merkel on one side of a table, while a seated Trump looked on with his arms folded.

From a French perspective, the hosts will “want to try to manage this G-7 so it doesn’t turn into another embarrassing mess with everyone arguing with each other,” Constantine Fraser, European political analyst at the TS Lombard research group, told CNBC via telephone.

“I think it is quite possible” there will be no joint communique at the end of this year’s summit, Fraser said, before adding the statement was now little more than an “increasingly desperate fig leaf.”

“The G-7 is no longer for the world’s richest countries to show a united front… And the lack of a joint communique is a recognition of where we are at,” Fraser said.

French media dubbed last year’s gathering in Ottawa as the “G-6+1 summit,” citing Washington’s refusal to sign the final statement.

Tech tax
Alongside environment and trade, analysts expect Brexit, inequality, the possible reinstatement of Russia and universal taxation on digital giants to dominate proceedings.

Late last month, Trump warned he “might” slap tariffs on French wine in response to the country’s new tax affecting technology companies.

“This is a very, very contentious topic. France wants to impose this digital tax but the problem is most digital giants are American,” the EIU’s Demarais said.

France passed a 3% charge in early July that would affect firms such as Facebook and Google. It is expected to draw about $28 million or more in revenue from digital services in France.

The Trump administration has since started an investigation under Section 301 of the Trade Act of 1974.

“France has decided to go ahead with this tax knowing it will provoke the U.S. … Trump will get angry and there will probably be a big row about it,” TS Lomabrd’s Fraser said.

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