As the G7 leaders convene in Kananaskis, they do so amid a stark reality: their combined share of global GDP has shrunk from a commanding 66 percent in 1990 to just 43 percent in 2025. Yet, their economic interdependence with China has never been greater, with trade reaching a record $1.5 trillion last year. This paradox deepening ties amid strategic rivalry defines the summit's fraught context. Compounding the challenge, over $250 billion in intra-G7 trade is now subject to tariffs or retaliatory duties, a sign of fraying trust among supposed allies.
Meanwhile, the G7's innovation lead faces a formidable challenger: China's R&D spending is projected to surpass that of the United States by 2027. Critical supply chains reveal vulnerabilities, with nearly half of essential minerals and advanced semiconductors sourced from outside the bloc, predominantly from China, Taiwan, and the Democratic Republic of Congo. Even the G7's ambitious Partnership for Global Infrastructure and Investment has mobilized only a fraction of the $15 trillion global infrastructure gap projected by 2040.
The Digital Trust Dilemma
The 2024 Hiroshima Principles on Digital Trust were meant to herald a new era of cooperation on artificial intelligence, data privacy, and digital infrastructure. Instead, they exposed deep divisions. The United States and the European Union remain locked in disputes over data localization and digital taxation, while Japan and Germany diverge sharply on AI governance. Canada and France's push for digital rights charters faces skepticism from partners wary of regulatory overreach. These fissures are more than technical disagreements; they reveal the limits of the G7's informal, consensus-driven model, which once promised agility but now risks becoming an excuse for inertia.
Trade Frictions and Fragmented Governance
The G7's rhetoric on WTO reform contrasts sharply with its internal realities. While declarations of support abound, progress stalls as protectionist impulses clash with regulatory ambitions. The result is a patchwork of bilateral deals and ad hoc alliances rather than a coherent global framework. WTO Director-General Ngozi Okonjo-Iweala has been unequivocal: "Selective protectionism by the G7 undermines the very system it claims to defend." This fragmentation threatens to erode the rules-based order the G7 once championed.
Voices from the Frontlines of Innovation and Policy
Industry and economic thought leaders sound a clear alarm. Siemens CEO Roland Busch warns, "Without regulatory alignment, innovation becomes a casualty of politics. The G7 must lead, or the world will fragment." Nobel laureate Esther Duflo underscores the credibility gap: "Trust is not declared. It is demonstrated by meeting commitments, not just making them." Former ECB President Mario Draghi encapsulates the dilemma succinctly: "The G7's strength is collective action. Its weakness is the temptation of national advantage."
A Boardroom of Uneasy Shareholders
The G7 increasingly resembles a boardroom where each shareholder pursues divergent agendas. The United States and European Union, once partners in liberalization, clash over electric vehicle subsidies and carbon border taxes. Japan and Germany, historically aligned in technology, now diverge on AI governance. Canada and France dispute agricultural standards and digital taxation. This fragmentation risks reducing the G7 to a venue for managing differences rather than setting global standards.
Extending the Circle, Testing the Limits
In recognition of its waning economic heft, the G7 has invited leaders from India, Brazil, South Africa, and Indonesia to Kananaskis. This outreach is both pragmatic and symbolic, acknowledging that legitimacy now demands broader engagement. Yet skepticism remains. South African President Cyril Ramaphosa posed a pointed question ahead of the summit: "Does the G7 want to be a club or a catalyst?" The group's underfunded infrastructure commitments to the Global South and perceived double standards on trade and technology fuel doubts about its global leadership.
The Crucible of Kananaskis
The 2025 summit is more than a routine gathering; it is a crucible for the G7's economic identity and global relevance. Its ability to reconcile national interests with collective action on trade, technology, and supply chains will determine whether it remains a vital actor or fades into managed irrelevance. Canadian Prime Minister Mark Carney's charge is clear: "The G7 must be the architect, not the archivist, of the global economic order." The world watches with bated breath. Will the G7 rise to this challenge, or will it be remembered as the board that lost its mandate? The answer will reverberate far beyond the Rockies, shaping the architecture of the global economy for decades to come.
[Major General Dr Dilawar Singh is an Indian Army veteran who has led the Indian Army's Financial Management, training and research divisions introducing numerous initiatives therein. He is the Senior Vice President of the Global Economist Forum AO ECOSOC, United Nations and The Co President of the Global Development Bank.]
