Group of Seven leaders agreed Saturday on a new set of measures to boost economic security and strengthen supply chains as they aim to adopt a common approach to de-risk and diversify their respective economic ties with Beijing and Moscow.
At the same time, the group emphasized the need to step up cooperation with emerging economies in the areas of infrastructure, digitization and trade as part of joint efforts to find new markets and sources of investment, according to a joint statement issued at the G7 summit in Hiroshima.
The measures include a new coordination platform against economic coercion as well as a series of steps to counter market-distortive practices, protect technology in critical areas and secure critical goods such as minerals, semiconductors and batteries through global partnerships.
In the statement — the group’s first ever on this particular issue — the G7 leaders refrained from mentioning China or Russia, even though most of the steps announced seemed to be aimed at dealing with alleged “coercive” actions taken by these two countries.
“Drawing lessons from recent incidents of weaponizing energy and other economic dependencies, we stand firmly against such behavior,” the leaders said.
They also pledged to strengthen channels of communication to address supply disruptions, stressing that economic cooperation would be rooted in maintaining the multilateral trading system, with the World Trade Organization at its core. The G7 countries have stood united in condemning Russia’s invasion of Ukraine and what they view as unfair and retaliatory measures taken by Beijing in a number of areas, including trade, investment and tourism restrictions, as well as boycotts, cyberattacks, detentions and intellectual property theft.
Another important measure was related to export controls to ensure that gaps in the dual-use technology protection system “cannot be exploited.”
The leaders said they want to prevent cutting-edge technologies developed in their respective countries “from being used to further military capabilities that threaten international peace and security” — a veiled reference to attempts by Beijing, Moscow and possibly Tehran and Pyongyang to acquire advanced equipment or know-how to gain a military advantage.
Specifically, the leaders hope to prevent the “capital, expertise, and knowledge” of companies within the G7 bloc from enhancing the military and intelligence capabilities of such countries.
The group clarified, however, that these controls would only apply to a “clearly defined, narrow set of sensitive technologies” that are crucial for national security or international peace, adding that they do not want to “unduly impact” broader trade in technology.
Nevertheless, the G7 agreed to take further restrictive actions “where necessary,” corresponding to the circumstances of each country, amid growing concerns about losing the technological competition against China.
Washington and its allies have already taken unprecedented steps to curtail Chinese access to Western technologies, implementing restrictions on the export of advanced semiconductors and other key technologies.
Although European countries understand the importance of protecting their economies and providing unified responses to coercive measures, not all of them have taken a hard-line approach toward China.
For instance, European Commission President Ursula von der Leyen announced Saturday that the EU would unveil its own economic security strategy next month.
While no details have emerged, von der Leyen emphasized that the EU’s “common response is de-risking, not decoupling,” noting that “fragmentation is costly and we need predictability for our businesses.”
The United States, on the other hand, has pursued a more hard-line approach, engaging in what some have described as an economic war with China in recent years amid intensifying geopolitical competition between the two countries.
This has prompted some in China to argue that Washington’s adoption of the European term “de-risking” is mainly intended to appease the United States’ European allies.
“Using this softened tone, Washington assumes this is a subtler way to persuade these countries to follow it and continue what is de facto ‘decoupling’ with Beijing in key areas,” China’s state-run Global Times newspaper said in a recent opinion article, adding that there is a sense that Washington’s “de-risking might be decoupling in disguise.”
Meanwhile, the U.S. is considering new legislation to offer assistance to foreign trading partners affected by economic coercion and penalize foreign adversaries.
Whether Washtington’s allies will follow suit, however, is still unclear.
“The degree to which the Europeans and Japan would support the U.S. position on economic coercion may depend on how much they need to shield their economies from Chinese pressure,” said Ian Chong, a professor and expert of international relations at Singapore National University.
The reason for this, he said, is that these countries may also consider the extent to which Beijing may penalize them for any such action and whether they can withstand such punishment.
In their joint statement, the G7 leaders also committed to building resilient digital infrastructure, including in the mobile, satellite and core networks’ sector, while countering “harmful practices” in the digital sphere, especially in relation to sensitive data. This comes amid growing momentum in the U.S. to ban popular Chinese social media app Tik Tok.
In addition, the G7 agreed to ramp up their involvement in emerging market economies through the Partnership on Global Infrastructure Investment (PGII), a framework to fund infrastructure-building in developing countries.
According to their final communique, the bloc agreed to offer $600 billion in assistance for quality infrastructure.
As the G7’s total share of global gross domestic product has dropped from slightly over 50% in 1990 to just under 30% this year, low and middle-income countries will need to play an increasing role in the bloc’s economic security strategy, not only to reduce the risk of overexposure to China but also to diversify supply chains.
While full of challenges, experts say the move could result in a win-win situation.
“De-risking can re-direct investment and trade from China to elsewhere in the Indo-Pacific, bolstering not only growth but also technology transfers for regional countries that could allow them to move up the value chain,” Chong said.
The presence of key members of the nonaligned “Global South” at the G7 summit, including Brazil, India, Indonesia and Vietnam, is therefore no surprise.
Not only are three of these countries located near China, but they all provide sizable low-cost labor forces, large markets as well as access to different natural resources and commodities, all of which are compatible with G7 interests.
This means they can help alleviate the West’s supply chain concerns and assist with diversification and de-risking.
“Should the cooperation model proposed by the G7 prove successful, more emerging economies could be encouraged to work with the G7,” Chong said.
This is important as many of these countries may themselves have an interest to diversify markets as well as sources of investment and financing, not necessarily to avoid Chinese pressure but to better manage their own risks.
Within the next few months analysts expect to see movements on framework proposals to enhance economic security, although the foundation for any formal, legal agreements or institutions may take longer to develop.
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