G7 leaders not sure how to deal with China

The G7 nations are in agreement about the threat posed by China’s economic coercion. However, finding consensus on concrete action to counter Beijing is proving challenging for the group of wealthy democracies, given divisions over how to manage ties with the world’s second-largest economy. The leaders of the G7 countries, along with European Union leaders, have indicated that China’s use of punitive trade measures will be a key topic during their annual summit in Hiroshima, Japan. While a statement expressing concern about China’s economic coercion and proposing collaborative approaches is expected, the extent to which Japan and European members will be willing to take measures that may antagonize China remains uncertain due to their significant reliance on Chinese trade.

Japan and the European Union both consider China their top trading partner. The United States, which has led global efforts to counter Beijing, conducts the most trade with Canada and Mexico, with China being its third-largest partner. Experts suggest that Japan and Europe may exercise more caution than the US in taking actions that could disrupt trade relations with China. The significance of China’s market, its projected GDP growth, and the interests of companies that have invested in China contribute to their cautious approach.

Calls for coordinated action against China have been particularly vocal in the US, where President Joe Biden has made countering Beijing a central aspect of his foreign policy. Suggestions have been made for an “economic NATO” to respond to economic coercion, military aggression, and sovereignty violations. The European Union has introduced an “anti-coercion instrument” for member countries, including dispute resolution mechanisms and countermeasures. China rejects accusations of using trade as a weapon and criticizes the US for its own use of sanctions and export controls. Enforcement of coordinated measures is likely to be challenging, especially for Asian countries with close economic ties to China.

Ahead of the G7 summit, differences have emerged between the US and other G7 members on the issue of Russia, as well as concerns about the feasibility of a G7-wide ban on exports to Russia. Nonetheless, US officials aim to go beyond mere rhetoric and anticipate concrete action from the G7 on economic coercion. The realization of the dangers of economic overreliance on any one country and the need to diversify supply chains could drive progress towards coordinated action. However, implementing such measures may prove difficult, particularly for Asian countries with strong economic ties to China. Suggestions have been made to adopt a decision-making model similar to the EU’s anti-coercion instrument, but replicating it on a G7 or global scale would be challenging.