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Joint statement on China conceals G7 members’ divisions on globalization

In May 2023, the leaders of the G7 countries met in Hiroshima, Japan to discuss the challenges facing the world’s economy and not least how to counter China’s increasingly assertive role on the world stage in terms of trade as well as politically and militarily.

Of course, the language used in the post-conference communique was couched much more diplomatically. It talked in general terms about creating, ‘resilient global supply chains that are transparent, diversified, secure, sustainable, trustworthy, and reliable, and that are fair for all and responsive to the needs of global citizens.’ The term ‘de-risking’ supply chains, was used rather than ‘de-coupling’, the latter implying an attempt to strangle China’s economic development.

However, this banal language did not properly reflect a more uncompromising mood at the meeting. Although trying to avoid mentioning China specifically, the communique asserted, ‘We reaffirm our shared concerns with non-market policies and practices, including their problematic evolution, that distort global competition, trade and investment.’ It went on to say that export controls were a fundamental tool to prevent the diversion of technology to military applications. What’s more the member countries would in the future take joint action against trade-related challenges, including economic coercion.

Despite its diplomatic language, the post-conference press communication prompted a furious response from China, calling it an ‘anti-China workshop’ and subsequently banning the sale of chips by US company Micron to Chinese companies. In an editorial quoted by Reuters, the state-backed Global Times said, ‘The US is pushing hard to weave an anti-China net in the Western world.’ Others would say that the G7 is finally waking up to the fact that the world trading regime has been successfully manipulated by China to project its economic and political power globally. However, it is still very unclear what the response of the G7 could be, especially when the economies of some members– such as Germany - are so deeply integrated with that of the Chinese.

Trade divisions were not the only concern. The meeting also recognised the importance of protecting cross-border data flows, obviously fundamental to visibility within global supply chains. ‘We should counter unjustified obstacles to the free flow of data, lacking transparency, and arbitrarily operated,’ the release stated. China is also implicated in this matter. It sees the personal data of its people as a strategic resource and prohibits its export. For its part, the European Union only allows the export of data to jurisdictions which have similar levels of personal privacy safeguards and so prevents flows of data to China. However, in a further example of ‘patchwork globalization’, the EU is yet to agree a data deal with the US, causing further friction amongst the G7 countries, despite the apparent unanimity of purpose. What’s more, US tech company, Meta has recently been fined €1.2 billion by the Irish authorities for transferring user data from the EU to the US and ordered to desist.

On the surface, the joint statement is a commitment by seven of the world’s most powerful countries to stand up for free and fair trade in goods and data and prevent China from abusing its position of power in the global economy for political and military aims. However, this hides the divisions which exist between the seven countries, three of which are within the EU, an economic bloc which increasingly views itself as a competitor to the US. While differences remain over data, subsidies (for example, the Inflation Reduction Act), border levies (the EU’s Carbon Border Adjustment Mechanism), WTO adjudication, export bans and approaches to de-coupling, China will continue to leverage the global trade regime for its own political ends.

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