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G7’s Battle Plan: Countering China’s ‘Economic Coercion’ Threat

G7's Battle Plan: Countering China's 'Economic Coercion' Threat

The G7 nations have reached a consensus on the threat posed by China’s economic coercion. However, finding common ground on concrete actions to counter Beijing is proving to be a challenge for the wealthy democracies due to divisions on how to handle relations with the world’s second-largest economy. The leaders of the G7 countries, along with the European Union, have indicated that China’s use of punitive trade measures will be a significant topic of discussion at their annual summit in Japan.

China’s coercive economic tactics have raised concerns in the Asia Pacific and Europe, with several countries facing trade restrictions after disputes with Beijing. Despite the G7 likely releasing a statement expressing concern about China’s economic coercion and proposing collaboration on the issue, the extent to which Japan and European members are willing to take measures that could antagonize China remains uncertain, considering their heavy reliance on Chinese trade.

China is the top trading partner for both Japan and the European Union, while the United States conducts the most trade with Canada and Mexico, with China ranking as its third-largest partner. Japan and Europe may exercise caution in taking actions that could disrupt trade relations with China due to the importance of China’s market and their companies’ interests.

Calls for coordinated action against China have been most prominent in the United States, with President Joe Biden making countering Beijing a central pillar of his foreign policy. The idea of an “economic NATO” has been proposed to respond to economic coercion, military aggression, and violations of sovereignty. The EU has already introduced an “anti-coercion instrument” that includes a dispute resolution mechanism and countermeasures against economic coercion.

China has denied using trade as a weapon and accused the US of hypocrisy, citing its own use of sanctions and export controls. As the G7 summit approaches, divisions on China are not the only differences among its members. Japan and the EU have objected to a US proposal for a G7-wide ban on almost all exports to Russia, deeming it unrealistic.

While progress is expected on coordinated action against economic coercion, enforcing such measures may prove challenging. Asian countries with close economic ties to China may face difficulties in implementation. Nonetheless, the focus on diversifying supply chains, building partnerships with other countries, and presenting alternatives to the Global South may serve as unifying factors in countering economic overreliance on any single country. However, replicating the EU’s anti-coercion instrument at the G7 or global level would be exceedingly difficult.

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