It took a murderous invasion of a neighbor by a bellicose, nuclear-armed state and a geopolitical struggle between superpowers to find the G7’s purpose in life – but it came about in the end.
The Club of Rich Democracies, which is holding its leaders’ summit in Japan this month, is like seven countries looking for a common role since the global financial crisis put the G20 broadly in the forefront of economic governance.
If the war in Ukraine and the conflict between the US and China mean that the global economy is now solely focused on geopolitics, the G7’s time is surely upon us. Vladimir Putin’s aggression has led the G7 to join forces with other wealthy democracies, including the rest of the EU, Australia, etc., and describe themselves as “like-minded countries”.
But their achievements to date have been more impressive than decisive. True, they have cooperated in imposing trade and financial sanctions on Moscow. But with economies as big as India and China outside the circle, oil and grain smuggling and other detours have punched holes in the cordon.
And the like-minded will be both coerced and coerced: they have yet to find a way to collectively stop other countries — notably China — from using economic pressure to try to coerce individual governments into making policy concessions. Long before China-US animosity escalated under the presidencies of Donald Trump and Xi Jinping, Japan was acutely aware of Beijing’s intimidation. In 2010, the country’s electronics makers suddenly found themselves cut off from supplies of rare earth elements from China during one of the resurgent tensions between Japan and China over ownership of the uninhabited Senkaku Islands in the East China Sea.
The US wants a vigilante group, not a victim support group.
Accordingly, Tokyo launched the idea of developing a joint G7 approach to combating coercion. Other countries affected by China’s harassment are also attending the summit, including Australia, which recently faced trade blockades after calling for an investigation into the origins of Covid-19, and South Korea, which faced a Chinese boycott, after it deployed US missile systems to its territory in 2016.
The idea was reinforced in March by a typically combative intervention by Rahm Emanuel, the US ambassador to Tokyo and former President Barack Obama’s chief of staff, a man who could spark a diplomatic incident in an empty room. It was also widely mentioned in last month’s communique by G7 foreign ministers.
A truly impressive result would be a “Seven Musketeers” mechanism of automatic mutual assistance – all for one and one for all – similar to the “economic NATO” proposed last year by Liz Truss, the interim Prime Minister of the United Kingdom. The principle is interesting, but such a concrete result is still a long way off. It will require a level of political coordination and tactical agreement that does not yet exist. Not all like-minded countries share the same opinion.
A senior Japanese official, for example, notes that Tokyo’s instincts are still multilateral. The company’s response to the China rare earth incident was to join the US in bringing a case before the World Trade Organization. Their preference for an anti-coercion campaign would be a broad coalition that includes as many developing countries as possible and operates within the framework of multilateral processes.
But in the decade since the US launched this lawsuit against China, sentiment in Washington has turned sharply against the multilateral path. Emanuel argued that WTO dispute settlement is so slow and bureaucratic that it “undermines rather than strengthens a rules-based system”. Therefore, he concluded: “It is clear that an effective response is required [China’s] Coercion must be collective and led by the United States.”
Such an attitude is causing breathing difficulties in both Europe and Japan, where governments are reluctant to automatically follow Washington’s geopolitical adventures.
In fact, European governments do not even necessarily trust the EU institutions to adequately balance commercial prudence with moral principles when dealing with China. The EU’s new “anti-coercion” tool, which gives it wide latitude to retaliate on trade and investment, gives Member States, not the Commission, ultimate power over its use.
The Japanese official said there were no plans to create a unified G7 anti-coercion instrument, let alone the creation of a unilateral instrument by Japan. “The G7 can express common positions against such practices,” says the official. “But it is difficult to develop a comprehensive mechanism.”
Finally, there might be more consensus on policies aimed at mitigating rather than retaliating against coercion. It will be less contentious for the G7 to offer export credit lines and new market openings, for example to compensate Australian companies for losing their Chinese customers, than to agree counter-sanctions against Chinese exports.
But even if this happens, it will not satisfy the US and will not prevent Washington from taking unilateral action against China. The US wants a vigilante group, not a victim support group. It is easy to assert the principle that countries band together to resist economic coercion. It will be more difficult to reach a political consensus on how to do this.
Comments are closed.