Scheduled for October 28-29 in Osaka, Japan, the G7 Trade Ministers’ Meeting aims to bolster supply-chain resilience and enhance export controls on critical minerals and technologies. China’s perceived economic coercion and its disruptive industrial policies are set to dominate discussions. Since joining the WTO in 2001, China has faced repeated accusations of unfair industrial subsidies, resulting in various WTO dispute cases over the years.
One notable case was in 2006 when the EU, the US, and Canada raised concerns about China’s export subsidies to its automobile and auto parts industries. Similarly, allegations of subsidies to wind-power equipment manufacturers and large aluminum producers have further strained relations. The recent decline in bilateral trade between China and countries like South Korea and Australia underscores the far-reaching impact of China’s retaliatory measures.
In response, G7 leaders pledged to combat economic coercion, with potential consequences for their economies, given their significant export ties with China. However, the term “economic coercion” remains ambiguous, raising the specter of its misuse as a pretext for protectionist measures globally. The lack of a clear definition of actions deemed coercive allows for broad interpretation, possibly leading to an escalation of trade barriers among nations.
Furthermore, the G7’s emphasis on export controls as a policy tool to safeguard critical technologies might inadvertently distort global trade, hamper competitiveness, and impede economic growth. Historical studies have revealed that trade protection measures often result in reduced output and higher prices for final goods, potentially exacerbating global trade fragmentation.
In light of the escalating trade tensions and the WTO’s revised forecast projecting a slowdown in global trade growth, the G7 must prioritize de-escalation efforts. By advocating for the effective operation of the WTO and steering clear of punitive measures that could destabilize the global economy, the G7 can play a crucial role in promoting a more stable and sustainable global trade environment.
