Is the G-7 Ranged Against China?

Japan is using the G-7 to manage China’s trading power

Japan's Prime Minister Fumio Kishida addresses a press conference next to German Chancellor Olaf Scholz and U.S. President Joe Biden during the G-7 Summit at Elmau Castle, southern Germany, on June 26, 2022. Jonathan Ernst/AFP via Getty Images

Commentary

Japan seems to be planning an end-run around China’s trading power.

As chair of the G-7 meetings scheduled for this May in Hiroshima, Japan, Prime Minister Fumio Kishida is leveraging concerns about supply chain reliability to range this group of powerful economies—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—against China.

Two items stand out on Kishida’s agenda: one is semiconductors, and the other is rare earth elements. Computer chips are essential to all computers, communications, utilities, automobiles, household appliances, and just about every product and service—if not directly, then indirectly. Rare earth elements are essential in the batteries and magnets on which electric vehicles, smartphones, and other such products increasingly depend. In other words, chips and rare earth are essential to the health of the G-7 economies and the global economy.

On the chips issue, China is not an immediate threat. It does not have control or even much influence on global supply, though Beijing clearly has ambitions to dominate chip manufacturing. Today, Taiwan dominates chipmaking, controlling some 60 percent of the global supply and 90 percent of advanced chips. The Chinese regime factors into the equation because of its ambitions in semiconductors and, of course, because it also threatens Taiwan.

The United States wants to change the chip landscape. It has recently passed legislation to subsidize domestic chip manufacturing. Washington has also moved to thwart Beijing’s chip ambitions by banning the sale of advanced chip manufacturing equipment to China.

Japan clearly would like to see that effort spread through the G-7 economies. It has joined Washington’s effort to ban the sale of chipmaking equipment to China. It also has reason to hope that the G-7 will go along with the effort. The Netherlands has joined the American-Japanese ban. Kishida, noting how Germany has moved closer to China in recent years, wants a general G-7 agreement to stop that flow of technology to China through Europe.

China’s connection to rare earth elements is more direct. Most of the production of these elements is in China. The Middle Kingdom is the major supplier to the world. It is not just Chinese dominance that troubles Kishida and the G-7. It is the aggressive way Beijing has leveraged its trade advantages in the past.

A loader shifts soil containing rare earth minerals to be loaded at a port in Lianyungang, in China's Jiangsu Province, for export to Japan, on Sept. 5, 2010. STR/AFP via Getty Images

In 2010, for example, Beijing restricted rare earth sales to Japan to further Beijing’s dispute with Tokyo over a series of uninhabited islands in the East China Sea—the Senkaku chain in Japanese and Diaoyu in Chinese.  

Beijing used trade restrictions against Australia not too long ago simply because Canberra questioned the origins of COVID-19. Rare earth was not part of these restrictions, but Beijing’s behavior showed a willingness to use trade aggressively and in response to relatively little provocation.

Several times in the past five years, Beijing has floated the idea of pressuring Washington by withholding rare earth sales in the United States.

Rather than live with such threats, Japan would have the G-7 work together to secure alternative sources of these elements in Africa and South America, even to the point of providing infrastructure funds to support mining.

Though Kishida is preparing the agenda and staff are drafting the necessary papers, this is not the first time the G-7 has dealt with the matter. The words “economic security” appeared prominently in last year’s joint declaration from the group’s meetings in Germany. The world will have to wait until May to see if the G-7 will pull together on this issue. These efforts often fall apart once the delegates are confronted with the details.

What is clear and will be clear even if the G-7 fails to reach an agreement on Japan’s agenda is that the trading nations of the world have awakened to Beijing’s predatory trade practices and its high-handed use of every advantage, and these nations, separately if not together, are taking steps to counter these practices.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.