In its official communiqué, the Group of 7 had some targeted words for China’s government. Meanwhile, a senior Biden administration official told reporters: “As time goes on, it becomes clear that President Xi’s objective is for Chinese dominance.”
The Group of 7 (G7) nations criticized China’s unfair trade practices in its official communiqué released Friday at the conclusion of its summit in Italy.
In the comminiqué, the G7 specifically noted that China’s “persistent industrial targeting and comprehensive non-market policies and practices are leading to global spillovers, market distortions and harmful overcapacity in a growing range of sectors, undermining our workers, industries, and economic resilience and security.” The G7 leaders also called on China to “refrain from adopting export control measures, particularly on critical minerals, that could lead to significant global supply chain disruptions.”
With that in mind, the G7 vowed to “invest in building our and their respective industrial capacities, promote diversified and resilient supply chains, and reduce critical dependencies and vulnerabilities.”
The harsh words for China’s government, along with the pledge to build and strengthen supply chains independent of China, are another strong signal that the United States and its allies are indeed pivoting away from the more conciliatory relationship with China that dominated the early part of the 21st century and preparing for a lengthy competition.
Part of the reason for this shift, especially for many European countries, is China’s relationship with Russia and its support for Russia’s unjustified invasion of Ukraine. The G7 pledged to continue “taking measures against actors in China and third countries that materially support Russia’s war machine, including financial institutions, consistent with our legal systems, and other entities in China that facilitate Russia’s acquisition of items for its defense industrial base.”
But another reason for the turn is China’s increasingly aggressive export strategy, in which it aims to dominate global industries. Gone are the days when much of the Western world believed that opening trade with China would encourage the country to democratize; there seems to finally be an understanding that China’s government is aiming to control global markets. The New York Times reported:
A senior Biden administration official who sat in on the conversations of the leaders gathered at the summit, and later briefed reporters, described a discussion of China’s role that seemed to assume the relationship would be increasingly confrontational.
“As time goes on, it becomes clear that President Xi’s objective is for Chinese dominance,” ranging from trade to influencing security issues around the world, the official told reporters, declining to be named as he described the closed-door talks.
While the challenge of the competition with China is daunting, it is somewhat refreshing to see the leaders of the most powerful democratic nations in the world finally coming to a shared understanding that much more needs to be done to take on China’s unfair trade practices.
For decades, one of the biggest problems has been China’s persistent industrial overcapacity, which has led to the decline of several industries in the United States, including paper, tires, and glass. As we outline in a new report, now sectors like steel, solar, and automobiles are at risk because of China’s malefeasance.
Alliance for American Manufacturing President Scott Paul joined CNBC’s Squawk Box on Monday morning to talk about China’s overcapacity, noting that the problem is daunting — but finally there seems to be shift.
“Now we see China with a tremendous amount of overcapacity in vehicles, EVs in particular, but also internal combustion engines. We see it in solar. We see it again in steel. We kind of know how this plays out. The sequel’s not going to be any better, and I think that we can limit the damage by getting in front of this,” Paul said. “And, I would say on EVs, it seems like the Biden administration agrees with that, and it seems like the EU is coming around to that view as well, but there’s a lot more that needs to be done.”
In our report SHOCKWAVES: The Ripple Effect of China’s Industrial Overcapacity on American Manufacturing and Factory Workers, we outline 10 policy recommendations aimed at mitigating the fallout of China’s overcapacity, including: imposing exclusionary tariffs in key sectors like automobiles; enacting new legislation like the Leveling the Playing Field Act 2.0 to create modernized tools to better enforce our trade laws; and reinstating Section 421, which allowed the U.S. to act to address market disruptions but expired in 2013. In addition, we recommend strong action to ensure incentives like the clean vehicle tax credits in the Inflation Reduction Act benefit domestic manufacturers.