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Biden wants the G-7 to unite against China. Beijing’s trade wars help.



For Biden, the meeting is a chance to build a united front with European allies and Japan to push against China’s trade practices, a key plank in his diplomatic platform. Europe is also eager to join in after four years of former President Donald Trump’s all-in-one foreign policy.

At that point, China seems to be playing into his hands.

Beijing’s aggressive diplomacy has already pushed the EU to reconsider a major investment agreement signed with Beijing just as Biden took office, a move that at the time was seen as a major blow to the new president’s plans to revive transatlantic relations.

In March, the EU and Britain imposed sanctions on China for human rights violations against Uighur Muslims in Xinjiang province, prompting Beijing to respond with sanctions on the EU and British lawmakers, academics and think tanks. Shortly afterwards, the EU put its investment agreement on hold.

“Obviously, China̵

7;s assertive stance on the global stage has disillusioned a number of our trading partners, prompting them to take a step back and reconsider their stance on China and, in some cases, bring them closer to the United States,” said Wendy Cutler. CEO of the Asia Society and a former Deputy U.S. Trade Representative.

China’s aggression is even greater towards its neighbors, diplomats note. After Australia questioned the origins of the Covid-19 pandemic in the World Health Organization, China struck back with a litany of trade restrictions against its exports. It also made a list of political demands, in recognition of highly contested territorial claims in the South China Sea.

“Australia is a guinea pig for this new strategy,” Matt Pottinger, former deputy national security adviser to Trump, told senators in a hearing Tuesday. “It is also being hired by other countries, and they plan to hire it against the United States if and when they get to the point where they no longer think they need access to our capital and our technology. ”

Biden wants to take advantage of Beijing’s confrontational posture. In general, the administration hopes to unite G-7 nations on a host economic issue so they can vote in a bloc in larger groups like the G-20 or the World Trade Organization.

The administration has already cut a victory by winning initial support from the G-7 at a 15 percent corporate tax rate, which will help consolidate their economies. Leaders will also unveil a new climate-friendly infrastructure fund to combat China’s trillion-dollar belt and road initiative spanning 140 nations.

“The atmosphere is that transatlantic cooperation is back on track after Trump’s four years,” said Ho-fung Hung, a professor of sociology at Johns Hopkins University focusing on China. Even if G-7 nations cannot agree on concrete actions during their first summit in the Biden era, “a statement or gesture from a united front to deal with China is likely,” he said.

The United States will also sign a new Trade and Technology Council proposed by the EU. While some details are still being removed, National Security Adviser Jake Sullivan said on Monday that the nations “will focus on adapting our approach to trade and technology so that democracies and no one else, not China or other autocracies, write the rules of trade and technology to the 21st century. ”

In addition to these actions, the Biden administration wants to unite its trading partners on a common approach to combating China’s world-leading steel and aluminum production. U.S. Trade Representative Katherine Tai has reached an international agreement as a precondition for raising Trump’s tariffs on steel and aluminum, which has hardened allies and U.S. importers.

“I think overcapacity is an incredibly important issue to deal with,” Cutler said, “especially if the United States and the European Union are trying to figure out how to lift tariffs in these two sectors.”

While the administration appears to be making progress in aligning with allies against Beijing, experts point out that their leverage over the Chinese economy is limited. They note that most of China’s steel and aluminum exports go to developing countries, so coordinated tariffs from G-7 nations will not do much to dismantle Chinese production.

“This work cannot end with the G-7 because it is not the right configuration of countries,” Cutler added. “But the G-7 can create momentum to deal with severe overcapacity in steel and aluminum.”

The G-7’s ability to combat China’s belt and road initiative may be even more limited. Although the size and design of the new infrastructure program “Clean Green Initiative”, which the G-7 will propose, is still under wraps, Sullivan said on Monday that it will prioritize funding for climate-friendly projects, while maintaining strict transparency and oversight standards.

Lending experts welcome these rules, but beware that they can also make loans from the Clean Green program appealing compared to money from Belt and Road, which typically deviates from host country standards, often ignoring environmental and social guarantees.

The new initiative “is stuck between a rock and a hard place,” said Kevin Acker, head of research at Hopkins China-Africa Research Initiative. If it attaches too many strings to its loans, it risks relinquishing projects to Chinese lenders.

The Clean Green Initiative could still attract interested nations if its participants pour new money into the fund and subsidize interest rates so that they fall below those offered by Chinese lenders.

It could also include local labor and content regulations that discourage belt and road practices from requiring Chinese contractors to build projects. But for now, it is unclear whether G-7 members are planning new funding or will simply reuse programs that are already on the book.

“They will have to find the money if they want to offer a real alternative,” Acker said.


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