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

Joe Biden

China’s aggressive economic diplomacy is pushing America’s allies bruised by Trump’s go-it-alone foreign policy back into the U.S. orbit.

China will dominate discussion during President Joe Biden’s first foreign trip, as the G-7 summit kicks off Friday. And that’s exactly what he wants.

The Communist-led country isn’t a member of the club of rich democracies established in 1975. But the leaders assembled in Cornwall, England, will spend much of their time discussing how to confront its growing influence.

During the meeting, the leaders will unveil an infrastructure lending program for developing nations intended to counter China’s aggressive debt diplomacy. They’ll also discuss ways to extract production lines for crucial industries, like pharmaceuticals and computer chips, from China.

And they’ll seek to unite their economies while isolating Beijing’s state-led model by signing a new trade and technology agreement and discussing ways to combat China’s massive dominance in steel and aluminum production.

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

On that count, China seems to be playing into his hands.

Beijing’s aggressive diplomacy has already pushed the European Union to reevaluate a major investment deal signed with Beijing just as Biden was taking office, a move that at the time was seen as a major blow to the new president’s plans for reviving trans-Atlantic relations.

In March, the EU and U.K. imposed sanctions on China for human rights abuses against Uyghur Muslims in the Xinjiang province, prompting Beijing to respond with penalties for EU and British lawmakers, academics and think tanks. Shortly thereafter, the EU put its investment deal on hold.

“Clearly China’s assertive stance on the global stage has disillusioned a number of our trading partners and has made them take a step back and rethink their posture toward China, and in some cases has brought them closer to the U.S.,” said Wendy Cutler, managing director at the Asia Society and a former deputy U.S. trade representative.

China’s aggression is even greater toward its neighbors, diplomats note. After Australia questioned the origins of the Covid-19 pandemic at the World Health Organization, China struck back with a litany of trade restrictions against its exports. It also made a list of political demands, like 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 on Tuesday. “It’s being employed against other countries as well and it’s one that they plan to employ against the United States if and when they’ve gotten to the point where they no longer believe they need access to our capital and our technology.”

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

The administration has already notched a victory by gaining initial support from the G-7 for a 15 percent minimum corporate tax rate, which would help unify their economies. The leaders will also unveil a new climate-friendly infrastructure fund to combat China’s trillion-dollar Belt and Road Initiative that spans 140 nations.

President Joe Biden, right, talks with Britain's Prime Minister Boris Johnson, during their meeting ahead of the G-7 summit.
President Joe Biden, right, talks with Britain’s Prime Minister Boris Johnson, during their meeting ahead of the G-7 summit. | Toby Melville/Pool Photo via AP

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

The U.S. will also sign on to a new Trade and Technology Council proposed by the EU. While some details are still being hashed out, National Security Adviser Jake Sullivan said Monday the nations “will focus on aligning our approaches to trade and technology so that democracies and not anyone else, not China or other autocracies, are writing the rules for trade and technology for the 21st century.”

In addition to those actions, the Biden administration wants to unite its trading partners on a common approach to combat China’s world-leading steel and aluminum production. U.S. Trade Representative Katherine Tai has made an international agreement a prerequisite to lifting Trump’s tariffs on steel and aluminum that have riled allies and American importers.

“I think overcapacity is an incredibly important issue that needs to be dealt with,” Cutler said, “particularly if the U.S. and the EU are trying to figure out a way for tariffs to be lifted in these two sectors.”

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

“This work can’t end at the G-7 because that’s not the right configuration of countries,” Cutler added. “But the G-7 can build momentum to deal with serious overcapacity in steel and aluminum.”

The G-7’s ability to combat China’s Belt and Road Initiative may be even more constrained. Though the size and design of the new “Clean Green Initiative” infrastructure program that G-7 will propose is still under wraps, Sullivan said Monday that it will prioritize funding climate-friendly projects while including strict transparency and oversight standards.

Lending experts welcome those rules, but caution that they may also make loans from the Clean Green program unappealing compared with money from Belt and Road, which typically defers to host country standards, often ignoring environmental and social safeguards.

The new initiative is “stuck between a rock and a hard place,” said Kevin Acker, research manager at the Hopkins China-Africa Research Initiative. If it attaches too many strings to its loans, it risks ceding 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 they fall below ones offered by Chinese lenders.

It could also include local labor and content provisions, countering the Belt and Road practice of requiring Chinese contractors to build projects. But for now, it’s unclear if G-7 members are planning new funding or will simply repurpose programs already on the books.

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

Biden wants the G-7 to unite against China. Beijing’s trade wars are helping – Politico

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