G7 nations signal tougher stance on trade with China

Industry News | | MIC Customs Solutions |

A recent meeting of the G7 economies led to an agreement between the countries to take a more robust and coordinated stance on trade with China.

Some of the world's biggest and most powerful economies have made a commitment to toughen up their stance towards China with regards to trade.

Following a recent meeting of the G7 group - which consists of Canada, France, Germany, Italy, Japan, the UK and the US - German minister for economic affairs and climate protection Robert Habeck claimed "the naivety toward China is over".

The countries agreed to coordinate their actions on this issue and make a collective effort to maintain high international trade standards.

This coincides with other challenges and questions facing China, including a recent weakening in economic growth and concerted efforts by many companies to diversify their production and sourcing strategies by shifting focus away from the country.

China set to face 'more robust' policies

Following two days of talks with his fellow G7 representatives, Mr Habeck said this new initiative will seek to prevent China from using its economic power and influence to put unfair pressure on its trading partners.

He stressed that Germany and other major world powers could no longer allow themselves to focus on promoting trade without due consideration for social or humanitarian standards, AP reported.

Mr Habeck also said Berlin would seek to persuade the European Union as a whole to implement "a more robust trade policy toward China and respond as Europeans to the coercive measures that China takes to protect its economy".

The G7 meeting at Neuhardenberg Palace, east of Berlin, concluded with the publication of a joint statement that stopped short of naming China specifically, but raised concerns about:

  • Intellectual property theft
  • The lowering of labor and environmental standards to gain a competitive advantage
  • State-owned enterprises engaging in market-distorting activities
  • Harmful industrial subsidies
  • All forms of forced technology transfer

This isn't the only recent signal that world economies are set to toughen up their position on China, particularly when it comes to concerns around human rights standards.

The European Commission this month proposed a full EU ban on all goods made using forced labor. The proposed legislation, which is due to be discussed by the European Parliament and all EU member states, calls for the prohibition of "products for which forced labor has been used at any stage of their production, manufacture, harvest and extraction".

While the proposal doesn't name any country in particular, it follows an earlier call from the European Parliament to implement such a law, which raised concerns around human rights in China's Xinjiang region.

The US effectively banned all imports from Xinjiang last year when it passed the Uighur Forced Labor Prevention Act.

Beijing facing wider trade and economic challenges

China is currently having to contend with a number of challenges related to international trade and the economy.

Recent data showed that economic growth in August was weaker than in July, even though performance was slightly better than anticipated, according to analysis by Capital Economics. This was partly due to factory closures caused by power shortages and ongoing disruptions related to the COVID-19 pandemic.

Julian Evans-Pritchard, senior China economist at Capital Economics, said September is "shaping up to be even worse" for the country.

"While the current virus wave may have peaked, activity is set to remain weak over the coming months amid the deepening property downturn, softening exports and recurring COVID-19 disruptions," he added.

The DHL Trade Growth Atlas 2022, published by logistics firm DHL and NYU Stern School of Business, highlighted other recent developments that could be a concern to Beijing.

One such trend is the spread of growth in imports and exports across a wider range of countries. China accounted for a quarter of the trade expansion recorded in recent years, but its share is predicted to fall by half, to 13 percent, in the near future.

The report also noted that many companies are working to reduce their reliance on China by diversifying their production and sourcing activities, which could benefit the likes of Vietnam, India and the Philippines.

Amid growing competition from other Asian economies and the tougher stance being taken by the G7, Beijing could struggle to maintain the levels of trade that have fuelled its rapid growth in recent decades.