Revealing steps such as tariff hikes in advance meant to dissuade Beijing
By RINTARO TOBITA, Nikkei staff writer
April 2, 2023
The U.S. hopes that preparing countermeasures against Chinese economic coercion will make Beijing think twice against taking such steps.
WASHINGTON -- The U.S. is pushing Group of Seven countries to take joint action against China if Beijing engages in economic coercion against the group's partners, Nikkei has learned.
By disclosing retaliatory measures in advance -- the U.S. government and Congress are discussing bills to raise tariffs, for example -- Washington seeks to discourage China from economically bullying other countries.
The U.S. has already called for a joint response to Chinese economic coercion in working-level talks with G-7 nations. It has asked for the matter to be on the agenda at this year's G-7 meetings. Washington is poised to hammer out specifics with Japan, this year's G-7 chair, ahead of the G-7 leaders summit scheduled for May.
At the same time, the U.S. is taking steps at home. A bipartisan bill introduced in February would grant the president the power to take multiple countermeasures against Chinese economic coercion. The Biden administration is reportedly in favor of this bill.
In addition to increasing tariffs on Chinese products, the bill would allow the U.S. to offer financial support to an country affected by economic coercion. Under one proposal, the U.S. would decrease duties from the affected country to boost shipments and offset the impact of Chinese bullying. Washington is pursuing a united front with Japan and European partners on this matter.
China has been increasingly using its economic might to get its way in foreign relations. It hiked tariffs on Australian imports such as coal, wine and barley after Canberra pressed for in independent inquiry into the origins of COVID-19. Beijing also restricted imports from Lithuania after the European nation deepened ties with Taiwan. And in 2010, China halted shipments of rare earth minerals to Japan over a dispute involving the Senkaku Islands.
Analysts have pointed out that China is breaking World Trade Organization rules by applying such economic pressure on other countries.
China has also retaliated against countries that have criticized its human rights record. It has taken such steps as shutting out corporations from the offending nation, restricting travel by its citizens to that country, and suspending lending.
The U.S. sees joint action as more effective than a unilateral approach, given many nations are heavily dependent on China economically. And China would be more likely to refrain from engaging in economic coercion if other countries band together.
China is Australia's largest two-way trading partner in goods and services, accounting for about 30% of Australia's trade with the world. China accounts for roughly 20% of the total trade of Japan and South Korea. But for China, trade with those three countries makes up less than 10% of its total. This asymmetry in bilateral trade enables China to bully others.
Washington believes that a framework in which multiple nations can cover each other's losses from trade in an emergency would help reduce the toll they would suffer in the Chinese market. The Biden administration aims to build up deterrence against an economic war.
Drawing up unified rules within the G-7 poses challenges. Germany and Japan have deep economic ties with China, and Beijing is sure to object to those countries joining the effort. Meanwhile, some European nations and Japan may hesitate to take actual retaliatory steps such as tariff hikes. On the other hand, any preemptive action by the U.S. could throw international trade rules into disarray.
Washington apparently hopes these efforts will have a positive effect on foreign relations. Many nations of the Global South -- emerging nations mainly in the Southern Hemisphere -- are easily bullied by China because they fear economic pressure from Beijing.
By making it more difficult for China to engage in economic coercion, the U.S., Japan and Europe will have an easier time luring countries to their side.