G7 Summit | To counter China, the G7 countries are doing like it

(Hiroshima) Halfway through his meeting with US President Joe Biden in Indonesia last fall, Chinese leader Xi Jinping issued a warning.

During the previous months, Joe Biden had signed a series of laws reinforcing the industrial capacity of the United States and restricting the export of technologies to China. The challenge: dominate the race for green technologies likely to support the fight against climate change. At the same time, the Biden administration had worked to convince allied countries to impose similar restrictions.

These efforts mimic the industrial policy through which China has become the world leader in manufacturing. In Bali, Xi Jinping urged Joe Biden to give it up.

The Chinese president’s protests only convinced Mr. Biden that the new US industrial approach was the right one, according to a source familiar with the tenor of the exchange.

During last weekend’s G7 Summit in Hiroshima, Japan, high-level discussions focused on how to accelerate large, internationally coordinated public investments. Democracies want to reduce their dependence on Chinese production and help their own companies compete in the new energy economy.

Unprecedented American industrial policy

Mr. Biden’s legislative program for industrial support – semiconductors, infrastructure and green energy – calls for public and private investments of trillions of dollars in American industrial capacity: electric vehicles, batteries, wind farms, solar plants , among others, will be eligible for grants.

This industrial policy – ​​unheard of in the United States for decades – has galvanized the allies of the United States in Europe and Asia, in particular the G7 countries. Canada, European countries, South Korea and Japan are pushing to improve their access to US subsidies and launching their own green energy aid programs.

“This race for environmental technologies is an opportunity to go faster and further, together,” said Ursula von der Leyen, President of the European Commission, after an economic workshop at the G7 Summit on Friday: “ We are in this race together, our competition should add production capacity” and not come at the expense of some and to the benefit of others, she added.

The G7 countries have two ambitious goals: to boost demand for technologies that reduce CO2 emissions₂ and give their workers an edge over Chinese workers to meet that demand.

This project began to take shape after last year’s G7 Summit in the German Alps.

Countering China

Recent G7 actions against China — to bolster their supply chains, semiconductor industries and other sectors — are driven by “economic security, national security and energy security,” Rahm Emanuel said. , United States Ambassador to Tokyo, a few days ago.

According to Emanuel, G7 leaders are increasingly critical of the economic measures used by Beijing to punish and deter foreign companies and governments whose actions displease the Chinese authorities.

But this change comes mostly from the urgency of climate action and two laws signed by Mr. Biden in 2022: one subsidizes the semiconductor industry to the tune of tens of billions of dollars; the other, the Inflation Reduction Act, includes significant climate-related incentives. Companies have flocked to these opportunities.

Green reindustrialization

These laws have prompted a flurry of announcements in the United States, on the construction of factories for batteries and solar panels, in particular. They have also sparked an international subsidy race, as they have caused friction with US-allied countries.

Generous US aid for green energy and semiconductors – with demands BuyAmerican tightened measures aimed at steel, vehicles and equipment – ​​have, for example, sparked protests among allied countries, which have sectors in competition with American companies.

These concerns have since been partially allayed. The United States signed an agreement with Japan in March: battery components made in this country will be eligible for aid offered by the Inflation Reduction Act. The European Union is negotiating a similar deal and preparing its own subsidies – $270 billion – for green industries. Canada passed a law inspired by American aid. The UK, Indonesia and other countries are working on bills that would secure their supply of strategic minerals.

According to American officials, the allies, initially agitated, now recognize the potential advantages of a concerted industrial strategy of the democracies.

This article was originally published in The New York Times.