With China in mind, G-7 to call for groupwide supply chains

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With China in mind, G-7 to call for groupwide supply chains​

TOKYO -- The Group of Seven major economies will call for the creation of groupwide supply chains for strategically important goods to be included in their joint document issued at the May leaders summit in Hiroshima, Nikkei has learned.

The idea is to expand various international supply chain arrangements being established individually by Japan and the U.S., and the U.S. and Europe, for example, to a cover the entire G-7.

With China in mind, the project will aim for stable supplies of microchips, rare earths and other commodities that are increasingly important to economic security, grappling with such risks as a crisis in Taiwan or a prolonged Ukraine war.

Prime Minister Fumio Kishida has positioned economic security as a major agenda item at the G-7 Hiroshima summit, which he will chair. This will be the first time that economic security will be its own theme at such a summit.

The members will begin work on the joint document this month. Japan, as the chair country, will begin to study the creation a groupwide supply network. It envisions a mechanism in which the G-7 designates certain goods essential for economic activity and forms materials and inventory networks for them.

The G-7 first included language on "economic security" in the joint declaration at last year's summit in Germany. Regarding the creation of supply networks, it only evaluated the efforts of individual countries and the Organization for Economic Co-operation and Development.

Kishida's decision to make it an agenda item at the this year's summit is also aimed at bringing Germany, which has close economic ties with China, closer to Japan and the U.S. This is seen as necessary to prevent the flow of goods and technology to China through Europe.

Chips are essential for the production of automobiles and home appliances, and Taiwan has the top global share of production capacity at more than 20%. When it comes to advanced products, 90% are concentrated in Taiwan.

Since supplies could be disrupted by a crisis in Taiwan, the G-7 aims to build a network in which a certain amount of chips can still be accessed. Japan and the U.S. plan to start research on the mass production of next-generation semiconductors for use in quantum computers and other applications, hoping to involve Europe as well.

China has the largest reserves of rare-earth elements, which are used in magnets and other components found in next-generation automobiles and other cutting-edge products. G-7 nations are not in the top tier of reserves, and Beijing's bargaining power, backed by its resources, won't be weakened unless there is a move away from this dependence.

The dependence was brought into sharp focus in 2010, when China took steps to restrict exports to Japan in response a fishing boat collision in waters around the Japan-administered Senkaku Islands, which Beijing claims and calls the Diaoyu.

The G-7 is expected to move to acquire resource interests overseas. Expanding cooperation with Global South countries that have mineral resources, such as those in Africa and South America, will be considered. There is a proposal for the G-7 to contribute infrastructure development funds to support mining.

Some products in the medical field are also made in great part in China. Immediately after the coronavirus pandemic outbreak, it was not possible to procure masks and medical protective clothing from China.

Pharmaceuticals and biotech products could also be covered by the G-7 supply chain scheme.

With China in mind, G-7 to call for groupwide supply chains

Economic security to be major topic at Hiroshima summit in May

asia.nikkei.com