G7 Summit 2023 Summary

The 49^th G7 Summit (also referred to as G7 Summit 2023) was held from 19-21 May 2023 in Hiroshima, Japan.

Aside from G7 member states, the Summit was notably attended by leaders from Australia, Brazil, India, Indonesia, South Korea, Ukraine and Vietnam, among others.

As Japan is assuming the G7 Presidency in 2023, Prime Minister Kishida issued a message to the Summit. Some of the noteworthy “mounting challenges” Kishida cited include “regional affairs including Ukraine and the Indo-Pacific, nuclear disarmament and non-proliferation, [and] economic security.” Indeed per the G7 Summit Fact Sheet, the three top themes of the Summit were:

1. 1. United on Ukraine
   2. United on China
   3. United on Economic Resilience and Economic Security

All three themes hold implications for trade compliance.

Ukraine: Leaders’ Statement & Russia Sanctions

On 19 May, the major development was the G7 Leaders’ Statement on Ukraine and subsequently issued Russia sanctions. The G7 Leaders announced an inelastic framework for a settlement of the conflict in Ukraine, declaring that a “just peace cannot be realized without the complete and unconditional withdrawal of Russian troops and military equipment, and this must be included in any call for peace.” G7 Leaders were unanimous in their agreement that economic pressure would continue until Russia complies.

Such economic pressure was demonstrated by a newly agreed package of sanctions on Russia, to be implemented on a member-by-member basis.  Broadly speaking, the economic measures fall into five prongs:

1. 1. Restrict further Russia’s access to G7 economies
   2. Prevent the evasion and circumvention of G7 measures against Russia
   3. Call upon third-party countries to cease providing material support for Russia
   4. Curtail Russia’s use of the international financial system
   5. Limit Russia’s energy revenue

These five prongs do not represent a new approach to Russia, but will rather “[build] upon previous measures.” Such a deepening of the existing measures on Russia is a natural next step. With over a year of intelligence on how Russia has operated in the post-invasion sanctions environment, the G7 has elected to fill in gaps in its trade control coverage and to focus on bolstering enforcement, disrupting illicit procurement and applying pressure to reluctant third-party countries to better conform to G7 measures.

“We will starve Russia of G7 technology.” This statement best describes the G7’s approach to hampering any attempts to rebuild or support Russia’s “war machine.” The G7 has underscored this approach by targeting five additional sectors of the Russian economy. Export controls on items such as “industrial machinery, tools and other technology” are intended to bolster new and existing sectoral sanctions.

 

For preventing “evasion and circumvention,” the G7 is focusing on the Russian Elites, Proxies, and Oligarchs (REPO) Task Force and the Enforcement Coordination Mechanism (ECM). The U.S. has so far led the way on identifying and hindering overseas Russian illicit procurement networks, often involving foreign nationals in third countries, as it did with OFAC’s 19 May sanctions. BIS also issued a raft of new Entity List designations related to illicit Russian networks. 

For industry, the ECM’s efforts are likely more relevant than REPO, which focuses on tracking and blocking Russian assets around the globe. The ECM’s aim is to aid information sharing between G7 states and allies as to bolster enforcement. While the G7 has been circumspect in the information shared on the ECM’s specific objectives and methods (see the 27 April G7 ECM Deputies Meeting statement), the ECM also has a mandate to “take action against third-country actors that are supporting Russia’s war in Ukraine.”

Indeed, the role of third countries is seen as critical to the success of G7 measures on Russia. Ukrainian President Zelenskyy used his presence at the G7 Summit to personally seek to persuade states aloof to the wider G7 sanctions program like India and Brazil to change their policy approach. In the Leaders’ Statement on Ukraine, the G7 was adamant that third-party countries “immediately cease providing material support” to Russia or “face severe costs.” This indicates a willingness of the G7 states to overtly apply pressure to countries outside the 37-country counter-Russia coalition for “supplying weapons to Russia.”

Of course, such a sentiment cannot be interpreted solely through the lens of Russia; a second major focus of the Summit was the G7’s role in the Indo-Pacific, which was a thinly veiled discussion of China.

China: A Unified Approach?

China served as the context for much of the wider discussions held during the Summit. While the name “China” was often avoided in favor of the more euphemistic “Indo-Pacific,” the fact that many messages were directed toward China was clear. However, the G7 faces a difficult balancing act to manage its shared China policy.

The G7 Summit Fact Sheet neatly summarized this inherent tension in the forum’s approach to China, stating “G7 countries are not decoupling from China or turning inwards,” but that the G7 will “stand up for our core values.” The G7 Leaders’ Communiqué underscored the G7’s intent to work with allies to “support a free and open Indo-Pacific and oppose any unilateral attempts to change the status quo by force or coercion” while also “taking concrete steps” to “coordinate” on “diversifying and deepening partnerships and de-risking, but not de-coupling.” Likewise, the Quad (U.S., U.K., Australia and India), which held its next meeting as a sidebar to the Summit, echoed the emphasis on the Indo-Pacific in the opening line of its Vision Statement.

The Financial Times went as far as to characterize the language issued from the Summit as the G7’s “strongest condemnation of China” so far. The British delegation, led by Prime Minister Sunak, played the most overtly hardline role, as Sunak proclaimed China as “the greatest challenge of our age.”

The G7 Leaders’ Statement on Economic Resilience and Economic Security featured some of the harshest drafted language directed at China. Decrying “attempts to weaponize economic dependencies,” the G7 Leaders expressed “serious concern over economic coercion and call[ed] on all countries to refrain from its use, which not only undermines the functioning of and trust in the multilateral trading system, but also infringes upon the international order.” One solution to perceived economic coercion was export controls. In the same statement, the G7 committed to “strengthen multilateral efforts to cooperate in the field of export controls to ensure gaps in our dual-use technology protection ecosystem cannot be exploited.”

The G7’s goals for China can be broadly summarized as:

1. 1. Apply diplomatic pressure on China to support Ukraine in the war against Russia
   2. Protect G7 economic security against “China’s non-market policies and practices”
   3. Foster “resilience to economic coercion” by “de-risking, not de-coupling”
   4. Safeguard “peace and stability across the Taiwan Strait and called for a peaceful resolution of cross-Strait issues”
   5. Recognize the “central role of multilateral export control regimes”

In terms of trade compliance, the G7 Summit did not produce a categorically different approach to China policy. The G7 countries are clearly focused on drawing some red lines around Chinese activities that they oppose (e.g., direct military support to Russia), but such activities have not escalated to the point where economic sanctions like those on Russia are threatened overtly. Indeed, while striving to project unity, the harmonized export control policy discussed is very much a continuation of the current approach: emphasis on multilateral controls and emerging technologies. The common refrain of “de-risking, not de-coupling” carries an implicit constraint on the desire of some within the G7 for a full economic break with China.

Outside events on the final day of the G7 Summit demonstrate the challenges of the “de-risking, not de-coupling” framework. The same day that President Biden capped his G7 appearance at a news conference by saying of China, “[e]verything changed in terms of talking to one another. I think you’re gonna see that begin to thaw very shortly,” the Cyberspace Administration of China announced Chinese companies were barred from purchasing Micron computer technology after a failed “cybersecurity review.” The Micron case will test the G7’s resolve (and its unity as Seoul will reportedly not block South Korean firms from filling the gap left by the U.S. ban). Micron offers a case study of China’s first foray into non-symbolic countermeasures. Advanced technologies remain a key battleground.

As before the Summit, the G7 has a complex and contradictory relationship with China, defined by many sensitive issues. Despite tough talk from the G7 on China, there appears to be some optimism, at least within the Biden Administration, that there are diplomatic avenues to reducing Sino-Western tensions. Regardless of the mixed messages about China, the G7’s main objective towards China at the Summit was to project unity.

Economic Security: Critical and Emerging Technologies

Beyond Russia and China, there was a general focus on the “common interest across G7 countries” to “protect certain dual-use technologies from falling into the hands of strategic rivals.” The emphasis on critical and emerging technologies and traditional dual-use goods accords with the broader approach of the U.S. and E.U. to multilateral export control. The G7 Leaders’ Communiqué reaffirmed export controls as a “fundamental policy tool” and recognized “the importance of cooperation on export controls on critical and emerging technologies such as microelectronics and cyber surveillance systems.”

One concrete outcome of the multilateral approach to export control at the Summit was the launch of the G7 Coordination Platform on Economic Coercion. The Coordination Platform will serve to “increase collective assessment, preparedness, deterrence and response to economic coercion.” The Coordination Platform will take the form of “early warning and rapid information sharing, regularly consult each other, collaboratively assess situations, explore coordinated responses, deter and, where appropriate, counter economic coercion, in accordance with our respective legal systems.” Essentially, the G7 is laying the groundwork to resist any sanctions and export control measures from China, while vowing to band together to support third countries that are the target of Chinese control policies. 

Likewise, the trade control discussion focused on critical minerals. On 20 May, the United States and Australia announced the Australia-United States Climate, Critical Minerals and Clean Energy Transformation Compact. The Compact will allow for the continued “diversification” of “critical mineral supply chains.” The Compact also established an inter-ministerial Australia-United States Taskforce on Critical Minerals (the Taskforce). The Taskforce will “deepen bilateral collaboration on the critical minerals” and “secure global access to critical minerals.” Much like the Quad, the Compact and Taskforce demonstrate the U.S.’s plurilateral approach to shoring up gaps in its trade controls. Likewise, in the U.S.-South Korea-Japan meeting readout, the “trilateral partnership” was hailed. The U.S. and other allies have sought to build out bilateral, trilateral and plurilateral arrangements beyond existing multilateral regimes and alliances to keep pace with technological developments in adversary states.

Lastly, in keeping with the West’s continuing approach towards multilateral export controls was the G7’s emphasis on human rights. The use of human rights as a rationale for control has been on the upswing in recent years, and the G7 Summit reaffirmed this approach. Human rights were directly cited in the G7 Fact Sheet as a differentiating factor in the “core values” of the G7 compared to China.

In sum, trade controls are an evolving product of the G7’s shared policy, both generally and specifically for China. Export controls remain a critical tool for G7 policy. Dual-use, critical and emerging technologies remain the focus of near-future control regimes. Where existing multilateral regimes limit additional controls on such items, the G7 members will continue to create and deepen plurilateral arrangements like the Quad and the Australia-United States Compact to compensate. Finally, moving forward human rights will remain a prime differentiator for trade the G7 will permit and trade the G7 will restrict.

Conclusions

The major objective of the G7 Summit 2023 was to present a unified front of the G7 and its allies. While the immediate focus remains on Ukraine and Russia, much of the subtext of the Summit was directed at China. Concerns over economic security color much of the harmonization of policy that the Summit was intended to achieve. While the G7 succeeded in presenting a unified front, it faces real challenges in implementing its harmonized policies.

The ”de-risk, but not de-couple” framework towards China is full of contradictions and will require a careful and measured approach that could strain the G7’s unity. Observer countries such as India and Brazil, while open to dialogue, have not indicated they will accede to the level of cooperation on trade controls that the G7 desires. The technical and regulatory challenges key to the management of critical and emerging technologies remain largely unresolved.

Ultimately, the G7 Summit 2023 featured a lot of tough talk and incremental cooperation. Whether that translates into effective deterrence against China remains a medium-term question. What is clear is that the G7 Summit occurred during a notable ebb in Sino-Western relations and the inertia of ongoing tensions may trump any optimism, at least in the short term.