During a meeting with President Biden in Indonesia last fall, Chinese leader Xi Jinping issued an unsolicited warning.
In the past few months, Mr. Biden has signed a series of laws aimed at boosting U.S. industrial capabilities in hopes of gaining an edge in the race for advanced energy technologies that will help fight climate change. , had imposed new restrictions on technology exports to China. For months, he and his aides have been campaigning for allies to impose their own limits on technology transfer to China.
This effort reflected a kind of industrial policy adopted by China to become the world’s manufacturing leader. In Bali, Mr. Xi urged Mr. Biden to abandon it.
The president was not persuaded. Mr. Xi’s protests only furthered Mr. Biden’s conviction that America’s new industrial approach was the right one, according to people familiar with the conversation.
When Biden and G7 leaders meet in Hiroshima, Japan, this weekend, the debate will center on how to quickly accelerate massive, internationally coordinated public spending. . The goal for these wealthy democracies is both to reduce their dependence on Chinese manufacturing and to help their companies compete in the new energy economy.
Mr. Biden’s legislative agenda, which includes bills focused on semiconductors, infrastructure and low-emission energy sources, is beginning to spur government and private investments potentially reaching trillions of dollars in America’s industrial capacity. This includes subsidies for electric vehicles, batteries, wind farms, solar power plants, etc.
The spending—the largest US intervention in industrial policy in decades—provokes many of America’s key allies in Europe and Asia, including key G7 leaders. European countries, South Korea, Japan, Canada, etc. are promoting it. While increasing access to US clean energy subsidies, it is also launching its own initiatives.
“This cleantech race is an opportunity to go faster and farther together,” European Commission President Ursula von der Leyen said after an economic-themed meeting at the G7 summit on Friday. rice field.
“Now that the G7 are in this race together, our competition should create additional manufacturing capacity, not at the expense of each other,” she said.
Biden and the G7 embarked on a project with two ambitious goals. One is to accelerate demand for the technologies needed to reduce emissions and fight climate change, even in decades, and the other is to make the technology available to workers in the United States and allies. Countries have an advantage over Chinese workers in meeting that demand.
Since the G7 leaders met in the German Alps last year, many of those projects have been in full swing. U.S. Ambassador to Japan Rahm Emanuel told reporters in Tokyo this week that supply chains, semiconductors and other waves of action by the Group of Seven (G7) nations to counter China are “economic security, national security and energy security. It is based on insurance,” he said.
“This is a tipping point for a new, more relevant G7,” he added.
Emmanuel said the effort reflected growing impatience among G7 leaders over what they called it. Utilization of economic measures of the Chinese government This is to punish and discourage actions by foreign governments and companies that Chinese authorities do not like.
But above all, the change was spurred by the urgency around climate action and two bills Mr. Biden signed into law last summer. A bipartisan bill that would give the semiconductor industry tens of billions of dollars in government subsidies, and federal climate change provisions. It is a so-called inflation control law, which companies are trying to profit from.
These bills spurred a wave of newly announced battery factories, solar panel factories and other projects. They also sparked an international subsidy race, which developed after a heated debate shortly after the climate change law was signed.
Massive U.S. support for clean energy and semiconductors, combined with tougher requirements for companies and government agencies to purchase U.S.-made steel, vehicles, and equipment, puts undesirable pressure on allies’ competing industries.
Some of those concerns have dissipated in recent months. The U.S. signed an agreement with Japan in March that would make Japanese battery materials eligible for the benefits of the anti-inflation law. The European Union is pushing for a similar agreement, proposing its own $270 billion program to subsidize green industries. Canada has passed its own Biden Climate Act, while the UK, Indonesia and other nations are seeking their own significant mineral trade.
Administration officials say formerly rival allies are embracing the potential benefits of a coordinated industrial strategy for the wealthy and democracies.
The seven-major meeting said, “From our perspective, we are seeing some convergence on this point where we can continue to transform the Inflation Control Act from a source of friction between the United States and our country into a source of cooperation and strength.” It’s a G7 partner,” national security adviser Jake Sullivan told reporters on Air Force One as Biden en route to Japan.
Some G7 officials say the alliance still has much work to do to ensure that fast-growing economies like India benefit from increased investment in the new energy economy. Says. “It’s important that the acceleration this brings doesn’t stifle investment around the world,” Karsten Hillman, Canada’s ambassador to the United States, said in an interview.
One country they don’t want to profit from is China. The United States has imposed drastic restrictions on China’s ability to access American technology—advanced chips and the machinery used to make them. And it has relied on allies as it seeks to impose global limits on technology sharing not just with China, but with Russia. All these efforts are aimed at hindering the continued development of China’s advanced manufacturing industry.
Biden officials urged allies not to intervene to supply China with chips and other products that are no longer available from the United States. The U.S. is also considering further restrictions on certain Chinese chip technologies, including a ban on venture capital investment, and U.S. officials are scheduled to meet with them in Hiroshima.
While many G7 governments agree that China poses a growing economic and security threat, there is little agreement on how to deal with it.
Japanese officials have been relatively reluctant to discuss a coordinated response to economic coercion from China after the Chinese government cut off supplies of rare earth minerals to Japan during conflicts more than a decade ago. was enthusiastic.
By contrast, European officials are divided on whether to jeopardize close and lucrative business ties with China. Some, like French President Emmanuel Macron, oppose US plans to cut off supply chains from China.
Ms von der Leyen, President of the European Commission, Promoting “risk aversion” in relations with China This includes reducing Europe’s dependence on China for its industrial and defense base in a targeted manner, while recognizing China’s growing economic and security ambitions. European officials said in Hiroshima that they were happy to see American leaders moving further in their approach, at least rhetorically.
Still, the allies’ push for industrial policy threatens to complicate their already difficult relationship with China. Consulting and advisory firms with overseas ties have been the target of raids, detentions and arrests in recent months in China. Chinese officials said they viewed the export controls as a threat. The Chinese embassy in Washington this week adopted a tactic used by US officials to criticize Beijing, warning the G7 against what it called “economic coercion.”
Mr. Xi delivered a similar rebuke to Mr. Biden last fall in Bali. He points to the late 1950s, when the Soviet Union collapsed. withdrew support For China’s nuclear program.
Xi said China continued its nuclear research and detonated its first atomic bomb four years later.
