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Finance ministers urged the G7 to stay united in the face of China’s ‘unfair’ industrial policies
Published : 25 May 2024, 09:20 AM
European finance ministers from the Group of Seven wealthy democracies called on Friday for the G7 to stay united in the face of China's "unfair" industrial policies and warned of the risks of a trade war after US tariff hikes against Beijing.
On the first day of a meeting of G7 finance chiefs in the northern Italian town of Stresa, ministers from Germany, France and hosts Italy all called for a common front against China's growing export strength.
Washington last week unveiled a raft of increased duties on Chinese imports including electric vehicle batteries, computer chips and medical products, triggering concerns of retaliation and fragmentation in global commerce.
The United States is not calling on its partners to take similar measures, but Treasury Secretary Janet Yellen said on Thursday she wanted the U.S' G7 allies - Japan, Germany, France, Britain, Italy and Canada - to show they stood with Washington.
French Finance Minister Le Maire said it was important to avoid a trade war with Beijing, which remains "our economic partner", but the G7 needed to protect its industrial interests in the face of China's "unfair trade practices."
Germany's export-driven economy would have much to lose from an escalation of trade tensions and its Finance Minister Christian Lindner told reporters that "trade wars are all about losing, you can't win them."
However, Italian Economy Minister Giancarlo Giorgetti, chairing the Stresa gathering as Rome holds the G7 presidency this year, said it may only be a matter of time before the European Union followed the US lead on tariffs.
"The United States has taken very tough decisions and Europe will probably have to consider whether to do the same," he told Italian state television RAI on Friday.
With the risk that the US tariffs lead to an increase in Chinese exports to Europe, Giorgetti said it was vital that the G7 remain united and European countries did not begin competing among themselves.
A US push for a loan to Ukraine backed by future income from some $300 billion of frozen Russian assets is another central theme for the G7 meeting which ends on Saturday, but it has become clear that no hard details will emerge in Stresa.
The ministers will be joined on Saturday by Ukraine's Finance Minister Serhiy Marchenko, whose war-torn country is struggling to contain a Russian offensive in the north and the east, more than two years after Moscow first invaded.
Yellen has said that a loan could amount to some $50 billion, but that no amounts have been agreed, and officials said the meeting would mull proposals to present to G7 heads of government at a summit in Puglia, southern Italy, on June 13-15.
Yellen's Undersecretary for International Affairs Jay Shambaugh told CNBC he did not expect ministers in Stresa to discuss technical aspects such as the structure of the loan, who would manage it or how it would be backstopped.
World Bank President Ajay Banga told Reuters on Friday he was "absolutely" open to the idea of managing a fund for Ukraine that would disburse a G7 loan based on the earnings from the frozen Russian assets, at least for non-military purposes.
The European Union on Tuesday finalised its own deal to help Ukraine by using the "unexpected and extraordinary" profits earned by European-based depositories holding Russian assets.
Ukrainian Foreign Minister Dmytro Kuleba thanked the EU for the decision but reiterated that Kyiv hoped for the full seizure of the Russian assets, not just the interest - something several European countries have ruled out for legal reasons.
German Finance Minister Christian Lindner told reporters on Friday the G7 was now discussing a "legally secure" loan proposal though "many legal and technical issues are still unresolved."
Italy had been hoping to use the summit to revive blocked talks on a global minimum tax on multinationals, but Giorgetti said the deal would not be finalised by June, as was previously planned.
He said the U.S, India and China all have reservations over the terms of the deal, which was signed by around 140 countries in 2021 but has never been fully implemented.
The G7 will also address a proposed global wealth tax on billionaires, promoted by Brazil and France among the broader Group of 20 developed countries.
However, Yellen said on Thursday the US could not back it in the formulation currently proposed, and Lindner said the world had enough on its plate to reform corporate taxation.
"The German government therefore views new components of a global tax agenda with the greatest scepticism," he said.
