The West’s fight against China’s ‘economic coercion’ is misguided and misleading

The G7’s latest move to take trade disputes into its own hands only weakens the WTO and suggests selfish geopolitical aims
China has been a victim of Western sanctions for decades and it is time for the world to demand an end to the misguided fight against economic coercion

Zhou Xiaoming

Published: 1:30am, 2 Jun 2023

Why you can trust SCMP

Economic coercion is not as new as some of us might think. Surfing the web for material for this commentary, I came across a United Nations document.

A 1991 resolution by the UN General Assembly “calls upon developed countries to refrain from making use of their predominant position in the international economy to exercise political or economic coercion through the application of economic instruments with the purpose of inducing changes in the economic, political, commercial and social policies of other countries”.

It seems developed countries’ use of economic coercion was already widespread. Bad habits die hard. Thirty-odd years on, developed countries have not changed tack. Rather, they have continued to deploy coercive economic measures with increased scope and magnitude. Between 2000 and 2021, the number of sanctions Washington slapped on other countries jumped over ninefold to more than 9,400.

Under Donald Trump alone, the US imposed nearly 4,000 sanctions, averaging three a day. Over the decades, US sanctions have hit nearly 40 countries, affecting almost half of the world’s population. Over 30 countries remain on its sanctions list.

What is new is that those who perpetuate economic coercion have decided to turn on their victims with false countercharges. The Group of Seven (G7) leaders, meeting in Hiroshima, Japan, last month, blasted what they see as a “disturbing rise” of the “weaponisation of economic vulnerabilities”. To counter it, they have launched a “coordination platform” and vowed to develop new tools while continuing to use existing ones.

Although the language on economic coercion in the G7 communique did not name China, it was obviously the group’s main target. Both US Treasury Secretary Janet Yellen and European Commission President Ursula von der Leyen have claimed that China economically coerced countries such as Australia and Lithuania.

But the G7’s plans are inconsistent with its commitment to the World Trade Organization. WTO members agree to use the multilateral trading system to settle disputes when they believe fellow members have violated trade rules.

As WTO members, G7 countries are obliged to seek resolution through the WTO’s dispute settlement system. If they consider that China’s trade policy measures are breaking WTO rules, the right approach would be to take the dispute to the world’s top trade body, as Australia did in 2021 over China’s anti-dumping duties on its wine.

Further, the WTO agreement stipulates that members shall not “make a determination to the effect that a violation has occurred”.

The G7’s latest moves circumvent the WTO dispute settlement system and take trade disputes into its hands. It breaches the grouping’s ’s obligation to the WTO, and jeopardises the authority of the multilateral trading system.

03:08

Protests over nukes as G7 leaders talk Ukraine and China in Hiroshima

There is also a danger that the G7’s drive against economic coercion could be used as a disguise to advance geopolitical goals, even if it is not intended to do so. Washington has even imposed tariffs on steel and aluminium products from its European allies, on national security grounds, an action that the WTO found contravened trade rules. Like “national security”, “economic coercion” is open to interpretation and could well become a convenient tool for Washington to intimidate and attack others.

China and the West have different perspectives on Beijing’s trade measures against Australia and Lithuania. But if we take the G7 nations at their word, it would be fair to conclude that their claims are driven by geopolitics.

According to Western media, Beijing blocked Lithuanian exports after the Baltic country allowed Taiwan to set up a de facto embassy there. And China’s anti-dumping actions on Australia goods were portrayed as retaliation against Canberra’s ban on Chinese telecommunication companies and accusations of infiltration.

01:48

Taiwanese supporters queue up to buy Lithuanian rum held up by mainland China

By labelling China’s trade measures towards Australia and Lithuania as economic coercion, the G7 is, in effect, endorsing these countries’ provocations. It sends a strong signal that the G7 is ready to back actions that antagonise and confront China. Analysts say the move was intended to abet hostilities towards China, and encourage other countries to adopt positions and policies that hurt Chinese interests.

China has long been a victim of Western sanctions. For over two decades soon after the founding of the People’s Republic, the West imposed a trade embargo. China still suffers daily under US sanctions. Some US$360 billion worth of Chinese imports remain subject to a punishing 20 per cent tariff. Over 600 Chinese companies are blacklisted on national security grounds. And Washington has export control bans on advanced chips and numerous other products.

Unsurprisingly, many in China see the G7’s move as a replay of Western powers’ interactions with their country at the turn of the last century.

Around the time of the G7 summit, a short video went viral in China featuring a famed commentator from Taiwan, who noted that the G7 nations, with the exception of Canada, were among the Eight-Nation Alliance that engaged in the widespread looting, raping and burning of Beijing in 1900-1901.

G7 leaders should focus on economic progress, not economic confrontation

Yet, a more accurate description is that the G7 aspires to a new global economic order where the West again dominates, writing global rules to be forced down the throats of developing countries, self-appointed as judges and dictating to the rest of the world.

In the 1991 UN resolution, the General Assembly “calls upon the international community to adopt urgent and effective measures to eliminate the use by some developed countries of unilateral economic coercive measures against developing countries”.

Today, it is even more critical for the world to demand – and put – an end to the G7’s ever-pervasive “economic coercive measures” and, indeed, its misguided fight against what it calls “economic coercion”.

Zhou Xiaoming is a senior fellow at the Centre for China and Globalisation in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva