G-7 to Call for Groupwide Supply Chains

by Carolyn Mathas

The Group of Seven (G-7) intends to call for groupwide supply chains covering strategically important goods to be included in their joint document at the May summit in Hiroshima hosted by Japanese Prime Minister Fumio Kishida. The plan is to expand various international supply chain arrangements established individually by Japan, the U.S., and the U.S. and Europe to cover the entire G-7.

Given the current situation with China, the goal is for stable supplies of microchips, rare earths, and other commodities that are increasingly important to economic security, given the risks of a crisis in Taiwan and a prolonged Ukraine war.

Specifically, chips necessary to produce automobiles and home appliances are of concern as Taiwan has the top global share of production capacity at more than 20% of global production capacity. For advanced products, 90% are concentrated in Taiwan. China currently has the largest reserves of rare-earth elements used in magnets and components in automobiles and other cutting-edge products. Beijing’s strength, backed by its resources, won’t be weakened unless there is a move away from this dependence. After the COVID pandemic, it was virtually impossible to procure masks and medical protective clothing from China; therefore, pharmaceuticals and biotech products may also be covered by the G-7 supply chain

The G-7 aims to build a network in which a certain amount of chips is accessible. Japan and the U.S. are researching mass production of next-generation semiconductors for use in quantum computers and other applications. They are hoping that Europe joins in as well. They are also expected to acquire resource interests overseas, expanding cooperation with countries with mineral resources, such as those in Africa and South America. There is a proposal for the G-7 to contribute funds to support mining.

Prime Minister Fumio Kishida is positioning economic security as a top agenda item at the summit–the first time that economic security will be its own theme. Kishida also wants to bring Germany closer to Japan and the U.S. economically to prevent the flow of goods and technology to China through Europe.

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