On Saturday, G7 countries agreed to implement, before the end of the year, a mechanism to diversify global supply chains. The decision was announced at the conclusion of a meeting of financial authorities in Niigata, Japan, ahead of the leaders’ summit scheduled for next week.
The new system will be based on a combination of financial assistance, knowledge sharing, and partnerships aimed at low- and middle-income countries, with the aim of enabling them to play a more significant role in this critical process for global industry, a communiqué issued at the end of the meeting said.
Although the ministers did not directly mention the intention to reduce dependence on trade with China or Russia as a justification for this agreement, US Treasury Secretary Janet Yellen made reference to the recent economic challenges the world has faced.
Yellen told reporters, “The effects of the Russian war in Ukraine and the disruptions caused by the pandemic have made clear the importance of diversified and resilient supply chains.”
The G7 finance ministers and central bank chiefs stressed the “urgent need to address existing vulnerabilities in highly concentrated supply chains.”
The plan, called RISE (Strengthening a Resilient and Inclusive Supply Chain), will be implemented in collaboration with the World Bank and other relevant international organizations, as specified in the communiqué.
Although the financial package allocated to this new initiative has not yet been determined, Japan’s Vice Minister of Finance, Masato Kanda, briefed the press on the matter.
In concrete terms, RISE would help countries not only to secure the extraction of raw materials for industry but also to develop their capacity to transform them in their own territories, which would make it possible, at least in part, to avoid the need to turn to China for this process.
The ministers justified this measure by arguing that diversification of supply chains can contribute to preserving energy security and help maintain macroeconomic stability.
In addition, the G7 countries reaffirmed their “unwavering” support for Ukraine and condemned the “illegal and unjustifiable war of aggression” unleashed by Russia. They announced that they will increase their budgetary and economic support to Ukraine to $44 billion through 2023 and early 2024. This figure represents an increase from the previous report in February, which stated a sum of $39 billion.
The three-day meeting in Niigata, a coastal city in central Japan, took place shortly before the G7 major economies summit to be held May 19–21 in Hiroshima.