Evaluation of the 2021 G7 Communiqué by Bundesverband der Deutschen Industrie e.V.

POSITION | EXTERNAL ECOOMIC POLICY | G7

Evaluation of the 2021 G7 Communiqué The Communique, while comprehensive and ambitious, left some things to be desired, namely on preciseness in WTO reform and consensus on national coal phase-out. June 2021 Evaluation of the 2021 G7 Communiqué The G7 summit took place from 10-12 June in Cornwall under the British presidency with the motto “build back better.” The summit culminated with a 25-page, quite comprehensive communique covering a myriad of policy areas including health, trade, digital, climate, foreign, economic recovery, and gender equality. In many areas, the G7 did pick up on several of the detailed and precise policy recommendations put forward by the B7, including on the strengthening of the WHO, a strong statement on human rights, support of data free flow with trust and of the industry-led inclusive multi-stakeholder approach to standard setting in digital policy, recommendations on cutting transport emissions across sectors and the move forwards mandatory climate-related financial disclosures. However, there were several areas in which German industry would have appreciated more detail, namely on the multilateral framework on subsidies and special and differential treatment, and where German industry was disappointed with the lack of integration of B7 recommendations, namely on telecoms diversification and cooperation with the private sector on cybersecurity, as well as consensus on a national coal phase-out date. Health Policy In terms of global health and the pandemic, the G7 responded quite clearly and well to the recommendations of the B7. It is to be welcomed that the G7 commit to strengthening the WHO and supporting the Organization in its leading role in global health policy. This is a direct answer to the B7 plea that the G7 champion and strengthen a revitalized WHO. In response to the B7 plea to facilitate vaccine production and rollout, the G7 committed to share at least 870 million doses directly over the next year and to accelerate rollout of safe and affordable vaccines for the poorest countries. Regrettably, however, they did not come to a consensus on, as recommended by the B7, avoiding counterproductive export bans. It is also to be welcomed that the G7 reaffirmed their support for the COVAX facility and committed to further cooperation with the private sector in vaccine sharing. Trade Policy The bulk of the B7 trade policy recommendations centered, rightly so, on WTO reform. Many key issues were in fact addressed by the G7 – however, in many cases, without the detail BDI would have appreciated. In order to make credible progress by the Ministerial Conference in November, it is crucial, as noted by the B7, to put the political weight of the G7 behind three specific deliverables – the multilateral agreement on fisheries subsidies and the Joint Statement Initiatives on services domestic regulation and e-commerce. BDI welcomes that the G7 did commit to doing so. However, it is regrettable that

Evaluation of the 2021 G7 Communiqué

they did not make a statement on the moratorium on customs duties on electronic transmissions, which should be made permanent. This would be an easy deliverable for MC12 and a clear statement on the importance of digital trade since the pandemic. It is certainly a good sign that the G7 reached consensus on WTO reform issues that they plan to advance, including “market-distorting actions of state-owned enterprises and harmful industrial subsidies”, “a fairer approach to countries’ different responsibilities…including through addressing the arrangements for special and differential treatment [SDT] so they reflect developments in the global economy” and “proper functioning of the WTO’s negotiating function and dispute settlement system.” Nonetheless, the detail is missing in several of these areas. It is to be expected that given the U.S. membership in the G7, more specificity on reform of the dispute settlement system would not have been realistic. However, BDI regrets more precise language on the multilateral subsidies framework, including modernization of the SCM Agreement and specificity of the definitions therein (such as “public body”) and efficacy of its enforcement mechanisms. German industry holds the view that the definition of a public body needs to be modified. The statement on SDT is solid, but could be operationalized to a further extent – here, the B7 recommends establishment of watershed criteria for self-designation, which should include “measures such as shares of global trade and output measured in terms of added value.” BDI is of the view that WTO members should undertake commitments according to their economic weight, capacities and competitiveness, which SDT should clearly reflect. It would have also been desired that the G7 commit to a specific work plan on the three most contentious issues (dispute settlement, special and differential treatment, subsidies) as suggested by the B7. The Communiqué also neglects to make specific recommendations on the WTO secretariat, including (as per B7) additional resources for more effective data collection across a greater range of sectors with a focus on distortive subsidies, work on increased transparency and notification, and new structures for business engagement. In addition, the B7 made the helpful plea to commit to a G7 roadmap to roll back protectionist measures, including export restrictions, adopted during the pandemic, which was not taken up by the Communiqué. China and Human Rights The B7 urged the G7 to take a “strong international stance regarding human rights” and to “share any serious concerns” in this realm. In this vein, the G7 made a clear signal of unity in opposition to China in the Communiqué. Indirectly the situation in Xinjiang was referenced in a statement of concern about “the use of all forms of forced labor in global supply chains, including state-sponsored forced labor of vulnerable groups and minorities, including in the agricultural, solar and garment sectors.” The G7 also highlighted the importance of “upholding…international labor standards, including those deriving from ILO membership”, another oblique jab at China at a time when an increasing number of FTAs include references to specific ILO agreements. Directly, the G7 called on China “to respect human rights and fundamental freedoms” with explicit references to Xinjiang and Hong Kong. At the same time, China remains an important growth market, innovation driver and overall economic partner. With a trade volume worth approximately 212 billion euros, China was Germany's largest trading partner – outside the European Union – in 2020 for the fifth year in a row and the second largest export market after the USA. Broad economic decoupling is not in the EU's interest. Dependence is not a weakness if it is mutual. Mutual dependence can contribute to the stability of our relations.

Evaluation of the 2021 G7 Communiqué

Digital Policy Building on ideas put forth by the B7, BDI welcomes the G7 support as a strategic priority to update regulatory frameworks, working with relevant stakeholders to leverage technology for the common good. The G7 committed to strengthening “coordination on the implementation and development of global norms and standards to ensure that the use and evolution of new technologies reflects our shared democratic values and commitment to open and competitive markets.” This is directly in line with the B7 goal of a stable regulatory environment promoting innovation, investment and competition. German industry welcomes the support of the G7 for data free flow with trust, with the aim to “better leverage the potential of valuable data-driven technologies while continuing to address challenges related to data protection.” Free flow of data is a prerequisite of the data economy. BDI welcomes the pragmatic approach of the G7 concerning data flows “towards pragmatic and reliable ways to enable flows of personal information while maintaining high privacy standards.” However, concrete measures to tackle unjustified data localization requirements or forced access to source code as market access requirement should have been added as well. B7 recommended that the G7 aim to convene a Future Tech Forum each very, and as such it is welcomed that the G7 explicitly supported this initiative. The Forum seeks to discuss the role of technology to support an open society and combat global challenges, with the goal of “mitigating the risk of regulatory fragmentation.” However, BDI regrets the lack of inclusion of specific G7 recommendations on telecommunications diversification, as well as an international platform on cyber risks, cooperation with the private sector on cybersecurity, and technical support and awareness-raising measures for business. Climate Policy For the most part, the G7 took up the B7 precise recommendations on climate and biodiversity policy. BDI regrets that the G7 were unable to come to a consensus on a date for national coal phase-out. Here, the B7 urged the G7 to set a target for phasing out unabated coal in power generation by 2040. However, it is positive that the G7 set the target of 1.5°C for warming, and that they committed to “rapidly scale-up technologies and policies that further accelerate the transition away from unabated coal capacity.” The B7 recommended that the G7 set “clear, ambitious, consistent and measurable roadmaps for hard-to-abate sectors to reach net-zero emissions” and to heighten international alignment in the development of sustainable finance taxonomies, which we regret was not taken up in the Communiqué. The G7 responded well to the B7 recommendation to cut transport emissions across sectors, as they committed to “sustainable, decarbonized mobility and to scaling up zero-emission vehicle technologies, including buses, trains, shipping and aviation.” It is also to be welcomed that the G7 recommended the move towards mandatory climate-related financial disclosures based on the framework of the Task Force on Climate-related Financial Disclosures. The B7 urged the G7 to protect and conserve nature through land and ocean targets, which were set by the G7 in the Communiqué, 30% of global land and 30% of global ocean by 2030, as well as 30% of national land. It is regrettable that the G7 did not make a specific statement on the Article 6 negotiations at COP26 as encouraged to by the B7, but German industry does welcome the commitment in the Communiqué to increased 2030 targets and submission of aligned NDCs ahead of COP26.

Evaluation of the 2021 G7 Communiqué

Cooperation with the Private Sector German industry welcomes the readiness of the G7 to engage with the private sector on a myriad of policy areas, including recovery from the Covid-19 pandemic and vaccine dose sharing with the developing world, deployment of renewable energy and climate finance. It is particularly encouraging that the G7 Communique explicitly supports the industry-led inclusive multi-stakeholder approach to standard setting in digital policy.

Impressum Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29, 10178 Berlin www.bdi.eu T: +49 30 2028-0 Authors Katherine Tepper Senior Manager External Economic Policy T: +49 30 2028-1499 k.tepper@bdi.eu Matthias Krämer Department Head External Economic Policy T: +49 30 2028-1562 m.kraemer@bdi.eu

BDI Document Number: D1409