G-7 Summit Ends With Alignment on Outbound Investment Screening, Export Controls, US Says

The U.S. ended the Group of 7 summit in Japan with an agreement by member countries to explore new restrictions on outbound investments into China and a strategy to de-risk with regard to certain aspects of the country’s economy, a result President Joe Biden said “showcased the unity of purpose” of the G-7 leaders toward Beijing. The countries also emphasized the importance of multilateral export controls, agreeing to increase cooperation on restrictions over dual-use technologies.

The approach -- outlined in a series of statements and fact sheets released during the course of the May 19-21 meetings -- shows the G-7 is “united in our approach” to China but isn’t “looking to decouple,” Biden said during a news conference. The countries instead want to “de-risk and diversify our relationship.”

“That means taking steps to diversify our supply chains, so we’re not dependent on any one country for necessary product,” Biden said “It means resisting economic coercion together and countering harmful practices that hurt our workers. It means protecting a narrow set of advanced technologies critical for our national security.”

Part of that effort -- which featured a range of new U.S. export controls and sanctions last week, including new measures to more closely align U.S. restrictions with G-7 partners (see 2305190059) -- could include outbound investment screening. The U.S. has been considering creating an outbound investment screening tool for months, and although a senior administration official on May 20 declined to say how close the U.S. is to issuing the mechanism, the G-7 agreed that “addressing risks from outbound investment could be important to complement existing tools of targeted controls on exports and inbound investments.”

The G-7 countries -- which include the U.S. along with Canada, France, Germany, Italy, Japan and the U.K. -- said outbound investment screening could work alongside other restrictions to “protect our sensitive technologies from being used in ways that threaten international peace and security.” They plan to soon “provide clarity to the private sector regarding these common goals.”

The senior administration official called the statement “a significant muscle moment” to “agree to explore outbound investments.” The person said the countries agreed to “make sure that we’re closely watching and monitoring investments” into China that “could allow them to advance capabilities and emerging technologies to assist them from a military perspective.”

Countries will need to “decide for themselves how they’re going to consider the challenge of outbound investments and what to do about it,” the official said. “We’re no different. We’re going to have to do that, too. I think you’ll see us work our way through that.” A senior Treasury official last week said the outbound review mechanism is still being “quite debated and deliberated” within the administration (see 2305180065), although some industry officials expect the tool to be released soon (see 2305110033 and 2305050041).

The G-7 leaders also agreed that “economic resilience requires de-risking and diversifying” from China, adding they will “push for a level playing field for our workers and companies.” The countries will “seek to address the challenges posed by China’s non-market policies and practices, which distort the global economy,” and will “counter malign practices, such as illegitimate technology transfer or data disclosure.” They also “recognize the necessity of protecting certain advanced technologies that could be used to threaten our national security without unduly limiting trade and investment.”

Their joint statement also called export controls a “fundamental policy tool to address the challenges posed by the diversion of technology critical to military applications,” and said the countries “affirm the importance of cooperation on export controls on critical and emerging technologies.” The statement specifically mentioned “microelectronics and cyber surveillance systems,” adding controls can help address the “misuse of such technologies by malicious actors and inappropriate transfers of such technologies through research activities.”

The G-7 countries also agreed to “further strengthen multilateral efforts to cooperate in the field of export controls to ensure gaps in our dual use technology protection ecosystem cannot be exploited.” Some current and former officials have called for a new multilateral export regime, especially since Russia remains a member of the Wassenaar Arrangement and can block proposals (see 2302080034, 2211210005 and 2205240039). The U.S. and its allies said they have a “common interest” in stopping a “narrow set of technological advances” from aiding the “military and intelligence capabilities of actors who may use these capabilities to undermine international peace and security, from being fueled by our companies’ capital, expertise, and knowledge.”