G7: Six principles of Supply Chain Resilience

Supply Chain Resilience is not prominent in the Group of Seven’s headline Joint Communique. But in the G7 Leaders Statement on Economic Resilience and Economic Security the language is stronger than that emerging from the Finance Minister’s meeting in Niigata. Here’s the principal paragraph:

The COVID-19 pandemic and Russia’s war of aggression against Ukraine has laid bare vulnerabilities in supply chains in countries around the world. Supply chain disruptions have had devastating impact for developing, emerging, and advanced economies alike. We recognize that transparency, diversification, security, sustainability, and trustworthiness and reliability are essential principles on which to build and strengthen resilient supply-chain networks among trusted partner countries both within and outside the G7. We encourage all nations to support these principles on resilient and reliable supply chains. We reaffirm our strong will to support the wider international community, particularly developing countries, in building their resilience, including through implementing the Partnership for Global Infrastructure and Investment. Our partnerships honor international law, are free and fair, and foster mutually beneficial economic and trade relationships. Drawing lessons from recent incidents of weaponizing energy and other economic dependencies, we stand firmly against such behavior. We will enhance resilient supply chains through partnerships around the world, especially for critical goods such as critical minerals, semiconductors and batteries. We will step up our efforts to strengthen channels of communication to address supply disruptions and share insights and best practices, including from respective scenario-based stress testing.

Hardly ground-breaking, but reasonable and actionable with sustained, constructive effort. These are principles that can and should guide the next generation of local to global supply chains.

In my reading, the strongest language related to Supply Chain Resilience in the Joint Communique is in a specific reference to China:

Our policy approaches are not designed to harm China nor do we seek to thwart China’s economic progress and development. A growing China that plays by international rules would be of global interest. We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying. We will take steps, individually and collectively, to invest in our own economic vibrancy. We will reduce excessive dependencies in our critical supply chains.

It is worth noting that “excessive dependencies” are not only related to what is sourced from China. Over-concentration of capacity is a recurring — even innate — feature of high volume, high velocity demand and supply networks. Reducing the risk of excess concentration requires ongoing vigilance, creative action, and meaningful investment.

Stefan Rousseau/Pool/AP


May 24 Update: If you can, please read Martin Wolf’s May 23 commentary in the Financial Times: The G7 must accept it cannot run the world.