US relies on G7 summit to revitalize transatlantic relations | Business and Economy News


On England’s rugged southwest coast, key leaders representing Western democracies meet from Friday through the weekend to discuss an intimidating list of important issues.

In addition to the United Kingdom, which hosts the meeting, heads of government from the United States, Canada, France, Germany, Italy and Japan will be in attendance. Leaders from South Africa, Australia and South Korea are also in attendance, with India’s planned participation blocked due to COVID-19.

Group of Seven (G7) foreign ministers began their consultations in early May to discuss the Western pullback against Russia and China, the coronavirus, economic recovery and climate change.

The geopolitical confab is US President Joe Biden’s first trip abroad since taking office in January.

At the Carbis Bay Hotel in Cornwall, Biden is expected to turn the page on the policies of his predecessor, Donald Trump, which have upset some of the United States‘ major allies.

Renewing transatlantic relations is crucial for US President Joe Biden, who started the ball rolling by holding bilateral talks with British Prime Minister Boris Johnson [File: Kevin Lamarque/Reuters]

Other presidents and prime ministers will help try to rekindle traditional diplomatic alliances in the post-Trump era between wealthy economies that amount to $ 40 trillion, or roughly half of the world’s gross domestic product.

Renewing transatlantic relations is crucial for Biden, who opens the ball on Thursday by holding bilateral talks with British Prime Minister Boris Johnson. The US government hopes to show that democracy – and especially its own – can respond now.

The richest and most powerful democratic nations in the world face a myriad of challenges, ranging from tackling autocratic governments and global warming to the persistent COVID-19 pandemic and unbalanced trade relations. These are precisely the four priorities of the summit identified by the British government.

Global minimum corporate tax

“It’s exciting because this is the first major G7 summit with a new administration, with new energy and momentum,” said Christine McDaniel, senior researcher at the Mercatus Center at George Mason University.

“The United States and many of our European partners realize that only through deep cooperation can we solve these problems,” she told Al Jazeera.

The business community is eager to see what emerges from the seaside meeting in response to the acceleration of ransomware attacks on critical infrastructure.

On the economic front, a huge achievement for the leaders’ pre-summit was announced last weekend when G7 finance ministers in London reached a landmark deal on a unified minimum tax rate for all multinational corporations. .

The victory of multilateralism awaits further work at an upcoming gathering of 135 nations within the Organization for Economic Co-operation and Development this summer in Paris.

The two pillars of the current pact are a minimum global corporate tax rate of at least 15% and the obligation for multinationals to pay taxes to the country where they actually sell their products and services, rather than reserving these benefits to a lower tax country. .

The United States is hoping the deal will avoid the digital services tax Washington feared for big tech and social media companies. But tax havens could still oppose it.

Last weekend, G7 finance ministers in London reached a landmark agreement on a unified minimum tax rate for all multinational corporations [File: Henry Nicholls/Pool/Reuters]

G7 leaders on the sunny Cornish coast are expected to endorse the ambitious US proposal first announced in May by US Treasury Secretary Janet Yellen.

The July Group of 20 (G20) finance ministers meeting in Italy is expected to iron out the finer points of a solution designed to end the race to the bottom that has prompted companies to avoid paying their fair share by accounting for profits . in jurisdictions with minimal taxes.

“Digital flows represent an increasing part of the global trade flow of ideas and people and an engine of productivity growth,” McDaniel added, warning against any kind of tariffs on digital commerce.

“Countries want companies to pay their fair share,” she added. “Germany cannot charge Google, but it can tax every order that crosses its border. “

UK Finance Minister Rishi Sunak said on Twitter that “under the principles of historic reforms, the world’s largest companies with profit margins of at least 10% will be targeted.”

Supporters of a global minimum corporate tax rate say a sealed deal would give many countries more money to fund their economic recovery after the pandemic devastated budgets on both sides of the Atlantic.

Clean green initiative

Dealing with a once-in-a-century pandemic may also have helped to highlight common ground on how to keep the climate emergency at bay.

As the summit approaches, US National Security Advisor Jake Sullivan said leaders would work to “provide funding for physical, digital and health infrastructure in the developing world.”

At a White House press conference earlier this week, Sullivan suggested the Clean Green Initiative would provide “a high standard [and a] a transparent, rules-based alternative to what China has offered ”with the Belt and Road Initiative (BRI).

This project aims to prove the effectiveness and cohesion of the West in its opposition to the Beijing BRI, which seeks to expand and deepen China’s economic and political power in the world by financing large infrastructure projects. .

“We have the opportunity to make ambitious progress that curbs the climate crisis and creates jobs by driving a global transition to clean energy,” Biden wrote in a Washington Post op-ed over the weekend.

G7 leaders have yet to determine whether substantial new funding will be allocated to the Clean Green Initiative, or whether they will just establish a flexible framework to compete with China’s trillion-dollar BRI.

Officials are also responsible for deciding the geographic scope of the plan. European nations would like to focus on Africa, while Japan prefers to focus on Asia and the United States gives higher priority to Latin America – its backyard.

G7 leaders set to unveil clean green initiative to compete with China’s Belt and Road Initiative [File: Tom Nicholson/Reuters]

But some analysts believe any G7 initiative that further exacerbates the growing global bifurcation between the US and Sino spheres of influence could be counterproductive when it comes to addressing global challenges.

“The Biden administration is doing the right thing by working closely with its democracy allies to solve some of the world’s pressing problems, but I don’t think it’s a good idea to use the G7 to open a another ideological battleground with Beijing, ”Yanzhong said. Huang, senior fellow at the Council on Foreign Relations.

“Global challenges like the COVID-19 pandemic or the climate crisis do not recognize territorial borders,” he told Al Jazeera. “You cannot expect a small group of democracies to deal with them without the cooperation or collaboration of China.”

Last weekend, G7 finance ministers began figuring out how to deliver the pledged $ 100 billion in climate finance. They also reached a consensus to require banks and other companies to regularly disclose information on climate risks.

According to a new study released Thursday by the Science Based Targets initiative, none of the G7 scholarships meet the goals of the 2015 Paris Climate Agreement. Only 19% of companies listed on these main indices have objectives aligned with this pact.

Either way, climate investments could be crowded out by continued efforts to accelerate the end of the global coronavirus crisis.

Charting a path to defeat the coronavirus pandemic remains at the top of the G7 summit agenda [File: Elaine Thompson/AP]

Vaccine distribution plan

Establishing a path to defeat the pandemic remains a priority on the G7 summit’s agenda, and finance ministers have started discussing a $ 50 billion vaccine distribution plan for countries poor with the International Monetary Fund, the World Health Organization and the World Trade Organization.

British Prime Minister Boris Johnson has said he is looking to commit to vaccinating the whole world by the end of 2022, and British Foreign Secretary Dominic Raab has said equitable access to vaccines via the COVID-19 Vaccines Global Access Facility (COVAX) is essential.

The UK has responded to the US President’s call to temporarily waive vaccine patents by instead advocating technology transfers from pharmaceutical companies with non-profit pricing.

A new international approach to prevent future pandemics was also launched last week with the G7 health ministers meeting in Oxford.

On another pressing global issue, lawmakers in the US and UK have pushed their leaders to establish – at the G7 – an international fund for Israeli-Palestinian peace.

UK Queen Elizabeth II is expected to meet Biden and US First Lady Jill Biden at her home in Windsor Castle at the end of the summit. He will become the 13th president to sit with the 95-year-old monarch.

Biden will travel to Brussels for NATO and US and EU summits, before traveling to Geneva to meet with Russian President Vladimir Putin as part of a major test for Western democratic values.


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