As Yellen prepares for G7 talks, leaders look for US cooperation

The G7 will meet this week to discuss the global economic recovery from the coronavirus pandemic and how to tax giant digital firms. Leaders are looking to the Biden administration to show a willingness to work together after four years of Trump’s ‘America First’ agenda.

The new administration of United States President Joe Biden joins international talks on the global economy this week with other developed nations expecting a decisive break from the “America First” nationalism of former President Donald Trump.

US Treasury Secretary Janet Yellen will join Friday’s online gathering with her Group of Seven (G7) peers. During the meeting, they are likely to renew promises to pursue huge stimulus programmes to aid the economic recovery from COVID-19.

The meeting, the first G7 encounter since Biden took office, will also seek to breathe new life into long-running efforts to solve the problem of how to tax giant digital firms, many of them based in the US, such as Amazon and Google.

That is seen as a test case of Washington’s renewed engagement after Trump effectively blocked any deal.

The United Kingdom, which is chairing the meeting, has said the talks will provide the chance to find “global solutions” to the hammer blow dealt to the world’s economy by the pandemic.

A G7 source said officials would discuss “how best to shape and respond to the phases of the global recovery from COVID-19” including support for workers and businesses in the near term and the assurance of fiscal sustainability in the long term.

Other aides said there would be a discussion on coordinating fiscal stimulus among the G7 countries, which aside from the US and UK include Japan, France, Germany, Italy and Canada. They will also be joined by the heads of their national central banks and the European Central Bank.

Biden has proposed a further $1.9 trillion in spending and tax cuts on top of Trump’s $4 trillion. UK finance minister Rishi Sunak is expected to say that he will borrow yet more money — after racking up the biggest ever peacetime deficit — while promising to fix public finances after the crisis.

The G7 source said the meeting would also discuss support for vulnerable countries to aid the global recovery.

The UK was likely to issue a statement after the meeting, the source said.

Digital tax

The meeting comes as much of the global economy continues to reel from the impact of lockdowns, although vaccination programmes are raising the prospect of recovery later this year.

The different pace of the roll-outs is likely to mean some regions lag behind, with the eurozone at particular risk of a slow recovery.

The UK wants to make climate change and biodiversity loss a top priority of its G7 presidency ahead of the United Nations Climate Change Conference (COP26) it is due to host in November.

There could also be some signs of progress on how to sort out the rules for taxing cross-border commerce.

Nearly 140 countries are negotiating the first update in a generation to the rules for taxing cross-border commerce to account for the emergence of big digital companies like Google, Apple and Facebook.

Biden is seen as more open to a deal, and some involved in the talks believe an agreement is within grasp this year.

UK Prime Minister Boris Johnson is due to host the first in-person summit of G7 leaders in nearly two years in June in a seaside village in Cornwall, southwestern England, to discuss rebuilding from the pandemic and climate change.