Summit leaders representing 80% global economy will meet to discuss and apply peer pressure on each other. Analysts are unsure how far they can make an immediate impact on the rising costs of everything, from food and furniture to heating bills that will rise in winter.
On Friday, health and financial officials will be sitting in Rome before the G-20 presidents and prime minsters meet. However, the leaders of China and Russia are not expected to attend in person. This may be a problem for cooperation in energy matters, as climate change is the main topic just before the U.N. The Climate Change Conference will be held in Glasgow, Scotland on Sunday.
Here are some economic issues that G-20 leaders face:
THE PANDEMIC RECOVERY
According to the International Monetary Fund, the number one priority in economic recovery is to accelerate the vaccination of the global population. However, big headlines about vaccine cooperation might not be forthcoming from the Rome summit.
G-20 countries supported vaccine sharing through the U.N.-backed COVAX program. This has not helped alleviate severe shortages in poor countries. The amount of vaccines being donated is only a fraction what is required, so developed countries are focusing on booster shots for their populations.
The summit was not about a large number vaccines, but countries discussed strengthening their health systems.
While rising consumer prices and government stimulus programs that help economies recover from the pandemic are topics of discussion, central banks tend not to handle higher prices, and spending on stimulus is determined at the national level.
GLOBAL TAXES
One important economic deal has already been made: The G-20 is likely to celebrate an agreement on a global minimal corporate tax. This will prevent multinational corporations from hiding profits in countries that pay low or no taxes.
All G-20 countries signed the agreement negotiated between more than 130 countries. It now faces a challenging timeline to be approved and enacted by 2023.
Joe Biden, the U.S. president, has linked his domestic agenda to it. Creating a global minimum tax will allow the United States and other countries to raise taxes without having to worry about companies shifting their profits offshore. Because so many multinational corporations are headquartered in the United States, U.S. adoption has a key role.
This agreement will also help to ease trade tensions between Europe and the U.S. It allows countries like France, Italy, and Spain to repeal digital services taxes that were imposed on U.S. tech companies Google and Amazon.
Biden will be attending the G-20 while his tax and economic agenda is still under congressional negotiation. This means that he won’t be able to show that the U.S. leads on global corporate taxes. However, Jake Sullivan, his national security advisor, stated that G-20 leaders are aware of the nature and importance of congressional negotiations.
“They will ask, “Is President Biden on track for delivering on the promises he made?” We believe that he will deliver on his promises, Sullivan stated.
HIGHENERGY PRICES
This summit provides an opportunity to have dialogue about high oil and gas prices, as it includes representatives from major energy producers Saudi Arabia, Russia, major consumers of Europe and China, and the U.S.
Russian President Vladimir Putin and Chinese President Xi Jinping plan to attend remotely.
Holger Schmieding (chief economist at Berenberg Bank) stated that “Perhaps, the most important thing that the G-20 could accomplish is to tell those who are major energy suppliers that it’s time for them to think about the future.”
He said that if energy prices in the developed world are too high, it will only accelerate the transition away from fossil fuels.
According to the White House, Biden will engage with other key leaders regarding energy prices. Oil recently hit a seven year high at more than $84 per barrel in the U.S. and Brent crude benchmark reached a three-year high at $86.
Claudio Galimberti (senior vice president of analysis at Rystad Energie and expert on oil market demand) stated that “We are certainly in an energy crisis. There is no other way to put this.”
He said that it was unlikely the G-20 would make any decisions with immediate impact.
Biden has repeatedly urged OPEC+ and its allies, including Russia, to boost production beyond the current pace of 400,000 barrels per month.
One bright spot was when Russian President Vladimir Putin instructed Gazprom, the state-controlled company, to pump more gas into European storage facilities. This is where prices have risen sharply this year, and there are fears about winter shortages.
Galimberti stated that producing countries “are in a strong position.” “There is no one that can pressure OPEC+.”
SUPPLY CHAINS
Biden will push for more transparency from countries about supply chain problems that have slowed down growth in the advanced world. Due to increased demand, port and factory closings, shortages in shipping containers, and backlogs at ports, delays have caused delays in deliveries of everything, from cars and bicycles to computers and chips for smartphones and other mobile devices.
Sullivan, Biden’s national security advisor, stated that the president would demand more transparency in identifying logjams between governments. “How can we know at all levels where there might be bottlenecks or breaks within the supply chain so we can respond quickly to them?”
Chad P. Bown is a senior fellow at The Peterson Institute for International Economics and a trade expert. He agreed that sharing information can help but stated that “there’s very little anyone could do now about the backups over the lack of shipping containers.”
Leaders can talk about long-term strategies to diversify the supply of key goods like masks, medical protective equipment, and semiconductors.
Bown stated that there is an urgent need to diversify some semiconductor production geographically from Asia.
The U.S., European Union and others are discussing ways to encourage chip production at home without starting an economic subsidy war. For example, they could agree on the sectors that each side would like to attract to the semiconductor industry.
