Janet Yellen used her first meeting of G7 finance ministers as US Treasury secretary to signal a revival in American multilateralism, in a clear change from Donald Trump’s administration, according to officials who watched the video conference on Friday.
The US’s positive tone in the international meeting raised hopes in other capitals that the chance of reaching agreement this year in difficult areas of global policy such as climate, digital taxes and help for the poorest countries had improved significantly.
With the coronavirus pandemic still ravaging the global economy, finance ministers stressed the need for continued economic support. Yellen told the rest of the G7 not to cut fiscal support this year, saying: “The time to go big is now.”
Her call was warmly received in European capitals. Roberto Gualtieri, the Italian economy minister, said that “withdrawal of policy support is premature”, while Bruno Le Maire, French finance minister, called for close co-ordination within the G7 on recovery plans and economic policies.
The biggest relief in other capitals came when Yellen emphasised the renewed commitment of Joe Biden’s administration to multilateralism and constructive dialogue between countries.
UK chancellor Rishi Sunak, who chaired the meeting, welcomed Yellen’s arrival as Treasury secretary and the support of the G7 for the UK’s agenda this year which prioritises climate change. Yellen told the other finance ministers the US now recognised it must play a “crucial role” in global efforts to combat carbon emissions and they should expect a “dramatic increase in US engagement” on the issue compared with the Trump years.
One of the most contentious areas among G7 countries has been the effort to reform corporate taxation of multinationals. Negotiations over a compromise package designed by the OECD have been stalled for months as the US threatened to impose tariffs on European countries in retaliation for their new digital sales taxes.
In contrast, in Friday’s meeting Yellen struck a positive tone according to several G7 capitals. The US agreed to a deadline of the summer to make progress on the issue.
One official familiar with the meeting’s events said that Yellen reinforced the US commitment to resolving the digital tax impasse at the OECD and insisted the agreement had to work for everyone.
Yellen also offered encouraging words on international efforts to ease the impact of the pandemic on heavily-indebted emerging economies.
The US is reviewing whether to back a plan for the IMF to allocate up to $500bn in special drawing rights to its members, a move that has been widely endorsed by other countries but was blocked by the Trump administration. Yellen said the G7 should work to “address the challenges facing low-income countries”.
The official said the US was still weighing up its support for an increased SDR allocation and would decide in the coming weeks. The US Treasury declined to comment on Yellen’s message about SDRs or the OECD talks.
In a statement Olaf Scholz, German finance minister, praised the spirit of global co-operation with the new US administration. “It’s good that we are once again seeking a common dialogue in the G7 format,” he said.
Additional reporting by Miles Johnson in Rome, Guy Chazan in Berlin and Victor Mallet in Paris
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