G20 leaders tackle energy prices and other economic issues

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ROME – The leaders of the Group of 20 countries meeting for their first in-person summit since the pandemic set in will face a global recovery hampered by a series of hurdles: an energy crisis leading to higher fuel prices and utilities, new COVID-19 outbreaks and bottlenecks in supply chains that keep the economy buzzing and goods flow to consumers.

The summit will allow leaders representing 80 percent of the global economy to speak out – and exert peer pressure – on all of these issues. Analysts are wondering what progress they can make to immediately ease the burden on people facing soaring prices for everything from food and furniture to higher heating bills as winter approaches.

Health and finance officials are sitting in Rome on Friday before presidents and prime ministers meet for the G20 on Saturday and Sunday, but leaders of major Chinese and Russian economic players will not be there in person. This may not bode well for cooperation, especially on energy issues, as climate change takes center stage just before the start of the United Nations Climate Change Conference on Sunday in Glasgow, in Scotland.

Here’s a look at some of the economic issues facing G20 leaders:

PANDEMIC RECOVERY

The International Monetary Fund says the top priority for economic recovery is simple: accelerating the vaccination of the world’s population. Yet the headlines on vaccine cooperation might not be announced at the Rome summit.

G20 countries have supported vaccine sharing through the UN-backed COVAX program, which has failed to alleviate severe shortages in poor countries. The doses given come to a fraction of what is needed, and developed countries are focusing on booster shots for their own populations.

Negotiations ahead of the summit did not focus on a large number of vaccines that could be made available, although countries have spoken of strengthening health systems.

Meanwhile, rising consumer prices and government stimulus packages to help economies rebound after the pandemic may be debated, but central banks tend to face higher prices and stimulus spending is on the rise. decided at national level.

GLOBAL IMPTS

A major economic deal has already been struck: the G20 will likely be celebrating an agreement on a global minimum corporate tax, aimed at preventing multinational companies from hiding their profits in countries where they pay little or no tax.

All G20 governments have signed the deal negotiated between more than 130 countries, and it now faces an ambitious timetable to be approved and enacted until 2023.

US President Joe Biden has linked his national agenda to it – creating a global minimum tax can allow the United States to charge higher taxes without risking companies shifting their profits to tax havens. Adoption by the United States is essential as there are many multinational corporations headquartered there.

The agreement also helps to eliminate trade tensions between the United States and Europe. It allows countries like France, Italy and Spain to remove taxes on digital services that targeted U.S. tech companies Google, Facebook and Amazon.

Biden goes to the G20 with his fiscal and economic agenda still under negotiation in Congress. That means he won’t be able to show that the United States leads the way in global business taxation, although his national security adviser Jake Sullivan has said G20 leaders understand the nature of the business. talks in Congress.

“They will say, ‘Is President Biden on track to deliver on what he said he was going to deliver? “And we think somehow he’ll be on the right track to do it,” Sullivan said.

HIGH ENERGY PRICES

The summit provides an opportunity for dialogue on high oil and gas prices as it includes delegations from major energy producers in Saudi Arabia and Russia, major consumers in Europe and China, and the United States, which are both.

Chinese President Xi Jinping and Russian President Vladimir Putin plan to participate remotely.

“Perhaps the most important thing the G20 could do is tell those of them who are the major energy suppliers that they should be thinking about their future,” said Holger Schmieding, chief economist at the Berenberg Bank.

If energy prices are too high in the developed world, it will only accelerate the shift away from fossil fuels, “which is ultimately, in the long run, bad for suppliers,” he said. .

The White House has said Biden intends to engage with other key leaders on energy prices, with oil recently reaching a seven-year high in the United States of over US $ 84 on barrel and the international benchmark for Brent crude hitting a three-year high at over US $ 86. .

“We are definitely in an energy crisis, there is no other way to put it,” said Claudio Galimberti, senior vice president of analysis at Rystad Energy and oil market demand expert.

But he said it was unlikely that the G20 “could take a decision with immediate impact.”

So far, Saudi Arabia-led OPEC and its allies, including Russia, dubbed OPEC +, have ignored Biden’s calls to ramp up production faster than its pace of 400,000 barrels per day every month until ‘see you next year.

On a positive note, Russian President Vladimir Putin asked state-owned Gazprom to pump more gas to storage facilities in Europe, where prices have quintupled this year and fears about winter shortages have spread.

But producing countries “are in a strong position,” said Galimberti. “There is no one who can put pressure on OPEC +.”

SUPPLY CHAINS

Biden will push for countries to share more information on issues with supply chains that have slowed growth in the developed world. Port and factory closures, shipping container shortages and growing demand have contributed to backlogs at ports and delivery delays on everything from bicycles to computer chips used in smartphones and cars.

Sullivan, Biden’s national security adviser, said the president would push for more transparency on identifying traffic jams with other governments: “How do we know, at all levels, where there may be bottlenecks or disruptions in the supply chain so that we can respond to them quickly? “

Business expert Chad P. Bown, senior researcher at the Peterson Institute for International Economics, agreed that sharing information can be useful, but said “there is not much that anyone can do. “Now about the safeguards for the lack of shipping containers.

Longer term, executives can discuss efforts to diversify the offering of key products such as masks, other medical protective equipment and semiconductors.

“There is a call to geographically diversify some semiconductor production” away from Asia, Bown said.

The United States and the European Union are considering finding ways to encourage chip production in their countries without starting a subsidy war, for example by agreeing on sectors of the semiconductor industry. that each party would seek to attract.

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Boak reported from Washington.


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