Yellen pledges US cooperation, urges G7 to ‘go big’ on virus aid

United States President Joe Biden’s administration told allies Friday that it was committed to re-engaging with them in order to steer the global economy out of its worst slump since the Great Depression, a contrast with the go-it-alone, “America First” approach of former President Donald Trump.

US Treasury Secretary Janet Yellen told her peers from the Group of Seven (G7) nations that Washington was committed to multilateralism and “places a high priority on deepening our international engagement and strengthening our alliances”.

Yellen spoke to the G7 in an online meeting, chaired by the United Kingdom, at which she called for continued fiscal support to secure the recovery, saying “the time to go big is now”.

The UK said officials discussed giving help to workers and businesses hit by the pandemic while ensuring the sustainability of public finances “in the long term”.

As well as the US and UK, the G7 includes Japan, France, Germany, Italy and Canada.

Italian Economy Minister Roberto Gualtieri said the group had committed to continuing coordinated action to support the economy. “The withdrawal of policy support is premature,” he wrote on Twitter.

Biden has proposed a further $1.9 trillion in spending and tax cuts on top of $4 trillion of coronavirus relief measures enacted by Trump.

UK finance minister Rishi Sunak is expected to say next month that he will extend his economic rescue programmes and that fixing public finances will have to be addressed later.

The UK said G7 officials agreed that making progress on reaching “an international solution to the tax challenges of the digital economy” was a key priority.

Countries have been trying to revive attempts at a global approach to taxing giant digital firms – many of them American, such as Amazon and Google – after progress was blocked by Trump’s administration.

The UK called on G7 countries to agree on a joint approach to taxing internet giants by mid-2021, a deadline agreed by the wider Group of 20 nations.

Help for the vulnerable

Sunak stressed “the moral, health and economic case” for fast global vaccine distribution and said international financial institutions had to help vulnerable countries respond to the pandemic.

The G7 had been expected to back a new allocation of the International Monetary Fund’s own currency, known as special drawing rights (SDR), to help low-income countries hit by the coronavirus crisis.

Officials from the US, the IMF’s biggest shareholder, had signalled they were open to a new issuance of $500bn, sources said on Thursday — another shift by the Biden administration.

Yellen urged the G7 countries and international financial institutions to address the challenges facing low-income countries that are struggling to respond to the pandemic, the US Department of the Treasury said.

A G7 source, who asked Reuters news agency not to be named, said the US told other countries it needed a few weeks to finalise the SDR increase.

Sunak called on private creditors to give debt help to the poorest countries and said climate change and nature preservation would be priorities for the UK’s G7 presidency.

UK Prime Minister Boris Johnson is due to host the first in-person summit of G7 leaders in nearly two years in June at a seaside village in Cornwall, southwestern England.

Trump threw the G7 into chaos in 2018 when he said he was backing out of a joint communique after a leaders’ summit because of a trade dispute with Canada.

World Bank President David Malpass said the G7 had a “good discussion” about inequality, COVID-19 vaccinations, climate change, economic vulnerabilities and debt reduction for poor countries.

Yellen said the G7 should expect to see the US Treasury’s engagement on climate change to “change dramatically relative to the last four years”.