Founded in 1999, the G20 brings together the world’s major economies. At the G20 Summit this October, the US can and should lead the way on concrete, actionable commitments to deliver an equitable recovery from the COVID-19 crisis—one that supports countries which have been hit the hardest.
At the recent G20 Finance Ministers meeting in Italy, US Secretary of the Treasury Janet Yellen insisted that America is “back,” and spoke about the administration’s intent to re-embrace multilateralism. “We can solve problems together that we can’t solve alone,” she said.
But can the US deliver meaningful solutions through the G20 that address the deep inequities that COVID-19 has laid bare?
While compromise is expected, the G20 is a unique opportunity for ambitious solutions to the ongoing health and economic crises; it’s an important opportunity for the Biden administration to reaffirm its commitment to multilateralism and demonstrate leadership in international negotiations.
The US has taken strong positions on important issues at the G20 so far, but more needs to be done to reach an agreement that will get the pandemic under control and support developing countries on their path to equitable and sustainable recovery.
We hope to see the US exercise leadership on the key issues that will get us there.
In May, the Biden administration declared its support for waiving intellectual property rights on COVID-19 vaccines, which is a critical step toward affordable and equitable access to lifesaving vaccines.
Yet, despite G20 leaders acknowledging that immunization is a “global public good,” and expressing determination “to bring the pandemic under control everywhere as soon as possible,” the US has not brought several members along on this—especially the UK and Germany.
Shortly after the most recent G20 meetings, Secretary Yellen acknowledged that significant gaps remain in the global vaccine rollout, and pointed to the upcoming joint finance and health ministers meeting (before the Summit) as a critical moment to address them..
With only three months to go, the Biden administration will have to work quickly to rally support for a comprehensive agreement that can address the vast vaccine inequities between richer and poorer countries, including a waiver of intellectual property rights, sharing of vaccine recipes, and decentralized production of COVID-19 vaccines in low- and middle-income countries.
While the vaccine can was kicked down the road, we were pleased to see G20 leaders express continued support for a new allocation of International Monetary Fund (IMF) SDRs, on track to be delivered this summer. This will most certainly be a gamechanger for many struggling economies, boosting their foreign reserves and enabling them to move into recovery more swiftly.
However, we were disappointed that G20 leaders did not echo their support for the G7’s call to reallocate $100 billion of these new resources. The US and other wealthier countries will receive a windfall from this allocation—one they don’t need. Those resources must be channeled to low- and middle-income countries who are facing serious economic pressures, including a looming debt crisis and vaccine shortages.
The Biden administration has been a supporter of a new SDR allocation since shortly after inauguration—a welcome shift after the Trump administration blocked it for almost a year. As the largest IMF shareholder by far, the US will receive the lion’s share of the new issuance—over $113 billion. It is critical that the Biden administration continue to show leadership on this front by rapidly channeling SDRs it doesn’t need to lower income countries.
To guarantee the allocation has the most positive impact, the US should ensure these resources are reallocated in ways that are debt-free, additional to other aid commitments it plans to make, and free of economic conditionality. This unprecedented allocation should not end up adding to developing countries’ debt burdens or pushing them into long periods of austerity that could delay recovery and increase inequality.
While the new SDRs will provide much needed liquidity to developing countries, meaningful debt relief is crucial to enable countries to use their resources to address the ongoing health, economic, and climate crises—rather than servicing debt to wealthier countries or other creditors.
However, the G20 has so far only opted to temporarily suspend payments through the Debt Service Suspension Initiative (DSSI) and to coordinate on “debt treatment” through the Common Framework. Neither effort requires the participation of private creditors, nor protects countries from credit rating agencies threatening to downgrade their ratings and making debt refinancing more expensive—a key deterrent for some countries to joining the initiative.
Daleep Singh, the Deputy National Security Advisor in the Biden administration who leads the US delegation to the G20, recently indicated that the US supports both cancelling debt and addressing the issues that prevent countries from seeking debt relief from existing platforms (such as the fear that their credit ratings may be downgraded—as Ethiopia experienced in May after announcing it would seek relief under the Common Framework).
It will be important for the administration to remain vocal on these issues, and not accept a compromise that fails to deliver meaningful debt relief to countries that need it—including middle-income countries that have been left out of debt relief efforts.
Oxfam strongly supports the objectives of the international tax agreement endorsed by leaders at the recent meetings and to be finalized at the G20 Summit in October—namely, ending the global race to the bottom in corporate tax, curbing tax havens abuse, and redistributing taxing rights to market countries.
While we commend the Biden Administration’s effort to raise the ambition of the global minimum tax (“Pillar 2”), the US should also ensure that the concerns of developing countries are included. For example, developing countries should not be asked to endorse an agreement that allows for the global minimum tax to be collected almost exclusively by wealthier countries where multinational corporations are headquartered.
Given that the US insists that other countries should abandon their digital services taxes, it should also ensure that the redistribution of taxing rights is large enough to result in a net increase in revenue for developing countries.
One of the bright spots of the recent meetings was a welcome commitment by the G20 to “an ambitious and successful IDA20 replenishment.” Development and humanitarian needs continue to grow around the world—at the same time that resources available to lower income countries are under stress.
IDA, the concessional lending arm of the World Bank, remains a crucial source of low-interest financing and grants on which many countries depend, and the replenishment process provides an important opportunity for IDA donors (including the US) to make significant impact through their individual contributions and to push for strong commitments from the World Bank to support countries in ways that reduce inequality as well as mitigate the impact of future crises. We hope to see the US at the forefront of these negotiations.
The meeting of the G20 Finance Ministers was only one among several over the course of this year that will lead up to the G20 Summit in October, where we hope to see real progress on these issues.