The world is faced with major challenges that will shape the decades to come. Issues such as climate change, COVID-19 and rapid technological change affect us all and demand a collective response.
Launched last month,Global Britain in a Competitive Age: the Integrated Review of Security, Defence, Development and Foreign Policy describes the UK government’s vision for the UK’s role in the world over the next decade and the actions we will take at home and with other countries to ensure that we are stronger, safer and more prosperous.
While the world remains in the midst of a global pandemic, we must be optimistic for the future and move collectively towards an economic and social recovery that is sustainable and inclusive - benefitting everyone, delivering jobs, prosperity and wellbeing for all our citizens. The UK’s G7 Presidency is uniting leading democracies in working together, drawing on our common strengths and values as democratic, open economies and societies.
The UK has the G7 Presidency at a critical time, alongside Italy as G20 President and our partnership on COP26, we are in an unrivalled position to help steer the international community to Build Back Better. The ambitious agenda of both of our Presidencies aims to leave a lasting legacy at this important time – spreading economic growth fairly, encouraging free and fair trade and protecting our planet for future generations.
Building Back Better captures the UK's holistic vision for the future, while harnessing the multilateral system and adopting a global approach for countries to collaborate and find solutions. As the most prominent grouping of democratic countries, the G7 has long been the catalyst for decisive international action to tackle the greatest challenges we face.
Now is no different and we must go further together, leading by example: whether leading the fight against and recovery from Covid-19, strengthening our resilience against future pandemics, promoting our future prosperity and advocating free trade, tackling climate change and preserving the planet's biodiversity, or creating an inclusive environment for all to thrive.
Inclusive economic recovery
It has been often said about Covid-19 vaccination that no one is protected until everyone is protected, the same is true of the global economy. The prospects for the global economy in 2021 depend upon our collective ability to recover, revealing the importance of stronger international cooperation and collaboration.
Working closely to support the G20, G7 Finance Ministers and Central Bank Governors are committed to dialogue on macroeconomic policies and on the role of the international financial system to provide effective support for vulnerable countries. This includes how best to shape and respond to the phases of the global recovery from Covid-19, including supporting workers and businesses in dealing with the pandemic while ensuring sustainability in the long term. Looking to the next stage of the recovery, the UK would like to facilitate a discussion on how G7 countries are planning to re-target their economic support measures once the pandemic is under control, recognising that countries will be in different situations and the economic recovery may not progress at the same pace across the world.
On the role of international institutions, last month the Chancellor and his fellow G7 Finance Ministers also agreed to support a new and sizable allocation of IMF Special Drawing Rights, which will provide vulnerable countries with much needed financial support during the global pandemic. We will continue to support the G20 to provide relief for Low Income Countries at this critical time. This includes the implementation of the G20’s Debt Service Suspension Initiative, which has supported 45 vulnerable countries, providing crucial liquidity for them to buy vaccines and support their economic recovery, and also implementing the G20’s Common Framework for eligible countries so that we take a long-term sustainable approach to deal with debt vulnerabilities.
If the world is to live up to the Paris Agreement, the path to net zero is vital. All G7 members have made or signalled their intent to make a commitment to transitioning their economies to net zero by 2050. These commitments need to be backed by appropriate financial, economic and trade policies.
The UK is leading the way by harnessing the power of green finance but, if capital is to flow in the way it must, our green finance ambitions need to be global. We are using our G7 Presidency to press for further ambition on climate and environment policies including improved climate-related financial disclosures, support for the development of international sustainability-related financial reporting standards, to ensure that all major companies and financial institutions are providing high quality, comparable information to investors and market participants
However, the transition to net zero will also rely on green technologies being adopted widely and quickly around the world. Liberalising tariffs on environmental goods and removing barriers to trade in environmental services will help to accelerate the green transition by reducing the cost of trade and expanding market opportunities, increasing incentives for green businesses to innovate and lowering the price of green goods and services for consumers to incentivise their uptake.
Free and fairer trade
National economies becoming integrated into a global economic system was one of the most significant developments of the 21st century. While there were already signs of weakening global trade in goods in 2019 – a 0.1% contraction was recorded for the first time since the 2008-09 financial crisis – 2020 inflicted significant harm exposing systemic weaknesses and reinforcing the understanding that our global prosperity is interwoven. Industries and businesses, large and small, suppliers and supply chains were all badly affected.
The outbreak of Covid-19 has strained international trade and supply chains, but at the same time the pandemic has also reinforced the centrality of global trade in tackling its effects. The Chair's statement at the inaugural G7 Trade Track (link) welcomed the contribution trade can make to a strong economic recovery and emphasised the need to build back better.
As we continue to navigate the next stages of our response to the pandemic, the G7 meetings will help us to learn from each other and to exchange views on how best to shape and respond to the phases of the global recovery, including supporting workers and businesses in dealing with the pandemic while ensuring sustainability in the long term.
We will support the foundations for global growth – that of freer and fairer trade. For the UK, the case for global trade is helped by recent UK government-led research estimating that nearly 6.5 million jobs (c.10%) in the UK are supported by exports and that jobs directly and indirectly supported by exports pay around 7% higher than the national median.
As a group of likeminded countries, the G7 share a commitment to free and fair trade. Consensus between us to both support and reform the global trading system will be a key step towards securing the future economic prosperity of our open and outward-looking societies, alongside the wider aim for green growth, systemic resilience and increased market access.
While the WTO global trading system remains at the heart of our shared prosperity, we acknowledge that the WTO has not kept pace with the opportunities and challenges of 21st century trade, and it is crucial we reform the WTO. That is why the UK G7 Presidency has placed WTO reform at the heart of our discussions. Whether to help break the current impasse through developing a shared approach on Dispute Settlement Mechanism reform, or to help mould the system into one that is binding, enforceable and impartial, tackling unfair practices. We will also encourage G7 Members to reaffirm the importance of transparency obligations and to consider how to increase adherence among the wider WTO membership.
This is the essence of the UK's G7 Presidency, to help create the conditions for collective global recovery so we can all Build Back Better.