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G7 Leaders Tackle Growth, Stability and Tax Bases; Warn Absent Russia

G7 leaders* met last week for the first-time ever in Brussels, and for the first time since 1998 without Russia.  They gave Russia a strong warning and then proceeded to make substantive headway without them on international tax, energy, trade and investment, security and development issues in ways that directly affect companies active in international markets. [1]  Below are highlights for the private sector:

Supporting Ukraine, Warning Russia: The G7 denounced Russia’s interference in Ukraine’s sovereignty and integrity, and deplored their illegal annexation of Crimea (which they will NOT recognize).  They applauded the IMF’s $17 billion Ukraine program, to which they and others will add some $18 billion of their own.  The G7 stand ready to impose new sanctions and other restrictive measures, and told Russia they must recognize the election results, finish withdrawing from Ukraine’s border, stop the flow of weapons and militants and work to influence armed separatists to stop their violence. [2]

Enhancing Energy Security/Markets: The Ukraine crisis forced soul-searching on energy security.  The G7 and their Energy Ministers have committed to work with the IEA and others and to develop concrete plans to make energy (including gas/LNG) markets and use more competitive and efficient, supplies and routes more diverse, integrated and secure, to better manage disruptions, to develop cooperative emergency plans for the winter of 2014/15.  The G7 are determined to reach a binding global agreement on climate change in 2015, while pursuing low carbon growth strategies. [3]  These goals will be challenging (and some say mutually inconsistent) politically and technically. [4]

Closing International Tax and Financial Loopholes: All G7 members need revenues, so they made common cause to fight to end international tax avoidance.  They got squarely behind the G20/Organization of Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting Action Plan and intend rapid implementation of the new single global standard for automatic exchange of tax information, all of which will impose new requirements on companies.  The G7 will join with developing countries to further combat illicit financial flows and to recover stolen assets.  They agreed to ensure timely availability of beneficial ownership information to financial intelligence units, tax collection and law enforcement agencies and to implement international standards and will participate in the United Nations Office on Drugs and Crime and the World Bank’s Stolen Asset Recovery Initiative and other international efforts.

Building Financial Resilience and Safer, More Transparent Markets: G7 also agreed to end too-big-to-fail and to take on shadow banking, with the G20 roadmap, including to set deadlines for stronger oversight and regulation, and to make derivatives markets safer.  Financial services companies should expect changes this year.  The G7 announced an initiative on Strengthening Assistance for Complex Contract Negotiations (CONNEX) to provide technical expertise to developing countries on how to negotiate complex commercial contracts, focusing initially on the extractives sector.  Extractives companies will want a window on that process.   Meanwhile, the G7 decided to put more shoulder into extractives industry transparency initiative (EITI) programs and to help developing countries better manage extractives revenues and uses. 

Promising Open Markets, Pressing for Market-Opening:  After promising again to keep their own markets open and to avoid protectionism, the G7 touted their substantial progress on key trade negotiations and committed to finalize them soonest (e.g. Canada-EU, Japan-EU, Canada-Japan, EU-US, the Trans-Pacific Partnership, the Trade in Services Agreement).  They also committed to liberalize environmental goods and services trade (including by an Environmental Goods agreement) and to conclude expeditiously an expanded Information Technology Agreement.  The G7 promised full, swift implementation of the Bali Package, especially the Trade Facilitation Agreement, to the substantial benefit of the Least Developed Countries.  They tipped hats to the WTO, calling for rapid agreement on a balanced work program to complete the Doha Round.  It is an ambitious agenda requiring a heavy lift, political deals and cooperation with diverse private sector actors and industries.


* Leaders from Canada, France, Germany, Italy, Japan, United Kingdom, United States and European Union (EU)

© 2019 Covington & Burling LLP

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About this Author

Anne Pence, International Advisor, Covington Law Firm
Senior International Adviser

Constance Anne Pence, a non-lawyer, is a senior international advisor in Covington’s Washington, DC office. As a policy-oriented economist for over 20 years, Ms. Pence has tremendous experience advising sovereign and corporate clients, as well as coalitions in both domestic and international policy settings. Before joining Covington, she was the special advisor to the newly-created USG Millennium Challenge Corporation.  Ms. Pence also served with the U.S. State Department for 16 years.  For eight of those years she was the Department’s G8 Summit policy coordinator in the Office of the...

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