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Subject: International Relations

  • Rare Earth Metals at the heart of China-US rivalry

    Beijing’s dominance in rare earth minerals, the key to the future of manufacturing, is a cause for concern for the West.

    Answer this question from CSP 2011 in the comment box:

    Q.What is the difference between a CFL and an LED lamp? 

    1. To produce light, a CFL uses mercury vapor and phosphor while an LED lamp uses semi-conductor material.
      2. The average life span of a CFL is much longer than that of an LED lamp
      3. A CFL is less energy-efficient as compared to an LED lamp.

    Which of the statements given above is/are correct?

    (a) Only 1

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    What are Rare Earth Metals?

    • The rare earth elements (REE) are a set of seventeen metallic elements. These include the fifteen lanthanides on the periodic table plus scandium and yttrium.
    • Rare earth elements are an essential part of many high-tech devices.
    • They have a wide range of applications, especially high-tech consumer products, such as cellular telephones, computer hard drives, electric and hybrid vehicles, and flat-screen monitors and televisions.
    • Significant defense applications include electronic displays, guidance systems, lasers, and radar and sonar systems.
    • Rare earth minerals, with names like neodymium, praseodymium, and dysprosium, are crucial to the manufacture of magnets used in industries of the future, such as wind turbines and electric cars.

    Curbing dependence on China

    • At a time of frequent geopolitical friction among those three powers, Washington and Brussels want to avoid this scenario.
    • They are investing in the market for 17 minerals with unique properties that today are largely extracted and refined in China.
    • The expected exponential growth in demand for minerals that are linked to clean energy is putting more pressure on US and Europe to take a closer look.
    • Amid the transition to green energy, in which rare earth minerals are sure to play a role, China’s market dominance is enough to sound an alarm in western capitals.

    Why such a move?

    • In 2019, the U.S. imported 80% of its rare earth minerals from China.
    • The EU gets 98% of its supply from China.

  • Can the G-7 give new direction to globalisation?

    The article highlights the challenges associated with the globalisation and important role G-7 can play in dealing with these challenges.

    The context that makes this G-7 Summit significant

    • The most significant expectation of the summit is that it will help determine the shape of globalisation.
    • There has been much discussion of the possibility of the G-7 pushing for global coordination on minimum corporate taxation.
    • The summit also seeks to redefine the broader relationship between states and markets in three ways.

    Redefining the relationship between states and market in 3 ways

    1) States reasserting the control over markets

    • States are reasserting control over the terms on which markets operate.
    • The idea of Neoliberalism did convey the idea that states should follow where the market leads, or step in only where there is a market failure.
    • However, this account of the relationship between states and markets had four harmful consequences.
    • 1) It provided a misleading picture of what makes economies vibrant.
    • 2) It led to a sense of loss of collective control over our economic future.
    • 3) It led to great inequality.
    • 4) In some fields like technology, it created new forms of corporate power.
    • To reverse some of these consequences, some coordination at the global level on taxation, or treatment of technology monopolies etc is required.

    2) Global interdependence cannot be managed without global public goods

    • At one level the global roles of the G-7 or even the G-20 were something like the political steering committee for global capitalism.
    • Their most useful political roles were during the financial crisis, when global financial coordination was required.
    • But there was relatively little attention to the systemic vulnerabilities that globalisation might create.
    • These could be vulnerabilities because of the way supply chains were distributed, or those that arose from the creation of winners and losers within globalisation.
    • Most importantly, there was short shrift given to global public goods like health.
    • The Covid crisis has reminded us of all of these vulnerabilities.
    • The commitment of G-7 to provide one billion vaccine doses is a welcome step.
    • But whether this crisis-driven commitment will translate into an enduring and just framework for providing global public goods on health and environment remains to be seen.

    3) Geopolitical context

    •  There are two geopolitical “cold wars” that cast a shadow on the G-7.
    • The first involves China.
    • In the context of rising geopolitical tensions with China, greater coordination and unity of purpose amongst the G-7 will become more important.
    • The second is a threat of authoritarian disruption.
    • Greater global disarray strengthens the possibility of giving political support to these political tendencies.
    • It is important, therefore, to demonstrate that the G-7 countries are part of a functional democratic civilisation.

    Challenges ahead

    • Despite the directional changes, many of the central distributive conflicts that beset globalisation are likely to continue.
    • The talk of global public goods works only in a context where the advanced economies are at the receiving end.
    • Take the G-7 proposal for the coordination of taxation.
    • In principle, this is not a bad idea, if it can close off tax havens and prevent a global race to the bottom.
    • However, it is sobering to read the Tax Justice Network’s “The State of Tax Justice Report” 2020.
    • According to this report, the United States, Netherlands and United Kingdom are three of the top five countries (along with Cayman Islands and Luxembourg) responsible for tax losses inflicted on other countries.
    • The US, Switzerland, Singapore and Hong Kong are amongst the highest on the Financial Secrecy Index.
    • So, the visible corporate tax rate, or taxing at point of sales, may just be the window dressing the global tax problem that allows countries to hold onto their privileges.
    • Similarly, on climate change. There is a lot of encouraging talk of ambitious targets, investment-led transformations.
    • Intelligently done, this might be for the good.
    • But it could also repeat the familiar pattern of regulation serving to preserve the dominance of advanced economies.
    • There is also, in the talk of a new global economic order, the curious absence of discussions on finance.
    • But if one is looking at potential sources of vulnerability, the ability to create winners and losers, and possible threats to global resilience, then regulation and coordination of global finance deserve more attention.

    Consider the question “What are the vulnerabilities associated with globalisation. Suggest the solutions to deal with these vulnerabilities.”

    Conclusion

    If the G-7 wants to truly exercise more leadership, it will have to convince the world that all its wonderful new principles, resilience, inclusion, global public goods, are not simply ruses to serve only the interests of the developed world.

  • G-7 agenda this year and what is in it for India

    At the invitation of UK PM, PM Modi will participate in the Outreach Sessions of the G7 Summit this week.

    Note the members of G7 and G20. UPSC may puzzle you asking which G20 nation isn’t a member of G7.

    The Group of 7

    • The G-7 or ‘Group of Seven’ includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
    • It is an intergovernmental organization that was formed in 1975 by the top economies of the time as an informal forum to discuss pressing world issues.
    • Initially, it was formed as an effort by the US and its allies to discuss economic issues.
    • The G-7 forum now discusses several challenges such as oil prices and many pressing issues such as financial crises, terrorism, arms control, and drug trafficking.
    • It does not have a formal constitution or a fixed headquarters. The decisions taken by leaders during annual summits are non-binding.
    • Canada joined the group in 1976, and the European Union began attending in 1977.

    Evolution of the G-7

    • When it started in 1975—with six members, Canada joining a year later—it represented about 70% of the world economy.
    • And it was a cosy club for tackling issues such as the response to oil shocks.
    • Now it accounts for about 40% of global gdp.
    • Since the global financial crisis of 2007-09 it has sometimes been overshadowed by the broader g20.
    • The G-7 became the G-8 in 1997 when Russia was invited to join.
    • In 2014, Russia was debarred after it took over Crimea.

    Agenda of G-7 this year

    • The UK currently holds the presidency of the G7 and has invited India, along with Australia, Republic of Korea and South Africa, as guest countries for the Summit.
    • The meetings will be held in hybrid mode.
    • The theme for the summit is ‘Build Back Better’ and the UK has outlined four priority areas for its presidency:
    1. leading the global recovery from coronavirus while strengthening resilience against future pandemics;
    2. promoting future prosperity by championing free and fair trade;
    3. tackling climate change and preserving the planet’s biodiversity; and
    4. championing shared values and open societies.

    Is India attending it for the first time?

    • Since 2014, this is the second time PM Modi will be participating in a G7 meeting.
    • India had been invited by the G7 French Presidency in 2019 to the Biarritz Summit as a “Goodwill Partner” and the PM participated in the Sessions on ‘Climate, Biodiversity and Oceans’ and ‘Digital Transformation’.
    • During Prime Minister Manmohan Singh’s UPA rule, India attended the G8 five times.
    • Russia was indefinitely suspended in March 2014 after the annexation of Crimea, reducing the count of the G8.

    What to watch out for at this G-7 summit?

    • This will be President Biden’s first visit to Europe, where he will signal his key message “America is back”.
    • He has flown down to the UK, where he will meet British Prime Minister Boris Johnson, Queen Elizabeth II and other allies at the G7 summit.
    • He’ll continue on to a NATO conclave in Brussels on June 14, before his conversation with Russian President Vladimir Putin in Geneva two days later.
    • This sequencing of events has been done to coordinate Washington’s moves of consultations with allies before meeting the Russian President.
    • This ties in well with the US President’s initial foray into multilateralism — he held the first summit of leaders of “the Quad” — Australia, India, Japan and the US.
    • This was aimed at increasing vaccine production and aligning their positions toward Beijing.

    Why is this meeting important?

    • The US-Russia relations are going through a rough patch — some analysts even refer to it as possibly their nadir since the end of the Cold War.
    • Interestingly, the venue of the Biden-Putin meeting — Geneva — is the place where then US President Ronald Reagan held his first meeting with Soviet Union’s Mikhail Gorbachev in 1985.
    • The key element that is making Washington take the important step of engaging with Moscow to contain the damage in their bilateral ties is that the US wants to focus on its strategic rival, China.

    What’s in it for India?

    • India has long called for reforming global institutions and groupings to reflect modern-day geopolitical realities.
    • Trumps’ offer to expand G7 fitted into New Delhi’s idea of being part of the global high table.
    • With an assertive China looming, the US is calling all like-minded countries to partner in dealing with Beijing.
    • If Biden and Johnson want to take the leap forward and constitute a global democratic alliance of 10-11 countries, it will be an important signal.
    • India is likely to get vaccines from the US — both directly as well as through COVAX. Initial estimates suggest India will get about 2 to 3 million vaccines in the first tranche.

  • US, UK seek to sign New Atlantic Charter

    US President Joe Biden and British Prime Minister Boris Johnson seeks to sign a new Atlantic Charter.

    What is Atlantic Charter?

    • The Atlantic Charter was a statement issued on 14 August 1941 that set out American and British goals for the world after the end of World War II.
    • The charter’s adherents signed the Declaration by United Nations on 1 January 1942, which was the basis for the modern United Nations.
    • The charter inspired several other international agreements and events that followed the end of the war.
    • The dismantling of the British Empire, the formation of NATO, and the General Agreement on Tariffs and Trade (GATT) all derived from the Atlantic Charter.

    Why sign new charter?

    • At their meeting, the two leaders plan to sign what they’re calling a new Atlantic Charter, pledging to “defend the principles, values, and institutions of democracy and open societies.”
    • US hopes to reassure European allies that the US had shed the transactional tendencies of Donald Trump’s term and is a reliable partner again.
    • The US staunchly opposed the Brexit movement, the British exodus from the European Union that Mr. Johnson championed, and has expressed great concern with the future of Northern Ireland.
    • Biden once called the British leader a “physical and emotional clone” of Trump.

  • Pushback against China more likely as Quad gains momentum

    The article discusses the future pushback against China in South Asia and Indo-Pacific as Quad gains more momentum. 

    Context

    Recently, the Chinese Ambassador to Bangladesh, Li Jiming, warned Dhaka that there will be “substantial damage” in bilateral ties between China and Bangladesh if the latter joins the Quad.

    Bangladesh’s reaction

    • Bangladesh Foreign Minister A.K. Abdul Momen promptly and publicly challenged the Chinese envoy’s statement, underlining categorically that Dhaka pursues an independent foreign policy. 
    • That China’s remarks would reverberate far beyond South Asia was expected and perhaps intended.
    • The spokesperson of U.S. State Department remarked, “What we would say is that we respect Bangladesh’s sovereignty and we respect Bangladesh’s right to make foreign policy decisions for itself.”

    Implications for South Asia and Info-Pacific

    • With its message to Bangladesh, Beijing was laying down a marker that nations should desist from engaging with the Quad.
    • This episode captures the emerging fault lines in South Asia and the wider Indo-Pacific.
    • For all its attempts to play down the relevance of the Quad, Beijing realises that the grouping, with all its weaknesses, is emerging as a reality and there is little it can do to prevent that.
    • And so, it is agitated about Quad’s future role and its potential success in offering the regional states an alternative to its own strong-arm tactics.

    About Quad’s agenda

    • The Quad member states are figuring out a cohesive agenda amongst themselves and there are no plans for an expansion.
    • There is a desire to work with like-minded nations but that can only happen if the four members of the Quad can build a credible platform first.
    • Quad has not asked any country to join and no one has shown an interest.
    • But China wants to ensure that after failing in its initial attempt to prevent the Quad from gaining any traction.
    • Its message is well understood by other states who may harbour any desire of working closely with the Quad members.

    Way forward

    • Beijing has failed to prevent nations from the West to the East from coming out with their Indo-Pacific strategies.
    • It has failed to prevent the operationalisation of the Quad, and now it might be worried about other nations in the region thinking of engaging with the Quad more proactively.
    • Even Bangladesh is planning to come out with its own Indo-Pacific strategy and Beijing has now warned Dhaka that a close cooperation with the Quad should not be part of the policy mix.
    •  As the Quad gains more momentum and the churn in the waters of the Indo-Pacific leads to new countervailing coalitions against China, Beijing’s belligerence can only be expected to grow.

    Conclusion

    Beijing is more likely to demand clear-cut foreign policy choices from its regional interlocutors, as its warning to Bangladesh underscores. But as Dhaka’s robust response makes it clear, states are more likely to push back than become subservient to Chinese largesse.

  • Opportunity to expand ties with West

    The article takes an overview of the growing convergence of India’s interest with the West in the changing geopolitical scenario and opportunities it offers to India.

    Significance of G-7 Summit for India

    • Summit of the G-7, the Group of Seven industrial countries, will be hosted by the United Kingdom this week.
    • Prime Minister Narendra Modi will participate digitally in this summit.
    • This participation also marks an important step towards a new global compact between India and the West.
    • The global financial crisis of 2008, the rapid rise of China, divisions within the West during the Trump years, and the chaotic response in North America and Europe to the Covid-19 pandemic, were the factors that indicated the decline of the West.
    • In his first tour abroad as the US president wants to demonstrate that the collective West is an enduring force to reckon with under renewed American leadership.
    • For India, the G-7 summit is an opportunity to expand the global dimension of India’s growing partnerships with the US and Europe.

    Convergence of interests between India and the West

    • The challenges from an increasingly aggressive China, the urgency of mitigating climate change, and the construction of a post-pandemic international order are generating convergence between the interests of India and the West.
    • India’s current engagement with the G-7 is about global issues.
    • The idea of a global democratic coalition that is based more broadly than the geographic West has gained ground in recent years.
    • And India is at the very heart of that Western calculus.
    • For India, too, the G-7summit comes amidst intensifying strategic cooperation with the West.
    • This includes strong bilateral strategic cooperation with the US, France, UK as well as the Quad and the trilateral partnerships with France and Australia as well as Japan and Australia.
    • India has also stepped up its engagement with the European Union.

    China factor

    • India’s increasing engagement with the US and the West has been triggered in part by the continuous deterioration of the relationship with China.
    • Besides the threat to territorial security, India finds that its hopes for strong global cooperation with China have taken a big beating in recent years.
    • China is the only great power that does not support India’s permanent membership of the UN Security Council and blocks India’s membership of the Nuclear Suppliers Group.
    • At the end of the Cold War, India believed that China was a natural partner in the construction of a multipolar world.
    • India now can’t escape the conclusion that China is the greatest obstacle to India’s global aspirations and the West is an emerging partner.
    •  India has relied on Western support to fend off China’s effort to internationalise the Kashmir question after the 2019 constitutional changes.
    • India walked away from RCEP due to the growing trade imbalance with China and the negative impact of Chinese imports on India’s domestic manufacturing.
    • After China’s aggression in Ladakh last April, India has also sought to actively limit its exposure to Chinese investments and technology.

    Way forward

    • The convergence of interests between India and the West does not mean the two sides will agree on everything.
    •  There are many areas of continuing divergence within the West — from the economic role of the state to the democratic regulation of social media and the technology giants.
    • It will surely not be easy translating the broad convergences between India and the West into tangible cooperation.
    • That would require sustained negotiations on converting shared interests.

    Consider the question “The idea of a global democratic coalition that is based more broadly than the geographic West has gained ground in recent years. This offers India an opportunity to expand the global dimension of India’s growing partnerships with the US and Europe. Comment.”

    Conclusion

    While India continues to strengthen its partnerships in Asia and the global south, a more productive partnership with the West helps secure a growing array of India’s national interests and adds a new depth to India’s international relations.

  • BRICS

    As India is gearing up to host this year’s BRICS summit, the grouping is facing fresh challenges, from disputes among member countries to tackling COVID-triggered crises and opportunities.

    What is BRICS?

    • To be clear, BRICS was not invented by any of its members.
    • In 2001, Goldman Sachs’ Jim O’Neill authored a paper called “Building Better Global Economic BRICs”, pointing out that future GDP growth in the world would come from China, India, Russia and Brazil.
    • Significantly, the paper didn’t recommend a separate grouping for them, but made the case that the G-7 grouping, made up of the world’s most industrialized, and essentially Western countries, should include them.
    • O’Neill also suggested that the G-7 group needed revamping after the introduction of a common currency for Europe, the euro, in 1999.
    • In 2003, Goldman Sachs wrote another paper, “Dreaming with BRICs: Path to 2050”, predicting that the global map would significantly change due to these four emerging economies.
    • In 2006, leaders of the BRIC countries met on the margins of a G-8 (now called G-7) summit in St. Petersburg, Russia, and BRIC was formalized that year.

    Issues in its consolidation

    • Common ground for the members was built by ensuring that no bilateral issues were brought up, but the contradictions remained.
    • Many economists soon grew tired of “emerging” economies that didn’t reach the goals they had predicted.
    • Others saw India’s closer ties with the US after the civil nuclear deal as a sign its bonds with BRICS would weaken.
    • Meanwhile, Russia, which had hoped to bolster its own global influence through the group, had been cast out of the G-7 order altogether after its actions in Crimea in 2014.
    • China, under Xi Jinping, grew increasingly aggressive, and impatient about the other underperforming economies in the group, as it became the U.S.’s main challenger on the global stage.

    Long-term prospects

    • China’s decision to launch the trillion-dollar Belt and Road Initiative in 2017 was opposed by India, and even Russia did not join the BRI plan, although it has considerable infrastructure projects with China.
    • South Africa’s debt-laden economy and the negative current account have led some to predict an economic collapse in the next decade.
    • Brazil’s poor handling during the Covid-19 crisis has ranked it amongst the world’s worst-affected countries, and its recovery is expected to be delayed.
    • India’s economic slowdown was a concern even before Covid-19 hit, and government policies like “Aatmanirbhar” were seen as a plan to turn inward.

    Issues with BRICS nations

    • Concerns about aggressions from Russia in Ukraine and Eastern Europe and China in the South China Sea, the border with India and internally in Hongkong and Xinjiang are clear visible.
    • There is creeping authoritarianism in democracies like Brazil and India have made investors question long-term prospects of the group.
    • In the market, BRICS has been mocked for being “broken”, while others have suggested it should be expanded to include more emerging economies like Indonesia, Mexico and Turkey, called the “Next-11”.

    A roadmap to progress

    • BRICS is an idea that has endured two decades, an idea its members remain committed to, and not one has skipped the annual summits held since 2009.
    • Along the way, BRICS has created the New Development Bank (NDB) set up with an initial capital of $100 billion.
    • There is a BRICS Contingent Reserve Arrangement fund to deal with global liquidity crunches, and a BRICS payment system proposing to be an alternative to the SWIFT payment system.

    Reforming the multilaterals

    • The BRICS ministerial meeting held this week sent several important signals to that end, issuing two outcome documents.
    • It included the first “standalone” joint statement on reforming multilateral institutions, including the UN and the UNSC, IMF and World Bank and the WTO.
    • It remains to be seen how far countries like China and Russia, which are already “inside the tent” at the UNSC, will go in advocating for the other BRICS members.
    • Another important agreement was the BRICS ministerial decision to support negotiations at the WTO for the waiver of trade-related intellectual property rights (TRIPs) for vaccines and medicines to tackle the Coronavirus.

    Way forward

    • What appears clear is in the post-Covid world, priorities for all economies will change, and offer up a churning in the world of the kind seen two decades ago, when the idea of a grouping of emerging economies was first floated.
    • For BRICS, the next few months could crystallize that idea, or sink it further, leaving others to wonder whether the “Rise of the Rest” as it was once called, is an idea whose time will ever come at all.

  • Colombo Port City Project and Chinese involvement

    Sri Lanka recently passed the controversial Colombo Port City Economic Commission Bill, which governs the China-backed Colombo Port City project worth $1.4 billion, amid wide opposition to the creation of a “Chinese enclave” in the island nation.

    Colombo Port City Project

    • The Colombo Port City has grabbed headlines in Sri Lanka in recent months even as the relentless third wave of the COVID-19 pandemic sweeps through the country.
    • Almost an artificial island, the territory coming up on 2.69 square kilometers of land reclaimed from Colombo’s seafront has stirred controversy since its inception.
    • Those backing it see in that patch of land their dream of an international financial hub — a “Singapore or Dubai” in the Indian Ocean.

    When was it launched?

    • The project was launched in September 2014 by Chinese President Xi Jinping during a visit to the island nation under the Mahinda Rajapaksa administration’s second term.
    • After President Mahinda Rajapaksa was ousted in January 2015, the successor “national unity” government of Maithripala Sirisena and Ranil Wickremesinghe went ahead with the project after briefly halting it.
    • On returning to power in November 2019, the Rajapaksas vowed to expedite the project. The Sri Lankan government says the project will bring in around 83,000 jobs and $15 billion initially.

    Issues with the project

    • But skeptics claim that it could well become a “Chinese colony”, with the Bill, which is now an Act.
    • The law provides China substantial “immunity” from Sri Lankan laws, besides huge tax exemptions and other incentives for investors.

    What is the extent of China’s involvement?

    Effectively, China has substantial control over two key infrastructure projects in Sri Lanka for a century.

    • The port city project is financed chiefly through Chinese investment amounting to $1.4 billion.
    • In return, the company will receive 116 hectares (of the total 269 hectares) on a 99-year lease.
    • The city separates from but located adjacent to the Colombo Port, the country’s main harbor — is the third major port-related infrastructure project where China has a significant stake.
    • China Merchants Port Holdings has an 85% stake in the Colombo International Container Terminal under a 35-year ‘Build Operate and Transfer’ agreement with the Sri Lanka Port Authority.
    • In 2017, the Sirisena-Wickremesinghe administration, unable to repay the Chinese loan with which it was saddled by the previous government, handed over the Hambantota Port to China on a 99-year lease.

    Concerns from within Sri Lanka

    • Since its launch, the Colombo Port City project has faced opposition from environmentalists and fisherfolk, who feared that the project would affect marine life and livelihoods.
    • However, in the absence of wider political and societal support, their resistance did not dent successive governments’ resolve to pursue the project.
    • The more recent opposition was specific to the Colombo Port City Economic Commission Bill.
    • The resistance came from Opposition parties and civil society groups, including many who do not oppose the project per se, but rather its governance by “an all-powerful commission answerable to no one”.
    • Significantly, a section of Buddhist monks, wielding much influence in Sri Lankan politics and the Sinhala society, also opposed the Bill and said that it eroded Sri Lanka’s sovereignty.

  • G7 members endorse global minimum tax

    Finance Ministers from the Group of Seven (G7) rich nations have reached a landmark accord setting a global minimum corporate tax rate, an agreement that could form the basis of a worldwide deal.

    Why a global minimum?

    • Major economies are aiming to discourage multinationals from shifting profits — and tax revenues — to low-tax countries regardless of where their sales are made.
    • Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.
    • With its proposal for a minimum 15% tax rate, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage, allowing competition on innovation, infrastructure and other attributes.

    Where are the talks at?

    • The G7 talks feed into a much broader, existing effort.
    • The OECD has been coordinating tax negotiations among 140 countries for years on rules for taxing cross-border digital services and curbing tax base erosion, including a global corporate minimum tax.
    • The OECD and G20 countries aim to reach a consensus on both by mid-year, but the talks on a global corporate minimum are technically simpler and less contentious.
    • If a broad consensus is reached, it will be extremely hard for any low-tax country to try and block an accord.

    How would a global minimum tax work?

    • The global minimum tax rate would apply to overseas profits.
    • Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top-up” their taxes to the minimum rate.
    • This would eliminate the advantage of shifting profits.

    What about that minimum rate?

    • Talks are focusing on the U.S. proposal of a minimum global corporation tax rate of 15% – above the level in countries such as Ireland but below the lowest G7 level.
    • Any final agreement could have major repercussions for low-tax countries and tax havens.
    • The Irish economy has boomed with the influx of billions of dollars in investment from multinationals.
    • Dublin, which has resisted EU attempts to harmonize its tax rules, is unlikely to accept a higher minimum rate without a fight.
    • However, the battle for low-tax countries is less likely to be about scuppering the overall talks and more about building support for a minimum rate as close as possible to its 12.5% or seeking certain exemptions.

    Back2Basics: G7

    • The G7 or the Group of Seven is a group of the seven most advanced economies as per the International Monetary Fund (IMF).
    • The seven countries are Canada, USA, UK, France, Germany, Japan and Italy. The EU is also represented in the G7.
    • These countries, with the seven largest IMF-described advanced economies in the world, represent 58% of the global net wealth ($317 trillion).
    • The G7 countries also represent more than 46% of the global gross domestic product (GDP) based on nominal values, and more than 32% of the global GDP based on purchasing power parity.
    • The requirements to be a member of the G7 are a high net national wealth and a high HDI (Human Development Index).

  • Close the vaccination gap, in global lockstep

    Why vaccination gap is cause of worry

    • By the end of May 2021, only 2.1% of Africans had received at least one dose of a COVID-19 vaccine.
    • A widely vaccinated world population is the only way to end the pandemic; otherwise, the multiplication of variants is likely to undermine the effectiveness of existing vaccines.
    • Vaccination is also a prerequisite for lifting the restrictions that are holding back our economies and freedoms.
    • If the vaccination gap persists, it risks reversing the trend in recent decades of declining poverty and global inequalities.
    • Such a negative dynamic would hold back economic activity and increase geopolitical tensions.
    • The cost of inaction would for sure be much higher for advanced economies than what we collectively would have to spend to help vaccinate the whole world.
    • The International Monetary Fund has proposed $50 billion plan in order to be able to vaccinate 40% of the world population in 2021 and 60% by mid-2022.

    Need to resist the vaccine nationalism

    • To achieve the goal set by IMF, we need closely coordinated multilateral action.
    • We must resist the threat posed by linking the provision of vaccines to political goals and vaccine nationalism.
    • The EU has been vaccinating its own population, while exporting large volumes of vaccines and contributing substantially to the vaccines roll-out in low-income countries.
    • The EU has also exported 240 million doses to 90 countries, which is about as much as used within the EU.
    • One-third of all COVAX doses delivered so far have been financed by the EU.
    • India’s Vaccine Maitri is another example of global solidarity.
    • However, this effort is still far from sufficient to prevent the vaccination gap from widening.

    Way forward

    • To fill widening vaccination gap, countries with the required knowledge and means should increase their production capacities, so that they can both vaccinate their own populations and export more vaccines.
    • All countries must avoid restrictive measures that affect vaccine supply chains.
    • We also need to facilitate the transfer of knowledge and technology, so that more countries can produce vaccines.
    • Voluntary licensing is the privileged way to ensure such transfer of technology and know-how.

    Conclusion

    The COVID-19 pandemic has reminded us that health is a global public good. Our common global COVID-19 vaccine action to close the vaccination gap must be the first step toward genuine global health cooperation, as foreseen by the Rome Declaration recently adopted at the Global Health Summit.