Published: Sat, May 13, 2017
Money | By Armando Alvarado

OECD chief: Tax treaty will ensure big firms pay their dues

The official agenda for Group of Seven finance ministers and central bankers in the city of Bari from Thursday to Saturday focuses on inequality, global tax rules, cyber security and blocking the funding of terrorism.

BARI, Italy May 12 French finance minister Michel Sapin said he and other ministers from leading economies had told U.S. Treasury Secretary Steve Mnuchin it was "unthinkable" that globally agreed policies in areas such as trade and financial regulation could be weakened.

The trade issue created a rift at the Group of 20 finance ministers meeting in March in Baden-Baden - Mnuchin's first foray into worldwide economic relations - after the USA blocked inclusion in the final communique of the long-standing pledge to avoid protectionism.

G7 finance ministers meet on Friday in Italy, seeking common ground and stability on future world trade after US President Donald Trump's declaration that "America First" would be his mantra. "What I hope is that this policy will be within the global framework, which means also multilateralism, which means also attachment to free trade".

Some economists, including those from the International Monetary Fund, have expressed concern that Trump's fiscal policies could stoke inflation and bring on faster-than-expected Federal Reserve rate hikes, while new USA trade barriers could also slow global growth.

Mnuchin, who skipped the opening session in Bari where academics spoke on inequality and growth and arrived long after other ministers, told reporters he was "excited" about the emerging new US trade policy.

Japan's Finance Minister Taro Aso arrives for a G7 of Finance Ministers and Central Bank Governors meeting, in Bari, southern Italy, Friday, May 12, 2017. "We can discuss, we can have different appreciations, but we are in the same world and in the same boat", he said.

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"I think you probably saw last night we made an announcement of a 100-day economic plan with the Chinese, so I think we are very happy with how we are proceeding on trade", he said. At a bilateral meeting before the G7 on Thursday, Italy's Padoan sought to reassure Mnuchin about the state of Italy's banks, an Italian official present at the meeting said.

Pier Carlo Padoan, Italy's minister of economy and finance, said he is watching the USA approach "closely" for lessons other countries can use in reforming their tax codes.

An Italian G7 official said on Friday the clause on trade used by the G7 would repeat the language of the G20 at Baden Baden, which merely said the group was "working to strengthen the contribution of trade to our economies".

Trump has already pulled out of the Trans-Pacific Partnership (TPP) and wants to re-negotiate the North American Free Trade Agreement (NAFTA).

"There is not enough clarity yet", said International Monetary Fund chief Christine Lagarde after the working breakfast.

"I allowed myself to tell him that an attack on the Champs Elysee was never going to affect the outcome", Sapin said.

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