G7 Italy: The Apulia Summit is a high-level briefing publication examining how the G7 is responding to a world shaped by conflict, climate pressure and shifting global alliances. The publication provides expert insight, leadership perspectives and data-driven analysis on the group’s priorities, from defending democratic values and strengthening international cooperation to advancing partnerships with emerging economies and addressing the risks of new technologies. Featuring contributions from global leaders and international organisations, alongside performance tracking from the G7 Research Group, the publication offers a clear, authoritative view of how the G7 is navigating today’s most urgent challenges and shaping the future of global governance.
The Apulia Summit Italy
2024 | globalgovernanceproject.org
Confronting interconnected crises Conflicts, climate and declining development are among the areas in sharp focus
Protecting democracy Leaders at Apulia will collaborate to promote open democracy and individual liberty
Building resilient partnerships Emphasis is on deepening relationships with emerging economies and developing states
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CEO & Publisher: Khaled Algaay Co-Editor: John Kirton Co-Editor: Madeline Koch Guest Editor: Chiara Oldani Managing Editor: Emily Eastman
ITALY 2024 The Apulia Summit
Contact: GT Media White Collar Factory, 1 Old Street Yard, London EC1Y 8AF United Kingdom Tel: +44 207 6085137 G7 Research Group Contributors: Ambra Bisagni Sonja Dobson
Hélène Emorine Samraggi Hazra Hiromitsu Higashi Ella Kokotsis Julia Kulik Jessica Rapson Denisse Rudich Alissa Wang Brittaney Warren Maria Zelenova
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WELCOME MESSAGE 06 KEY FOCUSES OF THE ITALIAN PRESIDENCY Giorgia Meloni, prime minister, Italy
10 THE FUTURE WE WANT Justin Trudeau, prime minister, Canada
11 A FUTURE FOR ALL Joe Biden, president, United States
24 PROMISING
PROSPECTS FOR THE G7’S APULIA SUMMIT John Kirton, director, G7 Research Group
14 DIPLOMACY BUILT ON COHESION Emmanuel Macron, president, France
15 A CLEAR PLAN Rishi Sunak, prime minister, United Kingdom
16 FOR THE FUTURE: OUR GLOBAL PARTNERSHIP Fumio Kishida, prime minister, Japan
26 ACHIEVING ALIGNMENT Chiara Oldani, professor of monetary
economics, University of Viterbo ‘La Tuscia’
17 WITHOUT SECURITY, ALL ELSE IS NOTHING Olaf Scholz, chancellor, Germany
20 FORGING A NEW ERA OF COOPERATION Charles Michel, president, European Council
21 WEATHERING CRISES WITH RESILIENCE Ursula von der Leyen, president, European Commission
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54 LEARNING FROM OUR MISTAKES Tedros Adhanom Ghebreyesus, director-general, World Health Organization 56 THE POLY-OPPORTUNITY Winnie Byanyima, executive director, UNAIDS and under-secretary-general, United Nations 58 TRUST – THE BASIS FOR HEALTH AND DEMOCRACY Ilona Kickbusch, founding director, Global Health Centre, Graduate Institute of International and Development Studies 60 CHANGING THE MINDSET
66 A PATH FOR MIGRATION TO WORK FOR ALL
1 SECURITY, PEACE, DEMOCRACY AND HUMAN RIGHTS EUROPE AND UKRAINE 28 STANDING TOGETHER IN A MORE DANGEROUS WORLD Jens Stoltenberg, secretary- general, NATO 30 POWERFUL MOMENTUM Rafael Mariano Grossi, director-general, International Atomic Energy Agency 32 PRESENTING A UNITED FRONT Ettore Greco, executive vice president, Istituto Affari Internazionale
2 PARTNERING WITH DEVELOPING, EMERGING AND AFRICAN COUNTRIES
Amy E Pope, director-general, International Organization for Migration
DEVELOPMENT AND DEBT RELIEF 42
BORDER SECURITY 68 FIGHTING CRIME IN A FRAGMENTED LANDSCAPE Jürgen Stock, secretary-general, INTERPOL 70 BEYOND THE SCREEN Catherine De Bolle, executive director, Europol 72 NEW BARRIERS TO CROSS-BORDER CRIME T Raja Kumar, president, Financial Action Task Force 74 FERTILE LAND FOR CRIME – AND REFORM Denisse Rudich, director. G7 and G20 Research Groups (London) and CEO, Rudich Advisory 4 CLIMATE CHANGE AND ENERGY CLIMATE CHANGE 76 G7 PERFORMANCE ON
G7 PERFORMANCE ON DEVELOPMENT Sonja Dobson, lead researcher, G7 Research Group 44 BOLD NEW APPROACHES TO TRANSCEND BORDERS Interview with Achim Steiner, Administrator, United Nations Development Programme
AFRICA 46 UNLOCKING OPPORTUNITIES FOR AFRICA
Vladimir Hachinski, Western University; Matilde Leonardi, Neurological Institute C Besta, Elena Moro, Grenoble Alpes University, and Paul Boon, Ghent University and Eindhoven University of Technology 3 MIGRATION,
MIDDLE EAST AND GULF 34
Akinwumi A Adesina, president, African Development Bank Group
LEADERSHIP AND MORAL COURAGE Interview with Sanam Vakil, director, Middle East and North Africa Programme, Chatham House
FOOD SECURITY 48 INVEST IN THE FUTURE AND THE PRESENT WILL LOOK LESS BLEAK Alvaro Lario, president, International Fund for Agricultural Development 50 FERTILE SOIL FOR FOOD SECURITY Cindy H McCain, executive director, World Food Programme HEALTH 52 G7 PERFORMANCE ON HEALTH Hélène Emorine, senior researcher, G7 Research Group
CHINA 38 LEADERSHIP IN THE FACE OF COLD WAR 2.0
REFUGEES AND BORDER SECURITY
MIGRATION AND REFUGEES 62 G7 PERFORMANCE ON MIGRATION AND REFUGEES Maria Zelenova, lead researcher, G7 Research Group 64 PEACEKEEPING IS AN INVESTMENT Filippo Grandi, United Nations High Commissioner for Refugees
George S Takach, author, Cold War 2.0: Artificial Intelligence in the New Battle Between China, Russia and America DEMOCRACY AND HUMAN RIGHTS 40 THE RIGHT TO PEACE Volker Türk, United Nations High Commissioner for Human Rights
CLIMATE CHANGE Brittaney Warren,
director of compliance and climate change research, G7 Research Group 78 AS STORM CLOUDS GATHER Celeste Saulo, secretary-general, World Meteorological Organization
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80 FOR A GREENER WORLD Interview with Mafalda Duarte, executive director, Green Climate Fund BIODIVERSITY AND POLLUTION 82 OUR BEST CHANCE FOR A SUSTAINABLE FUTURE David Cooper, acting executive secretary, CBD Secretariat 84 ACTIONS ON NATURE
94 DIGITAL: THE GREATEST FORCE REDEFINING DEVELOPMENT Interview with Doreen Bogdan-Martin, secretary- general, International Telecommunication Union 96 INTERNET GOVERNANCE IN THE DIGITAL WORLD Sally Costerton, interim president and chief executive officer, ICANN 98
120 G7 COMPLIANCE FROM HIROSHIMA TO APULIA Samraggi Hazra and Ambra Bisagni, co-chairs, summit studies, G7 Research Group 122 THE G7, PAST AND PRESENT
TRADE, INVESTMENT AND INFRASTRUCTURE 106 TRUST IN CUSTOMS Ian Saunders, secretary-general, World Customs Organization LABOUR AND EMPLOYMENT 108 THE URGENT NEED FOR A RENEWED SOCIAL CONTRACT Gilbert F Houngbo, director-general, International Labour Organization
Antonio Villafranca, director of research, and Matteo Villa, senior research fellow, Italian Institute for International Political Studies
REQUIRE ACTIONS ON ECONOMY AND SOCIETY David Obura, chair, Intergovernmental
GENDER SECURITY 110 G7 PERFORMANCE
INTELLIGENT GOVERNANCE Kenddrick Chan, LSE IDEAS, and Chris Alden, professor of international relations, LSE 100 THE BOTTOM LINE OF AMBITIOUS RULES Interview with Marietje
ON GENDER EQUALITY Julia Kulik, director of strategic initiatives and public engagement, G7 Research Group 112 FEMINIST CLIMATE JUSTICE Sima Bahous, executive director, UN Women 7 TRAVEL, TOURISM AND CULTURE 114 THE POWER OF TRAVEL Zurab Pololikashvili, secretary-general, UN Tourism 116 LET THE GAMES BEGIN Thomas Bach, President, International Olympics Committee 8 A STRONGER G7 SYSTEM 118 AI PREDICTIONS ON G7 COMMITMENTS Jessica Rapson, senior researcher, G7 Research Group
Science-Policy Platform on Biodiversity and Ecosystem Services
ADVOCACY FEATURES 08 ENI Rising to the challenge: meeting energy needs 12 EY The inflection point of supply chain, sustainability and tax: what does business need from government? 18 EUROPEAN SPACE AGENCY Innovation in Earth observation brings benefits to all 36 WORLD FUTURE ENERGY SUMMIT Championing a sustainable planet for today and future generations
ENERGY 86 G7 PERFORMANCE ON ENERGY Ella Kokotsis, director of accountability, G7 Research Group 88 POWERFUL SIGNALS Francesco La Camera, director-general, IRENA 90 TOWARDS TECHNOLOGICAL NEUTRALITY Francesco Corvaro, Italy’s special envoy on climate change 5 ARTIFICIAL INTELLIGENCE AND DIGITALISATION 92 G7 PERFORMANCE ON DIGITALISATION Hiromitsu Higashi, senior researcher, G7 Research Group
Schaake, international policy director, Stanford University Cyber Policy Center 6 ECONOMIC AND SOCIAL SECURITY MACROECONOMIC AND FINANCIAL POLICY 102 G7 PERFORMANCE ON MACROECONOMIC POLICY Alissa Wang, senior researcher, G7 Research Group 104 BETTER POLICIES AND EFFECTIVE MULTILATERALISM: THE PATH TO A BETTER FUTURE Mathias Cormann, secretary- general, Organisation for Economic Co-operation and Development
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WELCOME MESSAGE
Giorgia Meloni Prime Minister, Italy
Key focuses of the Italian presidency
O n January 1, 2024, Italy assumed, for the seventh time, the Presidency of the G7: the group that brings together Italy, Canada, France, Germany, Japan, the United Kingdom, and the United States of America. The G7, in which the European Union also participates, is united by common values and principles and plays an invaluable role in defending freedom and democracy and addressing global challenges … A key focus of the Italian Presidency will be the defence of the rules-based international system. Russia’s war of aggression on Ukraine has undermined its principles and triggered growing instability, with multiple crises unfolding worldwide. The G7 will give equal importance to the conflict in the Middle East, with its consequences for the global agenda. The relationship with developing Nations and emerging economies will be central. The engagement with Africa will be a key priority. We will work to build a cooperation model based on mutually beneficial partnerships, away from paternalistic or predatory logics. Particular attention will also be paid to the Indo-Pacific region. Italy will ensure great attention to migration, together with some of the greatest challenges of our time, including the climate-energy nexus and food security. The G7 has the responsibility and duty to identify, together with its global partners, innovative solutions. Artificial Intelligence will also feature in the Italian programme. This technology
can generate great opportunities but also enormous risks, affecting geopolitical balances. It is necessary to develop governance mechanisms and ensure that AI remains human-centered and human-controlled, giving concrete applications to the concept of algorethics. Welcome remarks, official website of Italy’s 2024 G7 presidency, 26 January 2024 … I’m working on a concrete and substantial G7 summit. We intend first and foremost to reaffirm the rules-based international order, defending freedom and building peace for Ukraine. And, in doing this, I think we need to tackle the narrative that wants “the West against the rest”. So, our dialogue within the G7 with the Global South is essential. The crisis in the Middle East is of the utmost concern. We need to coordinate our actions in order to avoid an escalation and, in this regard, we fully support the US mediation efforts. The humanitarian crisis is our number one priority. Italy is concentrating its contribution on this. Meanwhile, we are cooperating with all regional actors that must be part of any future outcome. We should work together on concrete steps to guarantee the two-state perspective, which is the only long-term sustainable solution. And then, the Houthis’ attacks on commercial vessels that endanger freedom of navigation in the Red Sea are unacceptable … Then, building on Italy’s role in the Mediterranean, the G7 will pay special
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attention also to the African continent. We’ve been discussing it, many times, for I think we have to remember that Africa is not a poor continent; it is, on the contrary, incredibly rich in human and material resources, but it has been neglected and exploited with a predatory approach for a long time. I want to reverse this approach, together with you, which is also a root cause of the migration crisis. We need to support Africa’s development on an equal basis and put an end to illegal migration while fighting human trafficking. Human trafficking has become the most financially rewarding crime globally, and we cannot accept it any longer. For this reason, I came here today also with a proposal to launch a global alliance against human traffickers. The G7 will discuss artificial intelligence as well. AI is a means, it can be a good or a bad one, it depends on our capacity to govern it, to tackle the risks and the impact it can have, for example on the labour market. We want to develop AI, but also we want to be certain that it remains human centered … White House, 1 March 2024 … Our goal is to put Italy back, on a political level, where our Lord already positioned us in geographical terms: a platform in the middle of the Mediterranean, a bridge between the European continent and the African continent. We have done this with Europe, we have done this with Africa and we have done this in our discussions within the Atlantic Alliance; we will do this as part of the Italian Presidency of the G7 during this very challenging year … States General of Italy, Brussels, 22 March 2024 … When it comes to artificial intelligence … This is one of the major issues we are addressing at [the] national level, and with the scientific community, with major international players and with companies that produce generative artificial intelligence. We want to do this by endeavouring to give body and soul to the concept of ‘algorethics’, i.e., giving ethics to algorithms. We did not come up with this concept ourselves; this work began with a wonderful initiative organised by the Vatican in 2020. I believe this must be the compass that accompanies our work as a nation and clearly in multilateral fora, because these are not issues that nation states can tackle and solve alone. Italian Scientists Association’s ‘La scienza al centro dello Stato’, 5 April 2024 we are also bringing it to Italy’s Presidency of the G7, which as you know is this year. We of course want to do this by talking about and engaging on this issue
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Rising to the challenge: meeting energy needs
We are accompanying the energy system through its transformation with strategic collaborations and a steadfast commitment to innovation. We are supporting this effort with a distinctive organisational and financial model, our ‘satellite model’, which entails creating separate companies that can independently access capital markets to accelerate the financing and roll-out of innovative solutions for decarbonisation. SATISFYING DEMAND In the short and medium term, the energy transition has to embrace a variety of initiatives and technologies which reduce emissions in different use cases while satisfying the existing demand. As the world still relies overwhelmingly on fossil fuels, natural gas, whose combustion emits about half of the carbon
By Claudio Descalzi , chief executive officer, Eni G lobal leaders today must reconcile the priority of development. While they strive to drive their countries to reach emissions goals, they must also ensure the competitiveness of their economies, as to do otherwise fighting climate change with supporting economic growth and would potentially undermine the consensus around decarbonisation. Technology will be key to delivering on the energy transition goals and enabling the creation of new businesses. Central to our vision for a sustainable energy future is the development of innovative and more sustainable value chains. Moreover, new, breakthrough technologies hold the promise of providing virtually limitless
To deliver on the energy transition, we must foster economic growth and technological innovation
energy. As a global energy technology company, Eni continues to invest in cutting-edge research and development to shape the energy system of the future, with the potential to provide safe and clean energy to the world, while, at the same time, improving the available and scalable technologies to preserve the competitiveness of the industry and the existing infrastructure.
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ADVOCACY eni
dioxide released by the burning of coal, can still play an essential role in the energy transition. Natural gas provides security and balance to the power system, necessary conditions for the growing penetration of intermittent renewables; their smooth integration into the existing industrial economy contributes to curb emissions and provide clean electricity. Eni is partnering with hard-to-abate sectors to find the proper solutions for their decarbonisation path. Safeguarding the continuity of these industrial processes is a critical element to ensure the social and economic sustainability of the transition. Industries such as cement, steel and chemicals have a carbon footprint mainly related to their own industrial processes, rather than the forms of energy they use, and – as of today – they have limited solutions to decarbonise. A practical way to substantially reduce their emissions is to capture the carbon dioxide generated from their operations and bury it in depleted reservoirs: this is the process called carbon capture and storage. CCS and its role in the decarbonisation of industrial clusters has been recognised by the most relevant international organisations such as the International Energy Agency, the Intergovernmental Panel on Climate Change and the International Renewable Energy Agency. Eni is already involved in large scale CCS projects: HyNet in the United Kingdom and Ravenna CCS in Italy are the cornerstones of our commitment to playing a leading role in CCS, thanks to which we will collect the CO2 captured in industrial districts and pipe it into exhausted natural gas deposits thousands of feet below the seabed. The definition of dedicated institutional and fiscal frameworks for CCS is a key enabler to further incentivise these kinds of groundbreaking projects that are critical to address the climate challenge. TOWARDS NET ZERO The decarbonisation of the transport sector is another crucial step towards net zero. Beside the progressive rollout of energy carriers such as electricity, biofuels play a critical role as a drop-in solution that can be already implemented with current technologies and infrastructures, especially for long-haul and heavy transport that is hard to electrify. Eni has been advancing its unique vertically integrated feedstock strategy for
the production of biofuels which involves communities, mainly in Africa, generating positive impacts on the local economy and employment. The model sees local farmers producing oilseeds, not in competition with the food chain, from marginal and degraded lands – identified in agreement with local authorities – to be then processed in dedicated agri-hubs before being used as feedstock for biofuel production. Eni contributes to a just and equitable transition, striving to eliminate energy poverty. To this end, in the countries where we operate, we prioritise the local sale of gas resources and we develop energy infrastructures with the aim of generating long-term value for local populations and improving their access to energy. Moreover, we promote initiatives to boost economic diversification, education, health, water management and sanitation. While pursuing our distinctive approach, we remain committed to maximising the engagement of our relevant stakeholders, such as governments, local communities and companies. We strive to develop new successful businesses in a robust and competitive market to provide abundant, reliable low-carbon energy and decarbonisation solutions to our customers, in the context of a growing global population which will push further up the demand for energy.
CLAUDIO DESCALZI Claudio Descalzi has been the CEO of Eni, an integrated energy company operating in over 65 countries, since May 2014.
X-TWITTER @eni eni.com
Bharat Masrani
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Justin Trudeau Prime Minister, Canada
LEADERS’ VIEWS
The future we want
W e are in a moment of unprecedented weakening of democracies and democratic institutions. These are shared, transnational challenges. To tackle them, we must work together – including with the G7. Like-minded partners working side by side to make the world better, fairer and more inclusive is critical to addressing these unprecedented challenges. G7 partners share deep-rooted democratic values that inform our common defence of international rules and how we work together to shape a global environment that protects our citizens and creates prosperity. This work starts with the clean energy transition – a once-in-a-generation opportunity that Canada along with our G7 partners are helping lead: taking bold climate action will cut emissions, keep the air clean and create well-paying jobs. That begins with investing in research, infrastructure, supply chains and opportunities for our workers. Canada’s wealth of critical minerals, cutting-edge innovation and world-class talent pool make our country an ideal destination for investment. As an example, Canada’s auto sector has long been an engine of economic growth, driving innovation and employment. As the demand for electric vehicles continues to grow, we will attract even more investment and position challenge and change. Canada is feeling the weight of mounting global crises – from climate change to global instability to the our auto, battery manufacturing and battery material production industries as global leaders across the entire electric vehicle supply chain. Investments in climate action and clean energy are investments in the economy. It puts Canada at the forefront of this opportunity, creates jobs and brings direct economic benefits to Canadians, now and into the future. We are committed to partnering with other G7 members and beyond to ensure shared prosperity in this endeavour while protecting the environment, ensuring strong labour standards and respecting the rights of Indigenous peoples. Digital technologies, including artificial
Canada’s AI ecosystem puts us in the driving seat of this technology. We are working with G7 and other partners to make sure this innovation is a joint effort: we need to close digital divides, connect communities, improve digital literacy, increase awareness about misinformation and disinformation, and invest in cyber resilient systems. Digital inclusion means a broad approach to the governance of digital technology, writing the rules of the road for AI together, so that it works for us and not against us. As more than half of the countries in the world have elections this year, the proliferation of mis- and disinformation, sometimes by foreign states, is eroding trust in democratic institutions. It is becoming increasingly difficult for our citizens to decipher fact from fiction and trustworthy sources from deceptive ones, especially in digital spaces. At the same time, the international rules-based order has been under threat in recent years. Russia’s illegal invasion of Ukraine was a direct attack on sovereignty, territorial integrity and human rights. In the face of Russia’s attack, Ukraine fought back and Canada’s support for Ukraine remains steadfast. Ukraine is fighting for its culture and identity, and for democracy – and Canada will stand with it for as long as it takes. These challenges will test us and our collective resilience. But together, we can transform these challenges into opportunities. We can promote our democratic values, deepen our collaboration and take action to tackle these challenges. All of this work must be anchored in making life better for Canadians and people around the world. At home, it means working to create more jobs, fewer barriers and fairer communities. It also means building more homes, improving health care, investing in technology and fighting climate change. This is Canada’s vision going into the Apulia Summit: promoting inclusive, sustainable and dynamic growth around the world that makes our communities fairer, better and more prosperous. And Canada is looking forward to taking the broader G7 agenda forward during our presidency in 2025. Working side by side
intelligence, have great potential to transform our lives, economy and planet. AI could supercharge our efforts to achieve the 2030
with our G7 partners, we can make a more sustainable and equitable future a reality.
Sustainable Development Goals, transforming global health and food systems.
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LEADERS’ VIEWS
Joe Biden President, United States
A future for all
W hat makes our moment rare is that freedom and democracy are under attack, both at home and overseas, at the very same time. Overseas, Putin of Russia is on the march, invading Ukraine and sowing chaos throughout Europe and beyond. If anybody in this room thinks Putin will stop at Ukraine, I assure you, he will not. But Ukraine can stop Putin if we stand with Ukraine and provide the weapons it needs to defend itself. That is all Ukraine is asking … History is watching. If the United States walks away now, it will put Ukraine at risk. Europe at risk. The free world is at risk, emboldening others who wish to do us harm. My message to President Putin is simple. We will not walk away. We will not bow down. I will not bow down. America’s comeback is building a future of American possibilities, building an economy from the middle out and the bottom up, not the top down, investing in all of America, in all Americans to make sure everyone has a fair shot and we leave no one behind! The pandemic no longer controls our lives. The vaccines that saved us from COVID are now being used to help beat cancer. Turning setback into comeback. That’s America! I inherited an economy that was on the brink. Now our economy is the envy of the world! 15 million new jobs in just three years – that’s a record! Unemployment at 50-year lows. A record 16 million Americans are starting small businesses and each one is an act of hope. With historic job growth and small business growth for Black, Hispanic, and Asian-Americans … We are the only nation in the world with a heart and soul that draws from old and new. Home to Native Americans whose ancestors have been here for thousands of years. Home to people from every place on Earth. Some came freely.
Some chained by force. Some when famine struck, like my ancestral family in Ireland. Some to flee persecution. Some to chase dreams that are impossible anywhere but here in America. That’s America, where we all come from somewhere, but we are all Americans. We can fight about the border, or we can fix it. I’m ready to fix it … We are also making history by confronting the climate crisis, not denying it. I’m taking the most significant action on climate ever in the history of the world. I am cutting our carbon emissions in half by 2030. Creating tens of thousands of clean-energy jobs, like the … workers building and installing 500,000 electric vehicle charging stations. Conserving 30% of America’s lands and waters by 2030. Taking historic action on environmental justice for fence-line communities smothered by the legacy of pollution. And patterned after the Peace Corps and Ameri Corps, I’ve launched a Climate Corps to put 20,000 young people to work at the forefront of our clean energy future. I’ll triple that number this decade … As we manage challenges at home, we’re also managing crises abroad including in the Middle East … Israel has a right to go after Hamas. Hamas could end this conflict today by releasing the hostages, laying down arms, and surrendering those responsible for October 7th. Israel has an added burden because Hamas hides and operates among the civilian population. But Israel also has a fundamental responsibility to protect innocent civilians in Gaza. This war has taken a greater toll on innocent civilians than all previous wars in Gaza combined … Israel must allow more aid into Gaza and ensure that humanitarian workers aren’t caught in the cross fire … Creating stability in the Middle East also
means containing the threat posed by Iran. That’s why I built a coalition of more than a dozen countries to defend international shipping and freedom of navigation in the Red Sea. I’ve ordered strikes to degrade Houthi capabilities and defend U.S. Forces in the region. As Commander in Chief, I will not hesitate to direct further measures to protect our people and military personnel. For years, all I’ve heard from my Republican friends and so many others is China’s on the rise and America is falling behind. They’ve got it backward. America is rising. We have the best economy in the world. Since I’ve come to office, our GDP [gross domestic product] is up. And our trade deficit with China is down to the lowest point in over a decade. We’re standing up against China’s unfair economic practices. And standing up for peace and stability across the Taiwan Strait. I’ve revitalized our partnerships and alliances in the Pacific. I’ve made sure that the most advanced American technologies can’t be used in China’s weapons … We want competition with China, but not conflict. And we’re in a stronger position to win the competition for the 21st Century against China or anyone else for that matter … I see a future where we defend democracy, not diminish it. I see a future where we restore the right to choose and protect other freedoms, not take them away. I see a future where the middle class finally has a fair shot and the wealthy finally have to pay their fair share in taxes. I see a future where we save the planet from the climate crisis and our country from gun violence. Above all, I see a future for all Americans! … State of the Union Address, 7 March 2024
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At a macro level, government policies affecting investment in supply chains are usually influenced by various interconnected public policy goals, including: • By Marna Ricker, global vice chair – tax, EY, and Jay Camillo, global operating model effectiveness (OME) leader, EY, with contribution from Joost Vreeswijk, global tax sustainability and supply chain leader, EY
Managing national security by enabling a stable local supply of vital goods, for example steel, active pharmaceutical ingredients and semiconductors Fostering domestic resilience with nearshore and friendly-shore supplies of critical goods in case of globalised supply chain disruption Increasing employment through onshoring Addressing environmental concerns by using fiscal and tax policy to support green industries and circular business models, and to reduce disposal and transportation waste.
The inflection point of supply chain, sustainability and tax: what does business need from government? The G7 is working hard to tackle a host of global issues ranging from geopolitical upheaval to climate change. As businesses respond to the new taxes and trade regulations designed to help meet the challenges, they are transforming their supply chains in ways that support global goals while managing and leveraging the new policies and tax implications. Their one big ask of governments: reassurance that they will provide clear enough guidance so that success is everyone’s to share
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T he G7 is setting multiple goals and policies to deal with a variety of issues including global trade disruption, geopolitical upheaval and climate change challenges. Businesses tasked with compliance and implementation of policies designed to meet these goals face substantial pressure to transform supply chains in response. Both governments and businesses need to understand each other’s goals and perspectives if these policies are to succeed. This is particularly true when evaluating the interaction of supply chains, sustainability and tax. SUPPLY CHAIN MODELS IN THE NEW ERA OF GEOPOLITICS The complex distribution of power globally is a defining feature of today’s geopolitical environment, and it has profoundly changed the landscape for global investment, technology transfer and trade. Blocs involving North America, the European Union and China are transforming global supply chains into more regionalised systems. Wars and renewed superpower rivalries are also driving change, as seen in the recent upheaval in global sea-lane traffic that
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Environmental concerns – and efforts to address them – have been the focus of the most active policymaking initiatives, but all these goals are likely to have a major influence on future supply chains. SUSTAINABILITY AND TAX A surge of fiscal initiatives supporting the United Nations Paris Agreement’s global goal of net-zero emissions by 2050 is prompting companies to take action and play a meaningful role. Businesses are considering how to balance the new fiscal subsidies and incentives with the new liabilities from indirect tax, tariffs and customs. Clear government policy related to these “carrots and sticks” is vital to helping businesses advance social responsibility and meet commercial targets. The EU’s Carbon Border Adjustment Mechanism (CBAM), the new Corporate Sustainability Due Diligence Directive (CS3D) and the Indo-Pacific Framework for Prosperity (IPEF) supply chain agreement are prominent regional examples of clear policy. The EY Green Tax Tracker cites more than 2,000 taxes and levies and 1,000 incentives that support sustainability. And these will all have implications for business decisions about supply chains, product configuration, sourcing and manufacturing. CBAM, for example, will have profound implications for supply chains in carbon intensive industries. Specifically, new import fees could impel companies to
challenges the stability of markets and economies.
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ADVOCACY EY
and exports via free trade agreements Tax: income tax rates and double tax treaties There is also a growing need for business and governments to have better data and analytics.
shift manufacturing in industries such as cement, steel and paper into EU members or to other “green” nations. In addition, governments are asking businesses to monitor their supply chains so that they can recycle, reuse and repurpose products. This circular business model can only be delivered with a supply chain strategy that brings products back at the end of their lifespan to recycle or re-manufacture, eliminating waste and avoiding costly surcharges. Some EU countries are introducing minimum levels of recycled content in, for example, consumer electronics. Meanwhile, the garment industry, supported by incentives, is investing in biodegradable fabrics and alternative source material to boost circularity. Global guidelines from the World Trade Organization, International Monetary Fund, Organisation for Economic Co-operation and Development and UN are meant to build business confidence in government support, fostering freer and more open investment and trade, in the hope that countries enact statutes and regulations consistent with these rules. Transparency is a result of clearly defined laws, regulations and enforcement procedures. CBAM as well as the US CHIPS and Science Act, Inflation Reduction Act and the EU Industrial Plan are examples of initiatives that build corporate confidence. Tax reforms such as the OECD’s Global Minimum Tax, by contrast, add more complexity to designing supply chain strategies and capital allocation options. And if tax were to become a sustainability topic under the EU’s Corporate Sustainability Reporting Directive, it would likely demand even greater transparency in terms of reporting obligations that companies face. The flurry of sustainability regulation and associated costs make foreign direct transformation need confidence in policies, particularly when they’re working across borders. They need governmental reassurance in five significant areas: • investment decisions more complex. Businesses undertaking this kind of
MARNA RICKER Marna Ricker is global vice chair – tax at EY. She leads a global practice of 80,000 tax and law professionals, driving strategy, services and operational
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Data has become the fundamental ingredient for improving tax collection and audit systems; enhancing corporate compliance and efficiency; and informing complex decisions, both public and private. There have been significant developments in expanding data useability. Businesses are, for example, investing in developing advanced technologies, including generative AI, to manage supply chains and increasingly complex tax, customs and regulatory reporting requirements. But there is a need for further advances. Governments already use artificial intelligence for multiple purposes, including tracking trade flows, monitoring tax compliance, ensuring national security and conducting scenario analyses for a myriad of issues. AI progress in other areas such as weather, infrastructure, transportation, the power grid, and natural resources could help companies to modify supply chain footprints to drive efficiencies in planning, sourcing, making and moving goods. A mutual focus by governments, NGOs and private corporations on innovating through AI can enhance the efficiency of compliance while underpinning the power, agility and skill that comprise success in today’s working world. Emerging supply chain regulations rely on end-to-end supply chain visibility. But most companies struggle to capture, process and report necessary data, especially externally. As businesses work to support these initiatives and progress towards sustainability goals, governments must set them up for success by affirming the rule of law, reinforcing transparency, protecting foreign direct investment and using taxes and incentives in a balanced way to support supply chain transformations. Only then can there be confidence in efforts to accelerate the world’s sustainable supply chains. The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
transformation. She champions innovative client service, where technical expertise meets technology and business outcomes. Her leadership fosters high performing, collaborative teams and excellence in tax and finance industries.
JAY CAMILLO Jay Camillo is global operating model
effectiveness leader at EY. He is a member of Ernst & Young LLP’s International Tax Services Transfer Pricing
National Tax Department group. Jay has managed numerous global operating model projects. Prior to EY, he has worked as a consultant with the Advisory Board Company and was also an international trade specialist for the US International Trade Administration’s Office of the North American Free Trade Agreement.
JOOST VREESWIJK Joost Vreeswijk is global tax sustainability and supply chain leader at EY. He focuses on designing and implementing transformational sustainable operating
models that help deliver strategy, purpose and bottom line for businesses. He and his broader team help companies navigate the green tax and incentives landscape, and implications of sustainable transformation from a tax, legal, supply chain and transfer pricing perspective.
Rule of law: protection of corporate investments, especially against the expropriation of property Regulation: clarity and transparency with administrative remedies in case of disputes Foreign exchange: stable foreign exchange and cash repatriation regimes for financial, operational and tax considerations Trade: relative openness to imports
X-TWITTER @EYNews EY.com/gl LINKEDIN linkedin.com/company/ernstandyoung
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2024 — G7 ITALY: THE APULIA SUMMIT
LEADERS’ VIEWS
Emmanuel Macron President, France
Diplomacy built on cohesion
initially arrive in Spain, Italy, the Balkans and Greece. They arrive on European soil and then make their way to France. And so in France, no doubt more than elsewhere, we need stronger European cooperation. That is why now that we have this Pact on Migration and Asylum, we must implement it, because it provides us with new instruments. There will be more effective registration, monitoring and conditions for returning to the country of first entry. That in itself is an unprecedented step forward. But we must take firmer action with regard to return operations and readmission for all men and women arriving in France who are not entitled to remain here, who are ineligible for asylum. To do this, we need a genuine European policy and genuine coordination. This can be achieved through greater cooperation with countries of origin and transit, stricter conditions and an unwavering combat against the economic model of smugglers and traffickers of human beings … The second key part of the response is prosperity … First, we must produce more and green, and decarbonized production is an opportunity for us to reindustrialize and maintain our industries in Europe. And in fact we have seen this in recent years: from hydrogen to semi-conductors to electric batteries, France has recreated industrial capacity through the green transition. And so we must stop viewing decarbonization and growth as being mutually exclusive. If we do it properly and if it takes place through new investment sectors, it works, and that is the model we are advocating. We are becoming leaders in the battery sector. The objective for European batteries to cover all our needs by 2030 will be met. And we will also bridge the gap in terms of semi-conductors, with the objective of doubling Europe’s market share by 2030. And as I was saying, from Dunkirk to Fos, we can see the results as regards training, economically attractive and innovative territories, and reduced dependencies. And so it is Europe which enables and supports green reindustrialization, and that is how we will regain capacities, and become the first zero plastic pollution continent, a continent at the heart of decarbonization and electrification … Europe Speech, 25 April 2024
Y es, we are at a pivotal moment, and our Europe is mortal. But the outcome depends on us, as [shown by] some very simple observations to highlight how serious my words are … The first thing is to scale up defence. Today, the main danger to European security is clearly the war in Ukraine. A sine qua non condition for our security is that Russia does not win the war of aggression it is waging on Ukraine. This is essential. That is why we have been right from the outset to impose sanctions on Russia, to help the Ukrainians and to continue to do so, and we have been fortunate to have the Americans on our side for this, as we constantly increase our aid and support … Each Member State stands up for diplomacy, it is our responsibility. But we can increase it and base it on wider European cohesion. It is for this reason that I think we must keep moving forward in the years ahead, in addition to this approach and this security and defence awakening. We must continue to form partnerships with third countries, in other words to build a Europe which can show that it is never the vassal of the United States and that it can talk to other world regions, to emerging countries, to Africa, to Latin America. Not just through trade agreements,
confrontation in which too many continents are engaging. Our strategies for the Arctic, Indo-Pacific, Latin America and with Africa show that Europe is not simply part of the West, but a global continent which is considering its universality and the major balances of the planet, which is rejecting continental confrontation and wants to build balanced partnerships. This is absolutely essential and we must continue along this path which allows us, on the issues of education, health, climate and alleviating poverty, to have a single voice, as we did with the Pact for Peoples and the Planet. And to show that we never apply double standards and that, here too, we are fully autonomous. A powerful Europe is also one which has control over its borders. I said that when speaking about the Pact on Migration and Asylum, which was a major step forward. But I want to reiterate it now, at a time when, as we all know, the issue of borders and immigration is a genuine concern in all our societies and countries. This is all the more important for France because, if I may use a somewhat technical term, it is a country of secondary movements. In [other] words, immigrants do not arrive directly in France, they arrive in Europe and particularly in the Schengen Area via other borders.
but through genuinely balanced and reciprocal strategic partnerships. That is what we wanted to build at the EU-Africa Summit from the first half of 2022 up to the EU-Indo Pacific Strategy. To show that we are a balanced power which communicates with the rest of the world and, in a way, rejects the bipolar
And so France, sometimes more than others, needs an effective European policy and strong cooperation because immigration begins at the borders of Europe and not simply those of France. Men and women who arrive in France are fleeing poverty, are sometimes victims of people smuggling networks, some are genuine asylum seekers when they are fighting for
freedom, but they always
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Rishi Sunak Prime Minister, United Kingdom
M y first duty as Prime Minister is the security of the British people … We have entered a period of history in which competition between countries has sharpened profoundly. An axis of authoritarian states with different values to ours … like Russia, Iran, North Korea, and China … are increasingly assertive. The danger they pose is not new. But what is new is that these countries – or their proxies are causing more instability, more quickly, in more places at once. And they’re increasingly acting together making common cause in an attempt to reshape the world order. Now I know there are some people who will think these are faraway problems. But they are not. They pose real risks to the United Kingdom’s security and prosperity. Russia has already poisoned people on British soil with chemical weapons. Caused energy bills to soar. Weaponised migration. And sent technology to Iran in exchange for weapons, like the Shaheed drones that I saw myself are wreaking such devastation on Ukraine. Iran themselves have threatened to kill and kidnap people within our borders for exercising their right to free speech. And used proxies like the Houthis, A clear plan
campaigns against British MPs. China itself is engaged in a huge military modernisation programme. Potential flashpoints in the Indo-Pacific could have an impact on the global economy far larger even than Covid. And China is increasingly working with others to try and reshape the world including their so-called ‘unlimited partnership’ with Russia. So the new assertiveness of these authoritarian states far from our shores must concern us. Because they are increasingly acting together against the fundamental values that we all hold dear of democracy, freedom, and the rule of law … I believe we must do more to defend our country, our interests, and our values. So today, I’m announcing the biggest strengthening of our national defence for a generation. We will increase defence spending to a new baseline of 2.5% of GDP [gross domestic product], by 2030. That starts today. And rises steadily in each and every year. Over the next six years, we’ll invest an additional £75bn in our defence. And it will be fully funded with no increase in borrowing or debt … We have a clear plan for what we’ll spend, when we’ll spend it, and how we pay for it. A plan that makes the United Kingdom by far the largest defence power in Europe – and second largest in NATO [North Atlantic Treaty Organization] … We must support Ukraine for the long term. Since the Cold War ended, the freedom of our continent has been based on a simple idea:
Win there, and he – and indeed others – will be emboldened. He has the desire, if not yet the capacity, to attack other countries in Europe potentially including NATO allies, who we would be bound to defend just as they are bound to defend us. The costs of failing to support Ukraine now will be far greater than the costs of repelling Putin. Because only if he fails will he and other adversaries be deterred. That is why the United Kingdom whose history of standing up to dictators is so much part of our national consciousness has come together with our allies to stand with Ukraine from the very start. Today we will go further. We will send Ukraine an additional half a billion pounds, hitting £3 billion of support this year. And we’ll provide them with the largest-ever package of UK military equipment … A decade ago, as Russian tanks rolled into Crimea and the fight against ISIL raged across the Middle East, NATO allies came together in Wales, and reached an historic agreement to increase their defence budgets to 2% of GDP. Back then, the UK was one of only 4 countries who did so. Today, there are 11. And I believe we will look back on this moment as a similar turning point in European security. Because for all that we welcome the news over the weekend that the US Congress agreed a new package of aid for Ukraine support that will be indispensable on the frontline this is not the moment for complacency. We cannot keep expecting America to pay any price or bear any burden if we ourselves are unwilling to make greater sacrifices for our own security. So I’m proud that the United Kingdom is increasing our defence spending to £87bn a year, the biggest strengthening of our national defence in a generation guaranteeing our position as the second largest defence power in NATO, after the US. All across Europe, countries like Poland, Germany, Norway and the Baltic nations are stepping up to take greater responsibility for our own security. And I’m confident that whether in months or years, others will follow, too … Speech in Warsaw, Poland, 23 April 2024
to attack British ships in the Red Sea disrupting supplies of crucial goods to our high streets. North Korea, too, is supplying munitions and artillery to Russia and their hackers have targeted British businesses and the NHS [National Health Service]. And Chinese state-affiliated
That it is for people to decide the fate of their countries, not foreign armies. But allow Putin to win in Ukraine and that principle of sovereignty would be undermined. We would be dragged back to a world where brute force, rather than the democratic will of free peoples would shape borders and decide futures. And Putin will not stop in Ukraine.
actors have conducted malicious cyber
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2024 — G7 ITALY: THE APULIA SUMMIT
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