Thursday, November 11, 2010

G-20 leaders head into high-stakes summit amid row over currency, trade imbalances

via Yonhap NA, Seoul, Korea
(ATTN: UPDATES in paras 2-4 with comments from S. Korean president, government source)
World leaders headed into a high-stakes economic meeting Friday to make a final push for compromise on an intensifying dispute over currency and trade, and discuss other steps to underpin the fragile global economic recovery as Asia's first G-20 summit took off in Seoul.
The meeting came just hours after envoys from the world's 20 major economies wrapped up last-minute, overnight negotiations to narrow wide differences over how to manage currencies and trade imbalances in an effort to draft a joint declaration to be issued after the summit.
"There has been big progress" in the negotiations, South Korean President Lee Myung-bak said at the start of the first session of the leaders' meeting held at COEX in southern Seoul. Lee did not elaborate on what the progress was.
A South Korean government source said that the negotiators came close to agreement to seek "more market-determined exchange rate systems," increase flexibility of their currencies and to create a guideline on sustainable current account imbalances by the next meeting in France.
At a working dinner Thursday, Lee urged other leaders to make concessions to reach compromise over the currency and trade imbalance issues, stressing the need for greater policy coordination to spur economic growth, South Korean spokesman Kim Yoon-kyung said.
"So far, the G-20 has achieved great results through international coordination, and now is the time for us to strengthen it without losing the sense of urgency," Lee was quoted as saying at the dinner. "I would appreciate it if the leaders of each country made concessions."
Other leaders shared an understanding that they need to strengthen cooperation, Kim said.
Negotiators from the countries resumed stalled talks late Thursday night and "had a lot of discussions through 3 a.m.," the spokesman said, declining to give any more details, including whether there was a deal.
It is the fifth meeting of the G-20 leaders since they first met in late 2008 to discuss joint responses to the crisis that was rocking the world economy at the time. The G-20, which includes major industrialized and emerging nations, accounts for about 85 percent of the global economy.
South Korea is the first Asian nation to host a G-20 summit.
This week's summit came amid a currency row between the United States and China as Washington has mounted pressure on Beijing to stop keeping its currency, the yuan, artificially low, which makes Chinese goods cheaper. The U.S. claims the Chinese currency policy has worsened global trade and current account imbalances.
Complicating the dispute was the Federal Reserve's move to inject $600 billion into the U.S. economy to lower long-term interest rates in an effort to spur growth. The move has raised the eyebrows of some countries, such as China, Germany and Brazil, which believe lower U.S. interest rates will lead to the values of their currencies rising and hurt their exports.
Last month, the finance ministers and central bank governors of the G-20 nations agreed to seek market-determined foreign exchange rates and refrain from competitive devaluation of their currencies. They also agreed to seek every possible policy to keep current account imbalances at a sustainable level.
South Korea, as chair of the summit, has hoped to flesh out that deal at this gathering, such as creating a guideline for sustainable current account imbalances by requiring countries to limit surpluses or deficits to a certain proportion of their gross domestic products.
In the run-up to the summit, vice finance ministers and personal representatives of the leaders, dubbed the "Sherpa" group, haggled for days over the current account guideline proposal, but failed to find a compromise, underscoring the difficulty of dealing with the sensitive issue.
After the series of sessions, the leaders plan to adopt a joint declaration to summarize their discussions and include whatever agreements are made. South Korean President Lee, as chair of the meetings, will later hold a press conference to announce the statement.
Unless there is a breakthrough, officials said that the leaders could settle for simply calling for defusing the standoff before they meet again in France next year or making general recommendations to reduce excessive imbalances.
The declaration is also expected to support what is known as the "Korea Initiative," which combines the establishment of a global financial safety net with the issue of balanced development.
Other measures likely to go into the declaration include universal calls for a "standstill" on all forms of protectionist measures and support for carrying out reforms in the International Monetary Fund as well as introducing financial sector restrictions.
Seoul is also pushing to incorporate a pledge by G-20 members to expand support for developing countries and fuel a drive to fight corruption that has been cited for holding up progress in the world's poorest countries.
The summit brought together about 4,000 officials from the 20 member economies, including top leaders such as U.S. President Barack Obama, Chinese President Hu Jintao, Japanese Prime Minister Naoto Kan and Russian President Dmitry Medvedev.
In addition, the leaders of Spain and four other invited nations as well as top representatives of the U.N. and other international organizations attended the summit.