Wednesday, November 10, 2010

'Seoul Consensus’ to set milestone for world economy

(EDITORIAL from the Korea Times on Nov. 11)
Despite protesters downplaying it, there can be no doubt the G20 Seoul Summit which opens at the Coex today is both significant and symbolic.
It is significant because the world has seen its postwar economic order no longer work as it used to, but is yet to agree on effective devices to supplement it, let alone find a new one. It is symbolic because Korea is the first non-G7 nation to host the summit of the 20 major economies at a time when part of global economic initiatives is shifting from rich to emerging countries.
A joint declaration might have already been drafted by working-group officials, or ``Sherpas,” but the leaders’ discussions will still be meaningful, as they show their governments’ different positions and the process by which they compromised to reach a conclusion.
What matters for the Korean government is how and for what the Seoul summit will be remembered. It would be little exaggeration in this regard to say the host has already attained a half success by demonstrating leadership in two of the summit’s four key agenda items ― reform of the IMF and a stricter regulatory regime for the financial sector.
All these early performances will of course lose their luster if the two-day conference is clouded by a free-for-all among presidents and prime ministers over readjusting their currency values and trade balances.
We hope the top leaders will know better than that. It’s time for America and China to meet each other half way instead of maintaining what’s good for the largest and second largest economies is good for the rest of the world.
Summit organizers seem to have long abandoned their initial goal of setting a numerical target to limit trade surpluses and deficits, as proposed and virtually withdrawn later by U.S. Treasury Secretary Timothy Geithner. It would still not be insignificant progress if the participants agree on an ``early warning mechanism” (EWM) as a midpoint to rebalancing the extreme disparity in the countries’ trade balances. Better still will be if they decide to work out an ``indicative guideline” within a certain time frame.
Excessive ambition on the part of the host government ― and other key promoters of the multilateral economic talking shop for that matter ― is neither desirable nor feasible. This is because what the world also direly needs for the moment is the ``rebalancing of development,” or industrialization. Global financial crises have occurred when the world’s economic leader lets its financial sector abnormally outweigh its manufacturing sector, or the real economy, as the U.S. ― the operator of the reserve currency ― has done over the past decade or two.
It is against this backdrop that the ``Korea initiative” for ensuring the co-prosperity of 170 non-G20 countries, carries special significance as the last of the four key agenda items at this summit. Seoul says it is ready to share its experiences of accomplishing industrialization in half a century with less developed global villagers. Although we doubt whether Korea can pose itself as a global economic model, even the country’s failure, including the 1997-98 currency crisis, could provide lessons of what hasty, unprepared opening of short-term capital markets could bring about.
We hope visiting leaders, especially those from rich advanced countries, will share this spirit of sharing with less privileged global partners, and contain it in a ``Seoul Consensus.” And much is up to President Lee Myung-bak and his administration to attain this objective through fair arbitrage and skillful persuasion.