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Leaders at the G20 meetings in Seoul failed to resolve differences (FT) on currencies and trade imbalances and agreed to try to reach a resolution over the next year. The G20 agreed to a set of "indicative guidelines"--to be assessed with the IMF's help--to enhance an existing international process on balancing global growth. The final G20 statement (WashPost) reiterated the group's prior pledges that nations would curb deficits and move toward more flexible exchange rates. It also encouraged countries with widely used currencies, like the United States, to "be vigilant against excess volatility"--following concerns that loose U.S. monetary policy could fuel inflation or asset bubbles in emerging markets. To emerging markets, the G20 allowed for "carefully designed" control measures (Reuters) to contain these capital inflows. China avoided a showdown about its exchange rate policy, but at a news conference following the meeting, U.S. President Barack Obama used some of his strongest language to date (NYT) on China's role in aggravating imbalances. "The issue of the renminbi is one that is an irritant not just to the United States, but is an irritant to a lot of China's trading partners and those who are competing with China to sell goods around the world. It is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued," he said.
Analysis:
In the Financial Times, John Plender says history suggests "competitive devaluations and capital controls are the inevitable consequence of surplus countries failing to take any responsibility for global payments imbalances."
Calls for coordinated reductions in G20 economic imbalances were eclipsed by criticism of the Fed's move to boost the U.S. economy, with experts divided on its economic and political merits.
In the Daily Star, Dani Rodrik says calls for greater global governance through the G20, IMF, and WTO are "bound to remain incomplete."
Background:
This Reuters Factbox outlines major outcomes of the G20 meeting.
Read the G20's closing communiqué here.
This Backgrounder examines the roots of the U.S.-China economic imbalance.
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