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U.S. President Barack Obama urged the G20 to embrace global cooperation (Reuters) on economic growth as leaders gathered in Seoul, South Korea, while deemphasizing heavily criticized U.S. economic policies. In a letter to G20 leaders Tuesday, Obama said, "When all nations do their part--emerging no less than advanced, surplus no less than deficit--we all benefit from higher growth." But diverging national policies since the financial crisis have called into question the effectiveness of the G20 (NYT) in cultivating cooperation. Growing international concern about the U.S. Federal Reserve's recent move to buy $600 billion in Treasuries is strengthening resistance to U.S. solutions to global imbalances. Some economists say countries like China and Germany are using the issue to divert attention from their own contributions to imbalances. Meanwhile, countries are also loath to cede national sovereignty on G20 efforts to create global recovery and resolution plans for systemically important banks (WSJ). The G20 is expected to defer a decision on whether these institutions should be held to a globally set capital surcharge. It also plans to delegate many tasks on addressing threats to the financial system to national regulators, believing a harmonized global approach would be too complex (FT).
Analysis:
In the Japan Times, Jamie Metzl and Zachary Karabell say one imperative for the G20 will be moving forward with multilateral trade agreements, particularly by completing the Doha Round of trade negotiations.
In the Financial Times, George Magnus says domestic political pressures, especially in China and the United States, will prevent G20 leaders from striking a "grand bargain" to resolve global imbalances
A New York Times editorial says while the Fed's quantitative easing plan is not ideal, the G20 should realize the alternative is prolonged stagnation, or the United States turning "off one of the main sources of global demand and global growth."
The Federal Reserve's move to inject an added $600 billion into the banking system is bad policy, straining the international monetary order and U.S. credibility abroad, writes CFR's Sebastian Mallaby.
Background:
This Backgrounder examines the roots of U.S.-China economic imbalances.
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