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2010-11-12 10:12:36
Barack Obama says there is "broad agreement" on global economic policy between
G20 nations
Leaders of the G20 group of major economies have agreed to avoid "competitive
devaluation" of currencies after a second day of difficult talks in the South
Korean capital, Seoul.
Leaders agreed to come up with "indicative guidelines" to tackle trade
imbalances affecting world growth.
Tensions had been high between some delegations over how to correct distortions
in currency and trade.
Some fear the conflict, chiefly between China and the US, may threaten growth.
US President Barack Obama said there should be no controversy about fixing
imbalances "that helped to contribute to the crisis that we just went through".
"Exchange rates must reflect economic realities," he said.
"Emerging economies need to allow for currencies that are market-driven. This
is something that I raised with President Hu of China and we will closely watch
the appreciation of China's currency."
'Slowly, slowly'
Washington says that China's currency, the yuan, is artificially weak and gives
Chinese exporters an unfair advantage as well as leading to Beijing amassing
huge foreign reserves.
Start Quote
There has been just enough progress on the vexed subject of exchange rates and
global imbalances for all sides to declare victory. But the US president has
had a tougher ride here than at any previous G20 summit
End Quote
However, Chinese officials argue that Beijing has an "unswerving" commitment to
reform its currency regime, but that global economic stability is needed to
achieve it.
UK Prime Minister David Cameron said progress was being made on the issue of
imbalances.
"Slowly, slowly China is moving into a position of actually increasing domestic
consumption, rebalancing its economy," Mr Cameron said.
However, the agreement to develop new guidelines to prevent so-called "currency
wars" fell well short of the 4% limit on national trade deficits and surpluses
proposed by the US, which had been blocked by China and Germany - the world's
two largest exporters.
And South Korea President Lee Myung-Bak admitted that "on the foreign exchange
rate issue, principles were agreed at the finance ministers' meeting, but there
was no word on when and up to how much we will implement them".
'Fractious' negotiations
The G20 leaders also gave their backing to reforms designed to give emerging
economies such as China a bigger say in the International Monetary Fund.
In their communique, leaders said they were delivering "a modernised IMF that
better reflects the changes in the world economy through greater representation
of dynamic emerging markets and developing countries".
UK sources say that officials from the UK, France and Russia had to be called
in the early hours of this morning after "fractious" negotiations between China
and the US broke down in "acrimony".
But at the end of the summit, the European Union said in a statement that it
was "satisfied" with the outcome.
The G20 also committed itself to completing soon the long-running Doha
Development Round of global trade talks, saying that 2011 presented a "critical
window of opportunity, albeit narrow" to conclude the discussions.
And it signed the Seoul Development Consensus for Shared Growth, committing it
to work in partnership with other developing countries on trade, development
and investment.
Irish debts
Meanwhile, the UK, France, Germany, Italy and Spain issued a joint declaration
to try to calm bond market jitters over a possible future EU bail-out fund.
As Irish bond yields reached a fresh high, leaders discussed the Irish
Republic's debt crisis amid concerns that the European Union will have to step
in.
"Any new [bail-out] mechanism would only come into effect after mid-2013 with
no impact whatsoever on the current arrangements," finance ministers from the
five countries said in the declaration.