On eve of G-20 economic summit in Toronto, Obama seeks cooperation
Friday, June 18, 2010
As a key world summit in Toronto approaches next week, Obama referred -- sometimes elliptically but still unmistakably -- to a lengthening list of disagreements among the G-20 group of nations, including China's overvalued currency and Europe's suddenly aggressive budget-cutting.
Instead of meeting in Toronto to review the progress made toward goals announced last year in Pittsburgh, when there was a buoyant mood of world cooperation, the coming session stands as a fresh reckoning.
"We meet at a time of renewed challenge to the global economy," Obama said in the letter, obtained by The Washington Post. He called on the G-20, which includes China, India, and major European nations and whose 20 members account for the bulk of world economic activity, to "reaffirm our unity of purpose" when "significant weaknesses" continue in several of the member countries' economies.
The debate over China is a long-standing one, but Obama's letter included sharp -- though veiled -- criticism of the country's failure to be more aggressive in reducing its reliance on exports. Rebalancing the global economy by reducing large trade surpluses in China and other export powers was a main goal agreed upon in Pittsburgh. But little progress has been made, and China has not allowed its currency to appreciate -- the one step many in the United States have awaited as a sign of good faith and a way for China to curb its exports by making them more expensive.
Obama's letter did not mention China by name, but he said he was concerned about "continued heavy reliance on exports by some countries with already large external surpluses . . . I also want to underscore that market-oriented exchange rates are essential to global economic vitality."
In the past year, China and other Asian powers have helped pull the global economy out of recession -- but have maintained the same export-led industrial and currency policies that have allowed them to sock away trillions of dollars in foreign currency reserves, a model that the International Monetary Fund and others have encouraged them to change to create a more balanced world system.
The differences with Europe have been stoked by the recent crisis over Greek government debt. Greece's problems led to broader concerns about slow growth and large deficits throughout the continent, and particularly among the 16 nations that share the euro.
That has prompted a surge in budget-cutting plans that the IMF has said are appropriate for the most indebted nations, such as Greece and Spain, but that risk undercutting recovery in countries where government debt is not as urgent a problem and growth remains tentative. France, Germany and England, the drivers of the European economy, have all announced austerity plans.
"I am committed to the restoration of fiscal sustainability," Obama said, "but it is critical that the timing and pace of consolidation in each economy suit the needs of the global economy, the momentum of private sector demand, and national circumstances." The United States is setting budget goals for 2013, for example, but in the interim "will pursue measures to support the recovery in private demand and return the unemployed to work," he wrote.
"This is not a time to take our foot off the accelerator here," said Vice President Biden, speaking to reporters at the White House. "We still need to continue to create jobs and spur job growth."
Europe and the United States are not totally out of synch. European leaders meeting in Brussels on Thursday approved the public release of bank "stress tests" to help clarify the financial health of the continent's banking system -- a step the administration has urged and that Obama broadly referenced in his letter. And they have agreed on the general principles of financial reform, such as better regulation of derivatives trading and new levies on the financial sector to help pay the costs of the recent financial crisis.
But the Brussels meeting also highlighted the G-20's elusive hope for unity.
Where Obama's letter emphasized the need to ensure growth, a statement released by the European Union in Brussels spoke of the "major risks" posed if European governments don't quickly cut spending.
Where Obama wants to impose a new levy on only the largest financial institutions, the Europeans want to pursue a broad, global tax on all financial transactions. The statement said Europe "will strongly defend this position" in the G-20.
"If there is no consensus in the G-20, we go forward," E.U. President Herman Van Rompuy said in a news conference.
A senior administration official who spoke on the condition of anonymity because the president's letter to the G-20 leaders has not been publicly released said that despite the list of issues, the group is still striving for common ground.
"I think one of the noteworthy aspects of the last 18 months is that countries didn't just go their own way," the official said. "The crisis isn't over, there are vulnerabilities and there's more work to be done in each of these areas. And they will continue to work on that agenda together."