Geithner asks G-20 nations to commit to trade, currency targets
Friday, October 22, 2010; 5:14 PM
Treasury Secretary Timothy F. Geithner has asked the world's largest economies to commit to specific trade and currency targets in an effort to secure a global economic recovery.
In a letter Wednesday to the finance ministers of the G-20 nations obtained by The Washington Post, Geithner outlined a three-point plan that warned countries against artificially undervaluing their currency to prop up exports. The proposal, rooted in the United States' ongoing trade dispute with China, did not mention China by name. But the letter said that countries should refrain from adopting "exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing appreciation of undervalued currency."
Geithner and the other Group of 20 finance chiefs are attending a two-day meeting this weekend in Geyongju, South Korea, for a round of preliminary talks ahead of a summit among the heads of state next month in Seoul.
In the letter, Geithner said the plan would require nations to trim their trade surpluses, while countries such as the United States would have to curb chronic deficits and commit to saving more on a national level. Finally, Geithner called on the International Monetary Fund to expand its role to monitor progress on these fronts.
The proposal drew split reaction from some G-20 members in Korea, Bloomberg news reported on Friday.
"Setting numerical targets would be unrealistic," said Japanese Finance Minister Yoshihiko Noda. He said the United States recommended trade deficits or surpluses of no more than 4 percent of a country's current account, which is a measure of a nation's trading relationships with the rest of the world. A persistent, high current account surplus is a sign of an undervalued currency, as is the case with China.
German Economy Minister Rainer Bruederle rejected a "command economy" approach. And Indian Finance Minister Pranab Mukherjee said caps would be hard to quantify.
In interviews with Bloomberg Television, however, Canadian Finance Minister Jim Flaherty said the idea was a "step in the right direction," and Australian Treasurer Wayne Swan called it "constructive."
The Obama administration is pushing major nations for a broad new agreement on fundamental economic issues such as exchange rates and trade surpluses. To succeed, however, the effort must breach a deep divide between developed and developing countries on how best to secure global economic growth. And it is poised to become a defining battle for the G-20 major economic powers.
At Obama's urging last year, the G-20 assumed a central role in coordinating world economic policy, a change that captured both the president's commitment to multilateralism and the urgent need for action to pull the global economy out of a deep recession. The result was a coordinated move by governments from Beijing to Brasilia to unleash huge amounts of spending to restart economic growth.
But a year later, national self-interest and bilateral feuds have reemerged amid concern that major countries risk a debilitating battle for jobs and trade. That, in turn, has prompted doubts about whether the disparate group of nations represented at the G-20 can remain on common ground outside of a global economic crisis.
"Among the G-20, we are looking for the least common denominator - it requires consensus - and the least common denominator is too low" to address some of the problems being faced, said Ali Babacan, Turkey's deputy prime minister and liaison to the group. "Short-term national interests are overwhelming."