By Howard Schneider and Scott Wilson
Washington Post Staff Writers
Friday, November 12, 2010; 7:26 PM
SEOUL - President Obama departed Friday from a summit of world leaders here with an agreement that major economies would abide by common standards that could, for example, reverse some of China's export dominance and help put Americans back to work.
But the deal, backed by the United States and adopted by the Group of 20, is not the detailed code of behavior Obama had sought; instead it's a statement of principle. Its impact won't be known until a group of finance ministers and the International Monetary Fund complete what could be months of haggling over the specifics. And if the G-20 meeting proved anything, it is the difficulty of wresting meaningful consensus from nations with increasingly divergent economic interests.
"You are seeing a situation where a host of other countries are doing well and coming into their own and they are going to be more assertive in terms of their interests and ideas," Obama said at a news conference. "The question was whether our countries can work together to keep the global economy growing. The fact is that 20 major economies gathered here are in broad agreement on the way forward."
But after pitched conversations over currency, trade and U.S. economic policy, Obama left Seoul with the details of the international code unfinished and with a much-anticipated trade deal with South Korea in disarray. Nor did Obama command the spotlight as he did when he first traveled overseas after becoming president.
Hoping to put the U.S. on a stronger economic footing, the Obama administration in September had floated the idea that countries should agree to certain limits, for instance on their holdings of foreign reserves and their trade surpluses.
World leaders in Seoul, in essence, agreed on the need for standards that will help flag trouble spots in the world economy but deferred a more complex debate on the details of these "indicative guidelines."
The accord reached in Seoul is "a work in progress," Obama said. His remarks were an acknowledgment of the limits of Washington's influence over a group riven by sharp disagreements, such as those between the United States and export giants such as China and Germany.
By agreeing to set economic standards, the G-20 leaders moved into uncharted waters. The deal rests on the premise that countries will take steps, possibly against their own short-term interests, if their economic policies are at odds with the wider well-being of the world economy. And the leaders are committing to take such steps even before there's an agreement on what criteria would be used to evaluate their policies.
In the most general of terms, the statement adopted by the G-20 countries says that if the eventual guidelines identify a problem, this would "warrant an assessment of their nature and the root causes" and should push countries to "preventive and corrective actions."
Earlier, there was a backlash from countries including Germany and China when U.S. officials pressed for a quantitative measure suggesting that nations limit surpluses in their current account - a broad measure of trade and investment with the rest of the world - to 4 percent of their gross domestic product.
German Chancellor Angela Merkel argued that countries should not be punished for being successful. Germany's surplus, she said, gives other nations a model to emulate and should not be limited arbitrarily.
The disagreement illustrated how difficult it may be to set the guidelines called for in the G-20 communique. "Everybody is a bit reluctant," said IMF Managing Director Dominique Strauss-Kahn. "They all say they are committed. . . . We'll see after six months, a year, two years, if we can give some reality to the process."
U.S. officials said the potential benefit of new standards over the long term is significant even if developing them proves complicated. The details may not fall into place quickly, a senior U.S. official said. "We are playing for consensus," the official said. "You can't force it."
The Seoul gathering also endorsed an overhaul of the IMF's structure to give more influence to emerging-market countries and backed the new capital requirements for banks drafted by a committee of central-bank heads working out of Basel, Switzerland.
In addition, the group agreed to push ahead with proposals by the Financial Stability Board to create even stiffer capital rules and regulatory oversight for the largest financial firms, an effort to head off public bailouts of companies considered "too big to fail."
Besides the limited progress on economic standards, Obama also faced other difficulties at the summit that spoke to the limits of U.S. power. Talks over a free-trade agreement with South Korea faltered even after one-on-one talks between Obama and South Korean President Lee Myung-bak. Obama expressed concern about whether he would be able to sell the deal to Congress.
His reception at this gathering was far more muted than the celebrity treatment he enjoyed at the summit last year. Obama said the world leaders' interest in "photo ops because there had been a lot of hoopla surrounding my election" has given way to "genuine friendships."
"It's not just a function of personal charm," he said. "It's a function of countries' interests and seeing if we can work through to align them."
The agreement on economic standards was hailed by South Korea's Lee, who had taken a personal stake in ensuring the summit didn't collapse as tensions rose over currency and other issues. It was the first such meeting hosted by a country that is not a member of the Group of Eight's mostly Western, industrialized nations.
Before the meeting, prospects for success dimmed as Germany, China and other countries criticized the United States over the Federal Reserve's decision last week to pump $600 billion into the economy. International critics called the step disruptive to the world economy.
"We have overcome the dangers," Lee said. "We will agree on a set of rules and common objectives."