Top finance officials from the world's major economies hunkered down Saturday for final day of talks aimed at quelling fears of a possible trade war sparked by competition over currency rates.
The gathering of Group of 20 finance ministers and central bank governors comes just two weeks after their meeting in Washington failed to resolve differences that have led to growing worry that a rift over exchange rates between advanced and developing countries could deal a further blow to the global economy.
Finance ministers and central bank governors from the G-20, which accounts for 85 percent of the global economy, began meeting Saturday about an hour behind schedule, said Kim Young-min, a spokesman for South Korea's Ministry of Strategy and Finance. Before the full session, finance ministers held a separate meeting, said D.S. Malik, a press official at India's finance ministry.
Ministers and governors were tight-lipped. Japanese Finance Minister Yoshihiko Noda and central bank Gov. Masaaki Shirakawa refused to speak to reporters Saturday as they departed for the meeting venue, a heavily guarded hotel in the scenic South Korean city of Gyeongju.
The G-20, which has been around since 1999 and includes both rich and emerging countries, assumed the role of global economic leader following the worldwide financial crisis after criticism that the Group of Seven advanced nations was too narrow a forum and failed to represent the voices of China and other fast-growing nations such as India.
Since the crisis, the G-20 has pursued major reforms to the global economy and financial system, such as attempting to coordinate economic and interest rate policies to spur growth and forge stricter regulation of banks and other financial institutions seen as responsible for the meltdown.
The current meetings come ahead of a summit of G-20 leaders set for Nov. 11-12 in Seoul where countries are expected to consider recommendations for strengthening the global economy, including stricter capital requirements for banks and reform of the International Monetary Fund.
Those tasks, however, have been overshadowed by tensions over exchange rates amid a global economic environment that, while better than in the depths of the economic crisis in late 2008 and early 2009, remains far from robust.
In recent weeks, fears have emerged of a so-called currency war. In that scenario, countries devalue their currencies to gain a competitive advantage, while other nations erect trade barriers in response. The result is a blow to international commerce and a reversal of economic recovery.
Nations in Asia and other regions have been trying to stem strength in their currencies amid sustained weakness in the U.S. dollar out of fear their exports will become less competitive in world markets. At the same time, China's currency has been effectively pegged to the dollar, provoking an outcry that it is being kept artificially low and giving China's exporters an unfair advantage.
The United States was pressing emerging nations at the meeting to set targets to reduce their vast trade surpluses with the West, a plan that could see their currencies rise further than they have in recent months.
U.S. Treasury Secretary Timothy Geithner's proposals, outlined in a letter to the G-20, met with immediate resistance on meeting's opening day Friday, with Japan calling the idea "unrealistic."
According to officials at the summit, Geithner's idea is to establish numerical targets for current account balances, be they surpluses or deficits — aiming to reduce conflicts over exchange rates by allowing the currencies of trade surplus countries to rise in concert. The current account is a broad measure of a country's total trade and investment with the outside world.
A G-20 official, speaking Saturday on condition of anonymity, said that the ministers and governors have reached abroad agreement on a statement they plan to issue later in the day and that the numerical targets were included in a draft version. The official said, however, it was not clear if the mentions of targets would remain in the final version, a hint that debate on the issue was fierce.
Canadian Finance Minister Jim Flaherty said Friday that the currency issue must be addressed and that no one in the G-20 wants to end the meeting without an action plan.
"If it's not, then we know from history the path that we end up going down, which is not good for any of us whether we're an emerging economy or a developed economy," he said.
Associated Press writers Tomoko Hosaka and Kwang-Tae Kim contributed to this report.
- current account balances
- Japanese Finance Minister Yoshihiko Noda
- exchange rates
- central bank governors
- developing countries
- emerging nations