Global finance leaders, under pressure to display unselfish policies, agreed Saturday to boost cooperation on rebalancing the world economy to help defuse tensions that had sparked fears of trade conflicts.
The Group of 20 vowed to avoid potentially debilitating currency devaluations and reduce trade and current account imbalances, amid a growing recognition that restructuring the world economy is necessary to accommodate the greater role played by fast-growing China and other developing economies.
G-20 finance ministers and central bank governors met for two days in the South Korean city of Gyeongju ahead of a summit of their leaders in Seoul next month. Just two weeks ago, a G-20 meeting in Washington failed to resolve differences that had stoked worries a possible trade war could trigger another economic downturn.
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. At the same time, China's currency, the yuan, has been effectively pegged to the greenback, provoking criticism it is being kept artificially low and giving the country's exporters an unfair advantage.
Asia relying less on exports for growth is seen as one of the adjustments that nations should make to ensure more stability in the global economy and markets. Stronger currencies, meanwhile, would make imported goods cheaper and boost local spending as a contributor to economic growth.
The G-20, which accounts for about 85 percent of the global economy, said in a statement that it will "move towards more market determined exchange rate systems" and "refrain from competitive devaluation of currencies." It also vowed to cooperate on reducing "excessive imbalances."
"I think it's fair to say for the first time we see the major economies come together and recognize that excess imbalances that persist over a period of time, that can threaten growth and financial stability, need to bring about adjustments in policies," U.S. Treasury Secretary Timothy Geithner told reporters after the meeting.
The G-20 includes both rich countries such as the U.S., Japan and Germany as well as emerging ones like China, India and Brazil. It assumed the role of global economic leader following the 2008 financial crisis.
South Korean President Lee Myung-bak, chair of the upcoming G-20 summit and a staunch advocate of free trade, had implored the finance officials on Friday to come up with what he called a "mutual win-win."
The G-20 also released proposals to give developing nations more say at the International Monetary Fund, part of what it described as an ambitious retooling of the lending institution to make it more representative of shifts in the global economy.
The officials called for greater representation for emerging countries on the institution's executive board by reducing European seats by two and shifting more voting power to developing economies and underrepresented countries.
"It is a milestone in reforming global governance," said Olli Rehn, economic and monetary affairs commissioner of the European Union, which also belongs to the G-20. "Today we have been rebalancing global growth and rebalancing political influence in global governance."
Since the 2008 crisis, the G-20 has coordinated economic and interest rate policies to spur growth and is forging stricter regulation of banks and other financial institutions seen as responsible for the meltdown.
Geithner had pushed in a letter to G-20 members for a commitment to polices that would reduce current account and trade imbalances "below a specified share" of gross domestic product "over the next few years."
But the G-20 statement said that large imbalances — such as China's vast trade surplus with the rest of the world — would be "assessed against indicative guidelines to be agreed." Geithner's proposal had drawn resistance from export-reliant countries such as Japan.
Japanese Finance Minister Yoshihiko Noda, who on Friday called the idea of targets "unrealistic," urged a cautious approach to specific numbers, though he expressed support for "guidelines."
"There are many perspectives on the current account issue," he said. "Every country has a different situation when it comes to surpluses and deficits. So we need to study this carefully."
Geithner said Saturday the U.S. was not pushing for any specific quantitative targets and that the country's stance found substantial support within the G-20.
He also made a point of praising China, which has drawn criticism on the pace of yuan appreciation, saying it was pursuing "very ambitious" changes to its economy and had in recent weeks taken steps to allow its currency to strengthen "more rapidly in response to market forces."
Geithner planned a brief visit to the Chinese city of Qingdao on Sunday for talks with Vice Premier Wang Qishan, according to Treasury Department spokesman Steven Adamske.
Associated Press writers Kwang-tae Kim and Tomoko A. Hosaka in Gyeongju contributed to this report.
- central bank governors
- free trade
- the European Union
- International Monetary Fund
- currency devaluations
- current account
- U.S. Treasury Secretary Timothy Geithner