Despite divisions, G20 leaders agree to cooperate (Second Lead)

Friday, November 12, 2010

SEOUL - The Group of 20 summit in Seoul ended Friday with a joint statement that papered over many key differences but showed that leaders were at least willing to help each other navigate through difficult economic times.

“We have produced specific and tangible results,” South Korean President Lee Myung Bak said at the close of the meetings of the world’s largest economies.

As expected, leaders agreed on an overhaul of the International Monetary Fund (IMF) that gives more decision-making power to developing countries such as China and Brazil, and committed themselves to implementing stricter banking rules in a bid to avoid a repeat of the 2008 financial meltdown.

But there was less progress on two of the summit’s most contentious issues: exchange rates and trade imbalances.

The leaders agreed to “move toward more market-determined exchange rate systems” to reflect “underlying economic fundamentals and refrain from competitive devaluation”.

But stronger language aimed at addressing the problem of “undervalued” currencies was dropped because of Chinese opposition.

China has long been accused by the US and others of manipulating the value of the renminbi in order to make Chinese exports more attractive.

Moreover, US plans to introduce numerical limits on balance of payment imbalances were shelved amid strong opposition from big exporting nations such as China and Germany.

Instead, finance ministers and central bankers were instructed to draw up a set of “indicative guidelines” designed to monitor such imbalances and prevent countries from running excessive surpluses or deficits.

Talks on such guidelines, which would eventually be implemented with the help of the IMF, were due to start in the first half of 2011.

The leaders once again vowed to avoid protectionist measures - arguably one of the G20’s greatest achievements during the last recession - and to try and end the protracted Doha Development Round on trade liberalisation in 2011.

And while there was hardly any news on the climate change front, the G20 for the first time included development in its agenda, with countries committing to an action plan aimed at boosting food security and bridging the gap between poor and rich nations.

“People should not think that every time leaders come together they are doing some revolutionary thing,” US President Barack Obama said.

Obama, who many observers regard as one of the losers of the summit, stressed that it was important that leaders had finally acknowledged that their countries needed to increase domestic demand rather than rely on exports to boost growth.

French President Nicolas Sarkozy said about the exchange rate row that while there had been “a lot of tension at the beginning of the summit, everyone contributed to calm things down” during the talks in Seoul.

Sarkozy, whose country assumes the presidency of the Group of Eight and G20 in 2011, said the forum had shown an ability to “stick to its commitments” in Seoul.

Asked about the trade imbalances talks, Sarkozy said, “We can either keep criticizing each other, a strategy that would lead to absolute failure, or go for an alternative: dialogue.”

Sarkozy said the priority of his presidency would be to start a reform of the international monetary system, describing China’s willingness to host a seminar on the issue next year as a “considerable step forward”.

Echoes of the financial crisis that is hitting Ireland reached Seoul, prompting the finance ministers of European Union heavyweights Germany, France, Britain, Italy and Spain to issue a joint statement aimed at reassuring jittery markets.

“The greatest achievement (of this summit) is international cooperation,” Lee said.

Filed under: Economy

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