SEOUL, South Korea — Leaders of the world’s biggest economies agreed on Friday to curb “persistently large imbalances” in saving and spending but deferred until next year tough decisions on how to identify and fix them. þþThe agreement, the culmination of a two-day summit meeting of leaders of the Group of 20 industrialized and emerging powers, fell short of initial American demands for numerical targets on trade surpluses and deficits. But it reflected a consensus that longstanding economic patterns — in particular, the United States consuming too much, and China too little — were no longer sustainable. þþPresident Obama called the agreement significant, even if not as dramatic or far-reaching as the one that emerged from the first G-20 leaders’ meeting in 2008, when nations came together quickly amid fears of a global meltdown. þþ“Instead of hitting home runs, sometimes we’re going to hit singles,” Mr. Obama said. “But they’re really important singles.” þþThe measured language on imbalances reflected the clout of China, which successfully resisted pressure for its currency to appreciate quickly, and Germany, which insisted that an examination of imbalances include fiscal, monetary and other policies, not just trade. þþChina’s president, Hu Jintao, pledged to shift the Chinese economy away from reliance on exports and toward domestic consumption — a strategy urged by the United States and most economists. Mr. Obama said that he had raised China’s exchange-rate policy with Mr. Hu and that “we will closely watch the appreciation of China’s currency.” þþMr. Obama, who had brought a trade-driven agenda to his 10-day trip to Asia but occasionally found his priorities frustrated by global disagreement, warned, “No nation should assume that their path to prosperity is paved simply with exports to the United States.” þþIn a news conference, Mr. Obama also used some of his strongest language to date on China’s role in the world economy, making it clear that he expected Beijing to assume part of the burden of leadership. þþ“Precisely because of China’s success, it’s very important that it act in a responsible fashion internationally,” he said. “And the issue of the renminbi is one that is an irritant not just to the United States, but is an irritant to a lot of China’s trading partners and those who are competing with China to sell goods around the world. It is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued.” þþMr. Obama acknowledged that China would move “in a gradual fashion” and expressed hope that a visit by Mr. Hu to Washington in January would yield additional progress. þþ“We understand that this is not solved overnight,” Mr. Obama said. “But it needs to be dealt with and I’m confident that it can be.” þþThe G-20 leaders largely endorsed an approach to imbalances that finance ministers, including Treasury Secretary Timothy F. Geithner, hammered out last month at a meeting in Gyeongju, South Korea, but added a timetable. þþThe finance ministers, along with the heads of central banks like the Federal Reserve, are to agree by next June on “indicative guidelines” for identifying big, persistent imbalances. The guidelines would “facilitate timely identification of large imbalances that require preventive and corrective actions to be taken,” the leaders said. þþUsing those guidelines, the International Monetary Fund will then conduct an analysis of the “root causes” of the imbalances and the damage that they cause by the next G-20 leaders’ meeting, to be hosted by France late next year. þþTechnical as it might seem, the language on imbalances was the most contentious part of the 22-page joint statement issued by the G-20 leaders, and was only agreed to after days of negotiation that stretched into the predawn hours Friday. þþLike Mr. Obama, other leaders tried their best to put the compromise in positive terms. þþ“Not heroic, but good and steady progress,” said the British prime minister, David Cameron. Or as the French president, Nicolas Sarkozy, put it: “The Seoul agreement is better than disagreement.” þþCanada’s prime minister, Stephen Harper, said that currency and trade imbalances were not going to be fixed right away. “It’s fair to say we didn’t resolve those issues here,” he said. “These are not going to be easy issues to resolve, but I think we’ve got everyone talking the same language, everyone understanding longer term what has to be done.” þþIn agreeing to a broad examination of imbalances and their causes, deficit countries like the United States and Britain are opening themselves to criticisms of their debt and deficits. While Mr. Cameron’s Conservative government has pursued a wrenching program of fiscal austerity, Mr. Obama will face a divided Congress locked in bitter disagreement over spending and tax measures. þþThe assessments to be conducted by the I.M.F. are likely to examine not only exchange rates and trade flows but also variables like labor costs, savings rates, demographics, investment and commodities. þþPerhaps the only big winner from the meeting was the I.M.F. The G-20 leaders ratified changes in the governance of the fund that will expand representation of emerging-market countries, endorsed the expansion of I.M.F. lending programs that can be used by countries facing a sudden liquidity crunch, and empowered the fund to spearhead the process for fixing imbalances. þþ“This was more a G-20 of debate than a G-20 of conclusion,” said Dominique Strauss-Kahn, managing director of the I.M.F., who said the G-20 had moved from a crisis phase, in which nations agreed to stimulate their economies, avoid protectionism and overhaul financial regulations, to a postcrisis era of difficult choices. þþ“In the first phase, cooperation, which is the goal of the G-20, was mandatory,” he said. “In the second phase, which is now opening, cooperation is now voluntary.” þþThe I.M.F. has offered that the principal rationale for cooperation is to fix the imbalances, concluding that global economic growth will be 2 percentage points higher through 2014 if major economies coordinate their policies rather than acting alone. þþ“I don’t think we can say it’s a problem that has been put aside, with an unlimited timeline, not knowing when it will be done,” Mr. Strauss-Kahn said. “But what is true is that it’s a complicated problem.” þþHe said both the fund and critics of the G-20 would like “quick decisions,” but the process would take time. þþThe basic tension, it seemed, is that countries are going their own ways while acknowledging that they probably should not. “Countries are sovereign entities,” Mr. Strauss-Kahn said. “They want to have their own policies. At the same time, they understand that more and more in the globalized world, they need to take into account their spillovers and interactions and can’t act independently.” þþTrade imbalances were not the only item on the G-20 agenda. The leaders also endorsed the new bank capital standards known as Basel III; backed an American-led push for overhauling financial regulations; called for completion of the long-delayed Doha round of world trade talks; and declared that the development of poorer countries was significant not merely for reasons of social justice but also for generating demand to sustain the recovery. þþSouth Korean officials, proud of being the first emerging-market country to host the G-20 leaders, tried to put the best face on the agreement. “We are all in one boat of destiny,” President Lee Myung-bak said. þþHyun Song Shin, a professor at economics at Princeton University who has been a top adviser to Mr. Lee, said in an interview that his country had served as a bridge between two economic giants. “We’ve had a breakthrough — we shifted the debate away from just exchange rates to one about macroeconomic imbalances,” Dr. Shin said. “That’s a shift the U.S. and China could sign on to.” þþ
Source: NY Times
