G20 leaders failed to find agreement at pre-summit talks on Wednesday ahead of a two-day G20 meeting in Seoul beginning Thursday, stymied by lingering disagreement over addressing trade imbalances and fears of a race to devalue global currencies.
AFP - Bad blood between the world's 20 biggest rich and emerging nations spilled over Wednesday on the eve of a summit devoted to rebalancing the lopsided global economy.
Ill-tempered pre-summit talks in Seoul grew heated as senior Group of 20 officials laboured to grind out a leaders' statement on fixing trade imbalances, a result of China's dramatic expansion and America's deficit woes.
Chinese President Hu Jintao, ahead of a meeting Thursday with US President Barack Obama in Seoul, called on other countries to "face their own problems" rather than casting blame for the chasm between debtor and creditor nations.
Hu also defended China's controversial controls on its yuan currency and warned of a "grim" world economic situation, in an interview published Wednesday by China's official Xinhua news agency.
The United States has long accused China of keeping the yuan grossly undervalued to boost exports, and wants the G20 to adopt a pact to curtail outsized imbalances between surplus and deficit nations.
But Washington has itself attracted widespread and stinging criticism after the Federal Reserve decided to pump an extra 600 billion dollars into the fragile US economy, triggering warnings of a global race to devalue currencies.
Obama, in a letter to fellow G20 leaders, hit back by arguing that the "dollar's strength ultimately rests on the fundamental strength of the US economy".
"A strong recovery that creates jobs, income and spending is the most important contribution the United States can make to the global recovery," added the letter obtained by AFP as Obama flew into Seoul.
South Korean officials laid bare the rancour at the preparatory talks among G20 deputy finance ministers this week.
"Each country was sticking to its original position," Kim Yoon-Kyung, a spokesman for South Korea's G20 presidential committee, told reporters after the deputies met for 14 hours on Tuesday.
"Voices were raised," Kim said. "They wouldn't compromise. They actually had to keep the door open because the debate was so heated and we were lacking oxygen."
Describing Wednesday's talks, summit spokeswoman Sohn Jie-Ae said: "The outcome of negotiations is still uncertain. The issues are contentious and everyone is trying to negotiate."
At best, officials suggested, the G20 may settle for a watered-down deal to task the International Monetary Fund with crafting guidelines to trim the imbalances between exporters such as China and importers, for instance the United States.
China, Germany and other G20 powers say the Fed's "quantitative easing" stimulus amounts to an effective dollar devaluation, and has the potential to trigger a 1930s-style trade war if other countries respond in kind.
"We have to be particularly wary of protectionist sentiments," Indian Prime Minister Manmohan Singh, who paid host to Obama this week, said in a statement before leaving for Seoul.
British Prime Minister David Cameron, in a speech in Beijing, urged the West to keep its doors open to trade with China.
But he also urged China to unshackle the yuan, and said its cooperation with the G20 would "go a long way towards helping the global economy lock in the stability it needs for strong and sustainable growth".
Emerging economies worry that much of the Fed's new money will flood their financial markets in search of higher returns, driving their currencies still higher against the dollar and Chinese yuan to the detriment of their exports.
Germany has been particularly vocal in accusing the United States of itself resorting to Chinese-style tactics. Like China, the eurozone giant has a hefty trade surplus but says this has nothing to do with any currency chicanery.
A draft leaders' statement obtained by Dow Jones Newswires, which officials stressed was a work in progress, reaffirmed a vow made by G20 finance ministers last month to "move towards more market-determined exchange-rate systems".
US critics of Beijing gained fresh ammunition Wednesday when China released figures showing its monthly trade surplus grew year-on-year in October to 27.15 billion dollars, while America's trade balance remains deep in the red.
Date created : 2010-11-10