G20 leaders agree: Let’s put off decisions until next year

The world’s biggest economies avoided a breakdown in cooperation at a G20 summit here by agreeing to put off decisions on issues dividing leading countries until next year.

“These things didn’t happen overnight, they’re not going to be fixed overnight,” Prime Minister Stephen Harper said of the intractable global trade and investment patterns that are hampering economic growth and pitting fast-growing emerging economies against debt-burdened industrial nations.Leaders of the G20, which took shape in 2008 to fight the recession, pledged to address these irritants, but failed to agree on a mutually-acceptable system for identifying economic imbalances that countries must fix for the good of the international economy. Canada will lead a G20 working group that will try in 2011 to set out guidelines that member nations must live up to.“I think it’s fair to say we did not resolve those issues here,” said Harper, whose mood after the two-day meeting in Seoul was decidedly less buoyant than after leaders agreed in Toronto in June to cooperate on economic policy in the wake of the recession.
“We are keeping things at least on a path that is viable,” he told reporters. But “moving forward, G20 credibility does depend on showing results and achieving concrete action.”
Underneath the tensions that emerged in Seoul are disagreements over how to address global imbalances in trade and investment flows that contributed to the recent recession. The United States is looking to exporting nations like China to adjust their economic policies to increase domestic demand at home rather than relying on the American consumer. In particular, U.S. President Barack Obama wants China to scrap its policy of keeping its currency, the yuan, artificially low on exchange markets, which the U.S. says hurts American exporters by giving Chinese companies an unfair price advantage.
G20 leaders agreed on the need for countries to refrain from keeping their currencies at artificially low rates but there was no mechanism to back up the principle.
Obama welcomed the leaders’ call for joint action but again implored China to let its currency float in keeping with market forces. “China spends enormous amounts of money intervening in the market to keep (its currency) undervalued,” Obama said at a news conference. He said the communiqué reflected the G20’s belief that “letting currencies reflect market fundamentals. . . is the best way to assure that everybody benefits from trade rather than just some” and he expressed hope that China would gradually reform its currency policy.
China has so far dismissed Obama’s demands, saying the U.S. needs to get its own financial house in order to cure its economic woes.
Without the pressure of an impending global economic calamity, G20 nations have found it harder to put aside their individual differences and ambitions to pursue strategies of mutual benefit. “Risks remain,” the joint communiqué said. “Some of us are experiencing strong growth, while others face high levels of unemployment and sluggish recovery. Uneven growth and widening imbalances are fuelling the temptation to diverge from global solutions into uncoordinated actions.”
There are fears that aggressive use of currency settings by countries trying to improve their export sales abroad could lead to a currency war that could badly hurt the world economy.
The G20 did agree on banking reforms intended to prevent a financial collapse such as the one that spawned the recent recession. And leaders threw their weight behind efforts to reduce international trade barriers under the long-stalled Doha round of global trade negotiations.
At his wrap-up news conference here, Harper said that he does not need the approval of Parliament to extend Canada’s military mission in Afghanistan because it will be a training mission not involving combat.
“My position is, if you are going to put troops into combat, into a war situation, I do think, for the sake of legitimacy. . . the government does require the support of Parliament. But when we’re talking simply about technical or training missions, I think that is something the executive can do on its own,” he told reporters. He noted, however, that the Liberals have indicated that they favour a training mission. “If they have any specific ideas they want to share, I’m not resistant to having debates on that matter in the House of Commons,” Harper added.