G20 pressed to agree on global imbalances

“China exports and saves,

Europe consumes,

United States prints money and consumes.

Is that a balanced model?”

French Economy Minister Christine Lagarde

Extrait de: G20 pressed to agree on global imbalances, Bill Curry, Globe and Mail, Feb. 16, 2011 3:09PM EST

Canada is pushing to complete an agreement among G20 members on measuring global imbalances, the crucial first step needed to tackle an issue that has divided the organization for over a year.

G20 finance ministers arriving in Paris Friday for two days of meetings will be under pressure to show progress and unity. After a series of bold moves on banking reform and stimulus spending at the onset of the recession, the atmosphere of co-operation and co-ordination that marked the G20 is giving way to incremental change and finger-pointing.

In spite of urgency to resolve the imbalance issue last fall in Seoul, G20 leaders were unable to move beyond U.S. concerns over China’s resistance to let its currency rise, and objections from China, Brazil and others over American “quantitative easing” policies blamed for boosting inflation in developing nations.

And now France, which is hosting the G20 this year, faces resistance over its calls for stronger regulation of food prices and commodity trading.

G20 members agreed last fall in Seoul that they need to do something about trade imbalances, but couldn’t agree on how to measure them. Canada was asked to co-chair with India a committee to hammer out the details. A senior Finance official told reporters Wednesday that progress is being made and there is a strong expectation G20 officials will agree on a mechanism.

Canada is supportive of using a nation’s current account balance – a broad measure of a country’s trade balance – as the measure to assess whether a country is outside a sustainable range. The United States proposed last year that the range should be plus or minus 4 per cent of gross domestic product – a target rejected by China and Germany.

Évidemment, les deux plus importants exportateurs.

French Economy Minister Christine Lagarde was quoted earlier this week describing the global imbalances problem in blunt terms.

“China exports and saves, Europe consumes and the United States prints money and consumes. Is that a balanced model?” she said.

Elle a tout à fait raison, il y a une disproportion de la balance commerciale,
les Chinois commencent à devenir le manufacturier du monde,
et le reste cumule des déficits.

Il faut rééquilibrer la situation, sans cela les pays vont se mettre en mode protectionniste, car les politiciens ont des comptes à rendre à leurs populations,
non à des actionnaires pour satisfaire les multinationales.

Even if the G20 agrees on a measure for global imbalances, the official said it will take further meetings to determine the targets or “guidelines.”

If G20 Agrees In Principle On Imbalances

 

French Finance Minister Christine Lagarde said Thursday it would be a great step forward if countries from the Group of 20 industrialized and developing nations agreed in principle on how to address the imbalances of the world financial and monetary system during this week's G-20 summit.

 

"If we had an agreement in principle between China, the Europeans, U.S. and Japan as well as all the emerging [economies] such as Russia, Brazil and India on the elements that allow us to measure the imbalances, so that China accepts the questions of balance of payments and, on the other hand, all the other countries accept that the questions of deficits and debts are elements of measures of imbalances, we would have made a great step forward," she said in an interview with local radio France Info

 

 

M. Strauss-Kahn le directeur général du FMI a par ailleurs mis en garde contre l'aggravation de déséquilibres mondiaux

 

Facteurs de tensions qui menacent selon lui de faire dérailler la fragile reprise économique

 

Le directeur général du FMI a par ailleurs noté que parmi les pays riches, les économies dotées d'une balance commerciale très excédentaire, comme la Chine et l'Allemagne, restent dopées par les exportations, tandis que celles pourvues d'une balance commerciale déficitaire, comme les États-Unis, continuent de s'appuyer sur la demande intérieure.

 

«Ces déséquilibres mondiaux représentent un risque pour la durabilité de la reprise», a déclaré M. Strauss-Kahn à Singapour.

 

L'autre déséquilibre qu'il a évoqué est celui qui existe au sein de différents pays, avec un nombre accru de chômeurs et de très forts écarts de revenus. Par exemple, a-t-il dit, le chômage est «une des raisons de fond des troubles politiques en Tunisie».

«Avec l'augmentation des tensions entre les pays, le protectionnisme, commercial et financier, pourrait s'aggraver», a-t-il mis en garde.

 

Canada and India co-chair a G20 working group on “strong, sustainable and balanced growth.” Finance Minister Jim Flaherty is scheduled to deliver an update on the working group's progress Friday behind closed doors to the G20 finance ministers.

The Indian government provided some detail on Wednesday, stating that the working group will propose the G20 use several indicators, including the current account, a measure of exchange rates and reserves, government debt and deficits, and private savings and debt.

Floating Exchange Resolving Trade Imbalance

As a major exporter of raw commodities, Canada has a lot at stake in the discussions. The comments from the Finance official suggest Canada is not fully supportive of France’s proposals on the matter.

The official said fast-rising commodity prices of late are largely due to supply and demand rather than excessive market speculation. Any attempt to control prices would be counterproductive, according to Canada.

Finance ministers are also expected to discuss currency matters, including the possible expansion of Special Drawing Rights (SDR) – an average of major currencies – as a global reserve currency.

The official said Canada is supportive of discussions about increasing the use of SDR to decrease the reliance on the U.S. dollar as the world’s reserve currency. The SDR reserve asset was created by the International Monetary Fund in 1961.

Those discussions are at a preliminary stage, according to Canada, and the Paris meeting of G20 finance ministers will likely decide whether to keep the conversation going or drop the topic altogether.