G-20 Leaders Promise Steps to Avoid Currency War
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This is IN THE NEWS in VOA Special English.
Leaders of the world's twenty largest economies met this week in Seoul, South Korea. They agreed to try to let market forces drive currency exchange rates. Their declaration Friday also promised to avoid competitive devaluation of currencies.
A weaker currency lowers the price of a country's exports. That angers other exporters with stronger currencies, and it can lead to so-called currency wars.
Leaders from the Group of 20 urged "advanced economies" to guard against disorderly movements in exchange rates. At the same time, they rejected the idea of setting target amounts for national trade balances.
The United States and South Korea supported the idea. Others, including China, Germany and Japan, opposed it.
Instead, the leaders said they will order their finance ministers to develop a set of "indicative guidelines" early next year. These will measure trade and economic balances, to signal when deficits or surpluses are becoming too large.
President Obama noted that the G-20 leaders made progress in areas like approving reforms for the International Monetary Fund. But he himself failed in efforts to secure a free trade agreement with South Korea. And he made little progress in his push to get China to let the value of its currency rise.
Mr. Obama says the yuan is undervalued. He also said he believes China will continue to make progress on the issue.
BARACK OBAMA: "Letting currencies reflect market fundamentals, allowing your currency to move up and down depending on the role that you’re playing in the international trading system, is the best way to assure that everybody benefits from trade rather than just some."
G-20 leaders say their Seoul Action Plan will help further strengthen the global economy. Stephen Schwartz is an economist at the Spanish investment bank BBVA in Hong Kong.
STEPHEN SCHWARTZ: "It should help ease some of the recent rhetoric and tensions over currency issues and imbalances for a little while. I stress a little while because as long as we have this very unbalanced global recovery we are going to get periodic tensions in policy setting."
After two days in Seoul, President Obama arrived in Japan. Leaders of APEC, the Asia-Pacific Economic Cooperation group, are meeting Saturday and Sunday in Yokohama.
The United States is leading the effort for a Trans-Pacific Partnership. This would cut import taxes for nine countries, including Japan. But Japanese farmers are fiercely opposed.
Last week, the United States central bank announced a plan to pump more money into the economy to support growth. Some Asian leaders and economists say the plan by the Federal Reserve could send a flood of dollars into Asia. They say prices could rise quickly and form "bubbles," whose collapse could cause another financial crisis.
Japan is the last stop on President Obama's ten-day trip to Asia. In India, he became the first American president to openly support a permanent seat for that country on the United Nations Security Council.
He also visited Indonesia, where he spent four years as a boy.
And that's IN THE NEWS in VOA Special English. I'm Steve Ember.
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Contributing: Heda Bayron, Akiko Fujita, Steve Herman, Ravi Khanna, Brian Padden, Robert Raffaele and Dan Robinson