November 10, 2010 12:52
With the G20 Summit just ahead, member countries are locked in battle to defend their positions on contested issues. The world's 20 most powerful countries are divided over the issues that will be included in a declaration at the end of the summit. At the center of debate is the currency war. The U.S. heated up controversy last week by announcing it will print US$600 billion in extra money.
Most G20 member countries led by China, Germany, Russia and Brazil, say the move is tantamount to currency manipulation in being clearly intended to weaken the dollar. The U.S. claims efforts to revive its economy are also good for the global economy, especially emerging countries. During President Barack Obama's visit to India, the U.S. won the support of New Delhi for its quantitative easing.
Countries are divided over current account guidelines as well. The U.S. initially proposed 4 percent of GDP as a guideline for current account surplus or deficit but backed down and proposed instead an early warning system that signals excessive current account surpluses or deficits. China is willing to accept the U.S. proposal, but Germany is not, saying trade surpluses are proof of outstanding exports and technological competitiveness. Resource-rich countries like Brazil, Russia and Saudi Arabia are siding with Germany. And while there has been broad agreement about the need for a global financial safety net and support for developing countries, there are differences when it comes to the details.
The Financial Times reports that the G20 is divided along "seven major axes that divide the world." The G20 decides on issues not by majority vote but rather by unanimous decision. As a result, no agreement can be reached if even a single member country opposes it. That is why a failure to reach a consensus on complicated issues could render the G20 useless.
The summit in Seoul will be a pivotal event determining whether the group can become the world's top economic negotiating body. Excessive ambition to achieve lofty goals could end up ruining everything. Rather than resolve the currency issue in one fell swoop, for instance, it could be beneficial to simply reaffirm the points agreed during the G20 Finance Ministers and Central Bank Governors Meeting in Gyeongju last month and take one more step along. As the host nation, Korea must maintain a centrist stance amid all of the lobbying. If not, it could end up being labeled as a mouthpiece for a particular country and put the entire summit in danger.
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