G-20 Fail to End U.S.-China Currency Feud
Updated at 4:08 a.m. Eastern.
Leaders of 20 major economies on Friday refused to endorse a U.S. push to get China to let its currency rise, keeping alive a dispute that has raised the specter of a global trade war.
At the end of their two-day summit, the leaders of the Group of 20 rich and developing economies - including President Barack Obama and China's Hu Jintao - issued a watered-down statement that only said they agreed to refrain from "competitive devaluation" of currencies.
Such a statement is of little consequence since countries usually only devalue their currencies in extreme situations like a severe financial crisis. Using a slightly different wording favored by the U.S. - "competitive undervaluation" - would have shown the G-20 taking a stronger stance on China's currency policy.
The crux of the dispute is Washington's allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. But the U.S. position has been undermined by its own recent policy of printing money to boost a sluggish economy, which is weakening the dollar.
On the bigger picture, Obama said Friday the global economy was "back on the path to recovery," while he and his G-20 summit partners must work further to resolve differences like the currency spat with China and trade imbalances.
Obama Battles Dire Economy on 2 Fronts
The G-20's failure to adopt the U.S. stand has also underlined Washington's reduced influence on the international stage, especially on economic matters. Obama also failed to conclude a free trade agreement this week with South Korea.
Obama told a news conference that China's currency is an "irritant" not just for the United States but for many of its other trading partners.
"China spends enormous amounts of money intervening in the market to keep it undervalued so what we have said is it is important for China" to follow a market-based system, Obama said. "We have to understand that this is not solved overnight. But it needs to be dealt with and I am confident it can be."
The joint statement avoided the words "competitive undervaluation," which was a reference to China's currency policy that had been inserted into a draft of the statement by officials during pre-summit negotiations.
The dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression in the 1930s.
The biggest fear is that trade barriers will send the global economy back into recession. A law the United States passed in 1930 that raised tariffs on imports is widely thought to have deepened the Great Depression by stifling trade.
The G-20 leaders pledged to move toward more market-determined exchange rate systems and enhance exchange rate flexibility. Although directed against China, the statement leaves significant room for interpretation since the language is vague and does not impose any timeframe for enforcing a market-determined exchange rate.
The U.S. says a higher-valued yuan would make Chinese exports costlier abroad and make U.S. imports cheaper for the Chinese to buy. It would shrink the U.S. trade deficit with China, which is on track this year to match its 2008 record of $268 billion, and encourage Chinese companies to sell more to their own consumers rather than rely so much on the U.S. and others to buy low-priced Chinese goods.
Other countries are irate over the Federal Reserve's plans to pump $600 billion into the sluggish American economy. They see that move as a reckless and selfish scheme to flood markets with dollars, driving down the value of the U.S. currency and giving American exporters an advantage.
Some critics warn that U.S. interest rates kept too low for too long could inflate new bubbles in the prices of commodities, stocks and other assets. Developing countries like Thailand and Indonesia fear that falling yields on U.S. government bonds will send money flooding their way in search of higher returns. Such emerging markets could be left vulnerable to a crash if investors later decide to pull out and move their money elsewhere.
Friday's statement is unlikely to immediately resolve the most vexing problem facing the G-20 members: how to fix a global economy that's long been nourished by huge U.S. trade deficits with China, Germany and Japan.
Exports to the United States powered those countries' economies for years. But they've also produced enormous trade gaps for the U.S. because Americans consume far more in foreign goods and services than they sell abroad.
Still, the leaders vowed to fight protectionism.
"Recognizing the importance of free trade and investment for global recovery, we are committed to keeping markets open and liberalizing trade and investment," the joint statement said.
The G-20 leaders also said they will pursue policies to reduce the gaps between nations running large trade surpluses and those running deficits.
The "persistently large imbalances" in current accounts - a broad measure of a nation's trade and investment with the rest of the world - would be measured by what they called "indicative guidelines" to be determined later.
The leaders called for the guidelines to be developed by the G-20, along with help from the International Monetary Fund and other global organizations, and for finance ministers and central bank governors to meet in the first half of next year to discuss progress.
"We don't have an agreement on what the criteria are, but we agree that there must be criteria," French President Nicolas Sarkozy, who will host the next G-20 summit in November 2011 in Cannes.
The language in the statement was broadly similar to what G-20 finance ministers and central bank governors agreed to last month, though with the new twist of a timeframe for progress.
"There's no simple solution to solve the problem of current account imbalances," Sarkozy said.
CBS/AP Leaders of 20 major economies on Friday refused to endorse a U.S. push to get China to let its currency rise, keeping alive a dispute that has raised the specter of a global trade war.
At the end of their two-day summit, the leaders of the Group of 20 rich and developing economies - including President Barack Obama and China's Hu Jintao - issued a watered-down statement that only said they agreed to refrain from "competitive devaluation" of currencies.
Such a statement is of little consequence since countries usually only devalue their currencies in extreme situations like a severe financial crisis. Using a slightly different wording favored by the U.S. - "competitive undervaluation" - would have shown the G-20 taking a stronger stance on China's currency policy.
The crux of the dispute is Washington's allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. But the U.S. position has been undermined by its own recent policy of printing money to boost a sluggish economy, which is weakening the dollar.
On the bigger picture, Obama said Friday the global economy was "back on the path to recovery," while he and his G-20 summit partners must work further to resolve differences like the currency spat with China and trade imbalances.
Obama Battles Dire Economy on 2 Fronts
The G-20's failure to adopt the U.S. stand has also underlined Washington's reduced influence on the international stage, especially on economic matters. Obama also failed to conclude a free trade agreement this week with South Korea.
Obama told a news conference that China's currency is an "irritant" not just for the United States but for many of its other trading partners.
"China spends enormous amounts of money intervening in the market to keep it undervalued so what we have said is it is important for China" to follow a market-based system, Obama said. "We have to understand that this is not solved overnight. But it needs to be dealt with and I am confident it can be."
The joint statement avoided the words "competitive undervaluation," which was a reference to China's currency policy that had been inserted into a draft of the statement by officials during pre-summit negotiations.
The dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression in the 1930s.
The biggest fear is that trade barriers will send the global economy back into recession. A law the United States passed in 1930 that raised tariffs on imports is widely thought to have deepened the Great Depression by stifling trade.
The G-20 leaders pledged to move toward more market-determined exchange rate systems and enhance exchange rate flexibility. Although directed against China, the statement leaves significant room for interpretation since the language is vague and does not impose any timeframe for enforcing a market-determined exchange rate.
The U.S. says a higher-valued yuan would make Chinese exports costlier abroad and make U.S. imports cheaper for the Chinese to buy. It would shrink the U.S. trade deficit with China, which is on track this year to match its 2008 record of $268 billion, and encourage Chinese companies to sell more to their own consumers rather than rely so much on the U.S. and others to buy low-priced Chinese goods.
Other countries are irate over the Federal Reserve's plans to pump $600 billion into the sluggish American economy. They see that move as a reckless and selfish scheme to flood markets with dollars, driving down the value of the U.S. currency and giving American exporters an advantage.
Some critics warn that U.S. interest rates kept too low for too long could inflate new bubbles in the prices of commodities, stocks and other assets. Developing countries like Thailand and Indonesia fear that falling yields on U.S. government bonds will send money flooding their way in search of higher returns. Such emerging markets could be left vulnerable to a crash if investors later decide to pull out and move their money elsewhere.
Friday's statement is unlikely to immediately resolve the most vexing problem facing the G-20 members: how to fix a global economy that's long been nourished by huge U.S. trade deficits with China, Germany and Japan.
Exports to the United States powered those countries' economies for years. But they've also produced enormous trade gaps for the U.S. because Americans consume far more in foreign goods and services than they sell abroad.
Still, the leaders vowed to fight protectionism.
"Recognizing the importance of free trade and investment for global recovery, we are committed to keeping markets open and liberalizing trade and investment," the joint statement said.
The G-20 leaders also said they will pursue policies to reduce the gaps between nations running large trade surpluses and those running deficits.
The "persistently large imbalances" in current accounts - a broad measure of a nation's trade and investment with the rest of the world - would be measured by what they called "indicative guidelines" to be determined later.
The leaders called for the guidelines to be developed by the G-20, along with help from the International Monetary Fund and other global organizations, and for finance ministers and central bank governors to meet in the first half of next year to discuss progress.
"We don't have an agreement on what the criteria are, but we agree that there must be criteria," French President Nicolas Sarkozy, who will host the next G-20 summit in November 2011 in Cannes.
The language in the statement was broadly similar to what G-20 finance ministers and central bank governors agreed to last month, though with the new twist of a timeframe for progress.
"There's no simple solution to solve the problem of current account imbalances," Sarkozy said.
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This causes lower wages for Americans which forces them to purchase the cheaper Chinese goods, making the problem worse.
Actually, I shop consciously to buy American goods, from my furniture (which I picked up in North Carolina), to my dishes, utensils, and everything else I could find. However, it is virtually impossible to avoid Chinese goods, because the businesses that made the same thing here in the States are no longer in existence.
I don't understand about the bailing on the debt they own? Calling it due?
The U.S. dollar is already as good as toilet paper. It is backed by nothing but the agreement we have to use it.
My question is how companies on American soil are suppose to compete when items here simply cost more to make because they are made here and we have more regulations. For instance, a friend of mine developed a component for the next generation of hard drives. In order to manufacture a competively priced component, his only choice is to have it built outside of the U.S. If he were to build it here, he could never sell it. It would simply be to expensive for other companies to purchase.
Reply to this comment .by msmsucks November 12, 2010 7:54 AM EST
Read carefully,
Donaldson?s work as a tough regulator who tried to empower ?average investors? and ?demanded more accountability from top executives.? The center says that Donaldson ?implemented a number of reforms that have clamped down on corporate wrongdoing, restored investor confidence and protected the public.?
Center for American Progress is funded by convicted insider trader George Soros
http://www.aim.org/media-monitor/george-soros-and-hedge-funds/
Read more: http://www.cbsnews.com/8601-202_162-7046966.html?assetTypeId=30&tag=contentBody;commentsStandAlone#ixzz155ID6Dj1
Hialeahtom
The liberal Center for American Progress has released an attack on the ?lobbyists? who have managed to get the scalp of William Donaldson, the resigned head of the Securities and Exchange Commission. In one of its daily newsletters, the center gripes about the ?business lobby? that was ?fed up? with Donaldson?s work as a tough regulator who tried to empower ?average investors? and ?demanded more accountability from top executives.? The center says that Donaldson ?implemented a number of reforms that have clamped down on corporate wrongdoing, restored investor confidence and protected the public.? This is fascinating and newsworthy because the Center for American Progress is funded by convicted insider trader George Soros, who runs a mysterious off-shore hedge fund and was a critic of Donaldson.
Donaldson?s work as a tough regulator who tried to empower ?average investors? and ?demanded more accountability from top executives.? The center says that Donaldson ?implemented a number of reforms that have clamped down on corporate wrongdoing, restored investor confidence and protected the public.?
Center for American Progress is funded by convicted insider trader George Soros
http://www.aim.org/media-monitor/george-soros-and-hedge-funds/
But, there is no visible positive action from the blueblood leaders of the fed and the boys and girls who manipulate foreign trade. May we please pull the rug out from under these false power mongers so we may have our country back?
What our President calls the irritant of China's competitive underevaluation looks a lot like Bernenke's Philosophy right here at home. Is there any recourse against these arrogant decision makers with poor taste and lack of vision? Or is it better to allow it all to come crashing down?
It seems there are way more questions than answers here. The adjenda of our country in its capitalism pathways have taken the jobs away, left us with great unemployment and has become the cancer which is very nearly beyond treatment.
Last question. Where do we go when the leaders all run us into complete poverty while playing this fools game?
Protectionism - government's placing of duties or quotas on imports to protect of domestic industries from global competition
Wouldn't a duty or quote on Chinese importants level the playing field for our companies... keeping jobs here? What am I missing?
China owns the second most US Debt then any other country in the world ($755.4 billion). Japan(owns US $768.8 billion dept) helps buy up the dept so American's can keep buying there useless electronic Wal-mart junk from them. Look in you home and realize everything is made from China! If US stops buying there crap or can't maintain the rate at which they import because US dollar is struggling. China and other Countries will bail on the dept they own and flood is back into the markets. US dollar would then be as good as toilet paper!