Image by KOREA.NET - Official page of the Republic of Korea via FlickrBy VIJAY JOSHI | APSEOUL: Leaders of 20 major economies on Friday refused to back a US push to make China boost its currency's value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.
A joint statement issued by the leaders including US President Barack Obama and China's Hu Jintao tried to recreate the unity that was evident when the Group of 20 rich and developing nations held its first summit two years ago during the global financial meltdown.
But deep divisions, especially over the US-China currency dispute, left G20 officials negotiating all night to draft a watered-down statement for the leaders to endorse.
"Instead of hitting home runs sometimes we're gonna hit singles. But they're really important singles," Obama told a news conference after the summit.
Other leaders also tried to portray the summit as a success, pointing to their pledges to fight protectionism and develop guidelines next year that will measure the imbalances between trade surplus and trade deficit countries.
The G20's failure to adopt the US stand has underlined Washington's reduced influence on the international stage, especially on economic matters. The biggest disappointment for the United States was the pledge by the leaders to refrain from "competitive devaluation" of currencies. Such a statement is of little consequence since countries usually only devalue their currencies — making it less worth against the dollar — in extreme situations like a severe financial crisis.
The statement decided against using a slightly different wording favored by the US — "competitive undervaluation," which would have shown the G20 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. US business lobbies say that a cheaper yuan costs American jobs because production moves to China to take advantage of low labor costs and undervalued currency.
A stronger yuan would shrink the U. 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 US and others to buy low-priced Chinese goods.
But the US position has been undermined by its own central bank's decision to print $600 billion to boost a sluggish economy, which is weakening the dollar.
Also, developing countries like Thailand and Indonesia fear that much of the "hot money" will flood their markets, where returns are higher. Such emerging markets could be left vulnerable to a crash if investors later decide to pull out and move their money elsewhere.
Source: arabnews.com
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