G-20 Delays Imbalance Deal

By LAURENCE NORMAN, WILLIAM MALLARD and IAN TALLEY

SEOUL—Group of 20 leaders Friday said they will develop indicators to measure economic imbalances, but delayed until next year the contentious work of defining problems they have vowed to address.

Ending a two-day summit, the G-20 leaders said in a communique they would seek to keep external imbalances "sustainable" by coming up with "indicative guidelines composed of a range of indicators" to "serve as a mechanism to facilitate timely identification of large imbalances that require preventive and corrective actions to be taken."

This represents a blurring of goals—pushed by the U.S. and G-20 host South Korea, but strongly opposed by such countries as China and Germany—to set targets for capping current-account surpluses and deficits.

Issues such as external imbalances have dominated the summit by the G-20, which is seeking to avert what has been dubbed a global "currency war," in which countries seek competitive advantage by weakening their currencies.

Sticking to language their finance ministers agreed to in late October, the G-20 leaders vowed to move "toward more market-determined exchange-rate systems" and avoid "competitive devaluation of currencies."

The leaders in Seoul added that they were committed to "enhancing exchange-rate flexibility to reflect underlying economic fundamentals."

The G-20 leaders targeted the 2011 leaders' summit late next year to develop an imbalance assessment.

The International Monetary Fund will help the G-20's working group on imbalances conduct the assessment, and the fund's surveillance will include exchange-rate policies.

Issues such as external imbalances have dominated the two-day summit by the G-20, who are seeking to avert what has been dubbed a global "currency war," in which countries seek competitive advantage by weakening their currencies.

It appears that leaders were to some extent struggling to agree on how to define and quantify "indicative guidelines" meant to gauge progress, portending further tough political battles over reining in global imbalances.

"We don't want to tie imbalances to one indicator; there are a lot of factors that need to be included," German Chancellor Angela Merkel told reporters. "These factors need to be discussed, and finance ministers will do this exhaustively over the next year."

Political disagreement means the G-20's "Mutual Assessment Process" report omits specific recommendations such as how fast China should let the yuan rise and how fast the U.S should cut its budget deficit, the people said.

The U.S. has pushed China to let the yuan rise more and for nonbinding targets to limit imbalances. China, in turn, has won adherents to its position that the Federal Reserve's lax U.S. monetary policy is weakening the dollar and pushing a wall of destabilizing speculative capital into emerging markets.

The summit aimed to build on a late-October meeting of G-20 finance ministers that produced an agreement to avoid "competitive devaluation" of currencies and to seek "sustainable" levels of imbalances, measured by a set of "indicative guidelines." The ministers rejected an informal U.S.-Korean proposal to target curbing imbalances to 4% of gross domestic product by 2015.

The late-night talks on a final draft of the communique exposed "the emergence of the G-2: China and America," said an official who participated in the talks. "Those were the two main opponents in this discussion about current-account imbalances," said the official, adding that the key product of their disagreements in the conclusions to be announced Friday will be that "quantitative current-account indicators are no longer on the table." (Fonte: Wall Street Journal)