Obama Jumps Into G-20 Surplus Spat

By JONATHAN WEISMAN

NEW DELHI—U.S. President Barack Obama, returning fire in a heated exchange with Germany, added his voice to U.S. efforts to reduce massive German and Chinese trade surpluses and increase pressure on China to let the value of its currency rise.

And in a highly anticipated speech to the Indian Parliament, the U.S. president for the first time publicly backed India's inclusion as a permanent member in the United Nations Security Council, albeit after the security council undergoes a broad restructuring that could takes years, if it happens at all.

Tensions have flared between German and U.S. economic officials ahead of the summit of the Group of 20 industrial and developing nations, which begins Wednesday night in Seoul. U.S. Treasury Secretary Timothy Geithner has been pressing member nations to adopt targets to lower trade surpluses and trade deficits. In return, German officials have publicly lectured Washington about the wisdom of its economic policies.

In a joint news conference with Indian Prime Minister Manmohan Singh here, the U.S. president came close to defending the U.S. Federal Reserve's decision to pump $600 billion into the economy by buying U.S. Treasury bonds in a bid to keep interest rates low and spur consumer demand. The Federal Reserve is independent of the administration, and by tradition the White House has strained to avoid any appearance of collusion on Fed and administration policies.

Mr. Obama said the administration doesn't comment on particular actions of the U.S. central bank, then said, "I will say that the Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole."

German officials have accused the U.S. of joining other countries in efforts to drive down the value of their currencies, which can make their products cheaper in other countries and boost exports. German Finance Minister Wolfgang Schäuble lashed out at U.S. pressure on Berlin to rein in the country's surging exports, accusing Washington of hypocrisy and telling Der Spiegel magazine in an interview that ran over the weekend, "the American growth model … is stuck in a deep crisis."

"It doesn't add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank's printing presses, artificially lower the value of the dollar," he said.

Data released Monday by Germany's federal statistical office showed the country's trade surplus shot up to €16.8 billion ($23.42 billion) in September from €9 billion in August, much larger than the €12 billion economists had anticipated and further evidence that the German economy continues to rely on exports to drive its recovery.

Mr. Obama didn't back down. "We can't continue to sustain a situation in which some countries are maintaining massive [trade] surpluses, others massive deficits, and there never is the kind of adjustments with respect to currency that would lead to a more balanced growth pattern."

He enlisted a key ally in Mr. Singh, an economist whose country is wielding increasing influence at the G-20 along with China and Brazil. Responding to Mr. Schäuble's denunciation of the Fed move, the prime minister said, "Anything that stimulates the underlying growth impulses of entrepreneurship in the United States would help the cause of global prosperity."

The G-20 summit is shaping up as a showdown between the exporting powers and nations like the U.S. that are struggling to emerge from recession and high unemployment by tapping export markets. Mr. Geithner, facing continuing resistance from China on the currency issue, has shifted his focus to trade surpluses, which can be exacerbated by artificially low currency values as well as other policies. That was meant to lift some of the pressure from China and spread it to other nations, especially Germany.

But Mr. Geithner has backed off demands that the summit produce numerical targets for countries to strive for in reducing trade surpluses after Berlin made it clear it wouldn't accede. The U.S. president made it clear the issue would still top his demands when he presses for "balanced and sustainable growth."

In a separate speech Monday before Parliament, Mr. Obama addressed several of the most-sensitive issues confronting the two nations. He reassured the Indian Parliament that the U.S. "will not abandon the people of Afghanistan—or the region—to the violent extremists who threaten us all."

He addressed Pakistan directly on terrorist organizations that operate on its soil, something some Indian commentators repeatedly have called on him to do since he arrived Saturday.

"We will continue to insist to Pakistan's leaders that terrorist safe havens within their borders are unacceptable, and that the terrorists behind the Mumbai attacks be brought to justice," he said

Mr. Obama also said he looked forward to overhauls at the U.N. that could include India's having a permanent seat on the United Nations Security Council.

"The just and sustainable international order that America seeks includes a United Nations that is efficient, effective, credible and legitimate," Mr. Obama said. "That is why I can say today—in the years ahead, I look forward to a reformed U.N. Security Council that includes India as a permanent member."

Undersecretary of State William Burns said such a process is underway but he acknowledged "it is bound to take a significant amount of time." He also said the U.S. has yet to lay out its vision of what that reconstituted Security Council will look like.

Mr. Obama called on India to be more vocal in opposing the military dictatorship in neighboring Myanmar, where India and China are vying for commercial and political influence but where the U.S. sees major human rights abuses and political suppression.

"If India has often avoided these issues," Mr. Obama said. "But speaking up for those who cannot do so for themselves is not interfering in the affairs of other countries. It's not violating the rights of sovereign nations. It's staying true to our democratic principles."

At the earlier press conference, Mr. Singh gave a cautious response to Mr. Obama's encouragement of talks between India and Pakistan, repeating India's line that Pakistan needs to do more to combat terrorism before it can expect a wide-ranging discussion with India.

He said that "the terrorism machine is as active as ever" in Pakistan and that "once Pakistan moves away from this terror-induced question, we will be very happy to engage productively with Pakistan to resolve our outstanding issues." (Fonte: Wall Street Journal)