Obama Pleads for Unity Ahead of G-20

By DAMIAN PALETTA And JONATHAN WEISMAN

SEOUL—U.S. President Barack Obama urged members of the Group of 20 to stand firm against economic protectionism and called for a joint commitment to growth, part of a concerted effort by U.S. officials to ameliorate global discord on economic policy.

It is unclear whether Obama's pleadings, made in a letter addressed to G-20 leaders, will settle nerves or inflame them. His letter comes amid finger-pointing that threatened to overwhelm the meeting of world leaders before they had even gathered.

Mr. Obama arrived in Seoul on Wednesday night for a series of critical meetings Thursday with German Chancellor Angela Merkel, whose government has led the criticism of U.S. dollar policy; with Chinese Premier Hu Jintao, who has resisted the U.S. president's push on China's currency; and with President Lee Myun-Bak of South Korea, where the fate of a free-trade agreement could be decided.

While some countries had hoped to use the G-20 gathering to push China to allow its currency to appreciate more quickly, other countries turned the tables on the U.S. in recent days. Several, including Germany, accused the Federal Reserve of driving down the value of the dollar, particularly through a controversial new program to buy $600 billion of U.S. government bonds and other assets. The criticism spread, with countries across three continents challenging the U.S.'s economic policies.

American officials have denied the central bank is manipulating the dollar and said U.S. growth should be in every country's interest. "A strong recovery that creates jobs, income and spending is the most important contribution the United States can make to the global recovery," Mr. Obama wrote in the letter. "The dollar's strength ultimately rests on the fundamental strength of the U.S. economy."

The letter came as relations have strained between negotiators working to cobble together a joint framework to address currency disputes and trade imbalances ahead of the G-20 meetings, whose motto "Shared Growth Beyond Crisis" is plastered on buildings and signs throughout the area. At the heart of the tension is a disconnect over "rebalancing" the global economy, an effort that has taken place slowly—and at times painfully—since the financial crisis two years ago. U.S. officials want countries with trade surpluses, such as China, to consume more domestically and export less, which will help the U.S. save more domestically and export more.

At a meeting of roughly 50 officials late Tuesday night in a crowded room at the Coex Center in Seoul, government officials debated in raised voices how they should word parts of a memorandum dealing with currencies and trade imbalances, according to Kim Yoon-Kyung, a spokesman for South Korea's Presidential Committee for the G-20.

"We had to physically open the door to the meeting, the debate was so hot," he told reporters. "We were lacking oxygen."

Mr. Kim said officials were reacting to mandates they had been given by top government officials, with little flexibility to actually negotiate on key points. They dug in and argued for hours, leaving brackets on a computer screen where they had hoped to fill in concrete agreements.

At one point, a negotiator tried to insert language into the communiqué that could have been interpreted as a condemnation of the Fed's recent move, but it was quickly rejected.

A draft communiqué, obtained by Dow Jones Newswires, illustrated the discord between countries. The draft, prepared Wednesday for G-20 leaders, says the group will increasingly let markets determine currency rates. "We will move towards more market-determined exchange-rate systems and enhance exchange-rate flexibility to reflect underlying economic fundamentals," the draft said.

But officials remained undecided about how to discuss currency interventions. The Wednesday draft says the G-20 will "refrain from competitive devaluation," the same as the language from a meeting of finance ministers several weeks ago. But the draft also has the alternative "competitive undervaluation" in brackets, an apparent reference to China, suggesting officials fought over whether to use the word "devaluation" or "undervaluation" as part of their joint communiqué.

The Obama administration's pleas for cooperation have come on multiple fronts. On Thursday, Treasury Secretary Timothy Geithner and his counterparts in Singapore and Australia called on world leaders to embrace a four-point plan targeting growth, currencies, capital flows and protectionism. "The deep economic challenges left by the crisis in the established economies and the prospect of rapid expansion in emerging economies necessitate a new agenda for international economic cooperation," they wrote in an editorial in The Wall Street Journal Asia.

As the fighting over currency and trade imbalances intensified in recent weeks, officials have tried to tamp down expectations that a consensus might be reached at the Seoul summit. Instead, officials now appear to be trying to get through the meetings without an incident, in part because of the fiery broadsides leaders have lobbed back and forth in recent days.

At a meeting of business and political leaders several miles from the Coex Center, several executives expressed frustration that the currency and trade imbalance issue had disrupted plans to improve economic growth.

"Will there be angst? Yes," said Harold McGraw III, chairman and chief executive of the McGraw Hill Cos., who is in Seoul meeting with business and political leaders. "They have to ask themselves, 'What do you want?' Do you want protectionism or do you want growth?"

Meanwhile, in separate meetings elsewhere in Seoul, trade chiefs from the U.S. and South Korea inched closer to resolving disputes that have stalled legislative action on a free-trade agreement the two countries created three years ago.

U.S. Trade Representative Ron Kirk and South Korean Trade Minister Kim Jong-hoon met for several hours for a third day in a row to modify import terms for automobiles and beef, before the presidents of the two countries meet on Thursday. Aides to Mr. Obama have said the deal is critical to his push to double U.S. exports by 2015. South Korean President Lee Myung-bak wants the deal to help jump-start stalled reforms to his country's economy.

U.S. politicians and industry representatives have complained the original deal made in 2007 didn't go far enough to open those two markets in South Korea. Earlier this week, South Korean negotiators said they were open to changes in auto standards, particularly those for emissions.

The South Koreans have been more reluctant to reduce barriers on U.S. beef, after huge protests erupted in the country when they resumed imports of American beef in 2008, which ended an embargo begun when the U.S. reported a case of mad-cow disease in 2003.