The Organization of Petroleum Exporting Countries learned long ago that it doesn't pay to bankrupt the customer. To China, that might seem an odd consideration given the non-durable goods they export include toys, computers and video game, aka. stuff that could not be considered essential. The irony, however, must be maddening in China: Now, it might be asked … now that the Chinese middle-class is finally growing, the United States calls for everyone to put their cards on the table? The United States wants trade rebalanced now? That's a good one.
Newspapers declared Friday that G20 leaders deferred Obama's push to find a formula for rebalancing trade until next year. This year, they vowed to put the current trade imbalances on a "sustainable" track, The Wall Street Journal reported -- in other words for at least a year: No sudden moves.
It was also said that the leaders "struggled" to find that formula for rebalancing, but struggle was hardly the right word. A sophomore in an economics class could suggest several viable measurements and consequences for rebalancing trade. Opportunistic economists are scribbling on napkins as we speak. But a therapist would rephrase "struggle" by saying, simply, "I sense resistance" and the truth is Germany and China are understandably resistant. Trade-negative countries, in turn, are understandably supportive.
While there is disappointment in the air, G20 leaders, frankly, are paid to defer the hard work to someone else. In this case, the International Monetary Fund was directed to "facilitate timely identification of large imbalances that require preventative and corrective actions to be taken."
President Obama told reporters, "Instead of hitting home runs, sometimes we're going to hit singles. But they're really important singles."
Between now and the next G20 summit, hosted by France, will be a test of wills and diplomacy.
IMF Managing Director Dominique Strauss-Kahn said, "This was more a G20 of debate than a G20 of conclusion."
However, he said, "I don't think we can say it's a problem that has been put aside with an unlimited timeline, not knowing when it will be done. But what is true is that it's a complicated problem."
But it's complicated by resistance, not mathematics.
International markets trended sharply lower Friday. The Nikkei 225 index in Japan lost 1.39 percent and the Shanghai composite index in China dropped 5.16 percent. The Hang Seng index in Hong Kong fell 1.93 percent and the Sensex in India lost 2.1 percent.
In Australia, the S&P/ASX 200 shed 0.76 percent.
In midday trading in Europe, the FTSE 100 index in Britain slipped 0.2 percent while the DAX 30 in Germany lost 0.02 percent. The CAC 40 in France lost 0.91 percent and the Stoxx Europe 600 dropped 0.61 percent.