G20 agree broadly on trade, currency rates

Oct. 23, 2010 at 12:17 PM
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GYEONGJU, South Korea, Oct. 23 (UPI) -- Group of 20 Nations financial leaders in South Korea agreed without specifics to avoid currency manipulations and reduce excessive trade imbalances.

The agreement puts the two pivotal debate points brought up by U.S. Treasury Secretary Timothy Geithner into the same agreement, but fails to put a formula in place that would dictate exchange rates through trade imbalances, as Geithner had sought.

The financial leaders gathered in Gyeongju, South Korea, agreed to curb "excessive imbalances" in trade, The New York Times reported Saturday.

Geithner was seeking an accord limiting the surplus or deficit on current accounts to less than 4 percent of gross domestic product in the next five years. Current accounts is a broad measure of foreign investment and trade balances.

The agreement, with less specifics, says the G20 Nations would "move toward more market-determined exchange rate systems that reflect underlying economic fundamentals." The G20 group also agreed to "refrain from competitive devaluation of currencies."

Japan, Germany, China and others with trade surpluses had rejected a specific limit on trade surpluses, while Britain, Australia, Canada, France and South Korea voiced approval, The Los Angeles Times reported.

Russian and Italy were also opposed, The New York Times said.

On trade, the group said in a statement released Saturday, "We will pursue a full range of policies conducive to reducing excessive imbalances and maintaining current account surpluses at sustainable levels," Yonhap reported.

The G20 finance ministers set part of the agenda and laid the groundwork for a G20 leadership summit, which is scheduled to convene in Seoul in November.

The financial accord at this point will rely on the International Monetary Fund to monitor trade imbalances, but the IMF, analysts said, has limited power over nations that are not looking for IMF loans.

"The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future," Geithner said.

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