The leaders of the world’s top 20 economies vowed today to refrain from "competitive devaluation" of currencies after two days of talks in Seoul, South Korea.
The leaders of the Group of 20, in a joint declaration, also agreed to come up with "indicative guidelines" designed to identify and tackle large trade imbalances affecting world growth.
But the agreement fell short of U.S. proposals to set a limit on national trade deficits and surpluses, after opposition from China and Germany, the world's two biggest exporters.
Speaking at a news conference at the end of the summit, U.S. President Barack Obama said countries with large surpluses must shift away from an "unhealthy dependence" on exports.
"Some countries are running large surpluses, others running large deficits," Obama said. "Put simply, we risk slipping back into the old imbalances that contributed to the economic crisis in the first place and threaten global recovery."
Central to the debate on trade imbalances is the question of currency exchange rates.
U.S. officials say China's currency, the yuan, is artificially weak and gives Chinese exporters an unfair advantage as well as leading to Beijing amassing huge foreign reserves.
IMF Managing Director Dominique Strauss-Kahn listens during a plenary session of the G20 Summit in Seoul.
Obama renewed that criticism at today's press conference, saying, "China spends enormous amounts of money intervening in the market to keep [the yuan] undervalued. And so what we've said is it's important for China in a gradual fashion to transition to a market-based system."
But the United States, meanwhile, faces complaints from China and other nations that Washington is itself pushing down the value of the dollar. That's because the Federal Reserve -- the U.S. central bank -- has announced it is to pump $600 billion more money into the U.S. economy so as to stimulate growth, and that has the secondary effect of weakening the dollar.
U.S. officials deny that the move represents intervention in exchange rates, saying the market is freely assigning value to the dollar.'Past Excesses'
Little surprise, perhaps, that the final communiqué was watered-down and contained no explicit call for countries to stop undervaluing their currencies.
That leaves open the dispute between the United States and China, which has threatened to resurrect the kind of protectionist policies that have proven so destructive in the past.
In a separate development, G20 leaders wowed to guard against “the past excesses of the financial sector” that triggered the global financial crisis. In their statement, the leaders backed tighter financial regulations, including bank capital and liquidity standards.
G20 leaders also gave their backing to sweeping reforms designed to give emerging economies a bigger say in the International Monetary Fund, which has long been dominated by Western powers.
The IMF's 24-member executive board had already agreed the changes.
Europe has agreed to give up two seats, while Brazil, Russia, India, and China will all be among the top 10 IMF shareholders. China will move up to the third-largest shareholder, from sixth place.
Meanwhile Britain, France, Germany, Italy, and Spain jointly sought to reassure investors over Ireland's financial crisis, saying no private money would be required in case of a bailout.
In a declaration issued at the Seoul summit, the finance ministers from the five countries said any new bail-out mechanism would “only come into effect after mid-2013” and would have “no impact whatsoever on the current arrangements.”written by Antoine Blua, based on agency reports