Currency row hangs over summit of global leaders
YOKOHAMA, Japan—Intensifying friction over currencies and trade loomed Wednesday as leaders of major economies converged on Asia for back-to-back summits aimed at safeguarding the still fragile global recovery.
President Barack Obama and other top leaders were arriving in Seoul, South Korea, for a two-day Group of 20 summit with the ambitious agenda of remaking the world economy to nurture stable growth and prevent a repeat of the financial meltdown in 2008.
But that gathering, and a weekend summit of Pacific Rim leaders in the Japanese port city of Yokohama, are taking place as those nations struggle to reconcile conflicting strategies for achieving those aims.
G-20 officials -- whose countries comprise 85 percent of all economic activity -- have pledged not to use their currencies as trade weapons. But tensions reignited last week when the U.S. Federal Reserve announced a $600 billion bond buying plan that angered many trading partners.
Obama, wrapping up a brief visit to Indonesia after touring India, defended the Fed's move as a way to hasten a narrowing of huge gaps in trade and investment by engineering a weaker U.S. dollar -- thus putting pressure on countries with large trade and foreign exchange surpluses.
In a letter he sent to other G-20 members, Obama defended moves to help the U.S. economy because he said its strong recovery would be the country's most important contribution to a global recovery.
Other countries complain excess cash may flood into their markets seeking higher returns, pushing their currency values higher, squeezing their exporters and inflating bubbles in stocks or other assets that could destabilize their financial systems.
G-20 financial officials made little headway Wednesday in resolving the currency standoff, a summit spokesman, Kim Yoon-kyung, told reporters in Seoul.
"Critical agendas, such as establishing a clear guideline on limiting current account surpluses and deficits to sustainable levels and recent moves by Washington to print more money, were put on the table, but only highlighted differences between member countries," Kim said.
Such issues were left unresolved to allow work on other issues that must be included in a declaration at the summit's end, he said.
The G-20 first convened a leaders summit two years ago and has since supplanted the Group of Seven advanced nations as countries like China and India gained economic and political stature.
The aim is to craft a new global economic order to replace one powered by the U.S. running huge trade deficits while countries like China, Germany and Japan accumulate vast surpluses. One U.S. proposal, for example, calls for setting guidelines for when such imbalances might become potentially destabilizing.
China announced Wednesday that its trade surplus surged to its second-highest level this year in October, raising pressure on Beijing over its currency, which the U.S. and other trading partners say is kept artificially weak, making its exports more competitive overseas.
Beijing maintains that the focus on its currency policies is misplaced.
If either side "chooses a confrontational approach, I think everybody will come out as losers," said Vice Foreign Minister Cui Tiankai, an envoy to the Seoul talks.
On somewhat less confrontational issues, the G-20 leaders are expected to endorse greater supervision of financial institutions and support giving developing countries more say in the International Monetary Fund.
In Yokohama, trade and foreign ministers of the Asia-Pacific Economic Cooperation forum were mulling moves toward a Pacific-wide free trade zone that would encompass more than half the world's economic output.
"We are quite committed to that. We believe that open trade is indispensable to overcome the financial crisis and the economic crisis," Mexican foreign minister Patricia Espinosa said on the sidelines of the meetings.
A failure to cooperate, rather than renewed financial woes, is the biggest threat, warned a report issued Wednesday by the Pacific Economic Cooperation Council, an APEC advisory group.
Debt troubles in Europe, weak U.S. growth and tensions over trade are clouding the global outlook and contributing to an "unprecedented crisis atmosphere," the report said, citing a survey of 422 regional opinion leaders.
The report urged APEC to carry though with reforms needed to ensure more balanced, sustainable and equitable growth as the group reviews its progress toward the still unfulfilled goal, set in 1994, of achieving free trade and investment among developed members by 2010.
A regionwide arrangement, dubbed the Free Trade Area of the Asia-Pacific, could help untangle a slew of bilateral and regional agreements, and by lowering trade barriers, could boost growth.
A building block of that plan is a U.S.-backed free trade agreement called the Trans-Pacific Partnership. It now includes only four small economies -- Brunei, Chile, New Zealand and Singapore -- but the U.S., Australia, Malaysia, Vietnam and Peru are in talks to join.
Though such moves could hurt farmers in South Korea and Japan who are outraged at the prospect of losing protective high tariffs, host Tokyo says it favors moving toward freer trade.
"In many ways, Japan has fallen behind the wave of creating freer economies," Japanese Prime Minister Naoto Kan said Tuesday. "I think it's time to steer once again toward opening the country."
Associated Press writers Kelly Olsen and Foster Klug in Seoul, Malcolm Foster, Jim Gomez and Tomoko Hosaka in Yokohama and Mari Yamaguchi in Tokyo contributed to this report.