G-20 pledges to refrain from currency wars
A group representing the world’s most prominent finance ministers wrapped up a two-day meeting in Korea Saturday with a pledge to not engage in currency wars or other economically protectionist policies.
The ministers from the so-called G-20 nations, who were meeting in Gyeongju, South Korea, discussed a wide array of challenges facing the global economy. But first and foremost was the issue of currency trading.
The United States has been vocally concerned about how some emerging markets nations, most notably China, have allowed their currencies to trade at artificially low levels. The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
In their statement, however, the G-20 ministers said that they would "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
The ministers added that the G-20 member nations would "continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade."
The G-20 stopped short of outright banning currency manipulation though. U.S. Treasury Secretary Timothy Geithner, who attended the meeting, had urged the G-20 ministers to take strong action to make sure emerging markets nations allow their currency to appreciate in line with the free market.
This weekend’s meeting is a precursor to a larger G-20 meeting taking place in Seoul on November 11 and 12. That summit will involve the heads of state from the G-20 nations. President Obama will attend.
Tensions about currency and trade are likely to be high at that meeting as well. The G-20 acknowledged in Saturday’s statement that the global economic recovery is currently advancing, but it was doing so in "a fragile and uneven way."
The ministers added that "growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies."
As further evidence of that, China announced earlier this week that its gross domestic product for the third-quarter rose at an annual rate of 9.6%. While that’s slower than in previous quarters, it is still far higher than the growth rates of the United States, Japan and nations in Europe.
China’s central bank also announced earlier this week that it was raising a key interest rate for the first time in nearly three years. That comes at a time when many expect the Federal Reserve to soon announce more details about how it intends to further ease its own monetary policies.
In a nod to the increased economic clout of China and other emerging markets, such as Brazil, India and Russia, the G-20 ministers also announced a deal Saturday that would give emerging markets countries more seats on the board of the International Monetary Fund.