By: Elison Elliott
Note: This post reflects the views of the author, not those of the Foreign Policy Association. The author is an independent contributor.
G-20 to confront global economic imbalance created by financial crisis
Pittsburgh, PA will host the next G-20 Summit slated for Thursday & Friday, September 24-25th, 2009. President Obama will chair this meeting of leaders from countries around the world who represent 85% of the global economy. At the Pittsburgh G-20 Summit, leaders will review the progress made since the London Summits and discuss further actions to assure a sound and sustainable recovery from the global financial and economic crisis. According to today’s Financial Times of London (FT), the global economic imbalances between nations resulting from the global financial crisis will be front and center on the agenda. An interesting debate with economic foreign policy implications is brewing between high-consumption (e.g., U.S., UK, Germany) and high- savings nations (China, India, Japan). The push on global imbalances is motivated in part by the US belief that high savings rates in emerging economies with export-led growth models helped to foster the financial crisis by creating a global savings glut that depressed borrowing costs and induced excessive borrowing by US consumers. That assessment is contested by officials from high-savings nations, who argue that the problem lay in the misallocation of abundant global capital by mismanaged and badly regulated financial sectors in New York and London.
Yet another pressing topic that promises to be high on the agenda will be a flare-up of economic nationalism between the U.S and China, sparked by President Obama’s recent decision to impose tariffs on tires made in China. The president argued that the Chinese tire imports were harmful to American companies and workers, that the tire imports were inferior in quality, manufactured using unfair labor practices, and that China was “dumping” tires into the $1.7Bn U.S. market. Under WTO rules, “anti-dumping” tariffs can be imposed under the President’s stated reasons. In retaliation, China quickly countered with — nationalist fervor — that they would impose equally harsh tariffs on American made automotive parts and U.S. chicken exports. This should make for an interesting Summit.
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FT (London) — The US administration, with support from Europe, is seeking to reach agreement on a new framework for tackling global economic imbalances at next week’s G20 summit in Pittsburgh. The goal is to achieve both a basic agreement on what needs to be done to produce more balanced global growth and a process for ensuring that countries deliver on their commitments.
FT EDITOR’S CHOICE
G20 nations break ‘No Protectionism’ vows – Sep 14
G20 calls for better capital buffers at banks – Sep-06
In depth: G20 – Sep-04
But it is still unclear how far China and other trade surplus nations will be willing to go, and whether the G20 as a whole really is ready to submit to meaningful global policy co-ordination.
“We hope to reach agreement on a framework for balanced growth, for agreeing on how to address the imbalances that led to this crisis and on some process for holding each other accountable,” Michael Froman, deputy national security adviser for international economics, told reporters yesterday.
One idea – promoted by some European governments – is for the G20 to establish a high-level task force of senior officials from the major economies to co-ordinate a global push to reduce imbalances, with support from the International Monetary Fund. The IMF held so-called multilateral consultations on global imbalances before the crisis, but without strong political backing the discussions led nowhere.
Read more from FT here.
