Article first published as G20 Seoul Summit Delivers Fake Commitments Once Again on Blogcritics.
G20 summit held in Seoul on November 11 and 12 has failed to reach a concrete agreement to address the rising fears of currency war. It has also failed to bring out guidelines for curbing trade imbalances as envisaged by the world countries amid discouraging conditions of multi-speed growths for various economies. Fifth communique issued by the G20 countries since the financial and economic crisis broke out in 2008, has repeated its rhetoric of addressing concerns of the most vulnerable, providing social protection, decent work and also ensuring accelerated growth in low income countries (or Least Developed Countries).
Jobs at Heart of Recovery!
The communique said the G20 countries were determined to put jobs at the heart of the recovery which is just a big lie. The leaders of the developed countries and the emerging market economies (EMEs) are not ashamed even a bit to give this empty commitment, where at least
There have not been serious attempts to create jobs throughout the world, instead the jobs are lost every day by the austerity measures in European Union countries and jobless growth in the US. Number of economists and analysts along with Nobel laureate Paul Krugman, have dubbed the growth that we are witnessing as “jobless growth.”
Crisis Contributors
BBC news has quoted Obama as saying there should be no controversy about fixing imbalances “that helped to contribute to the crisis that we just went through.” Obama must have lost his senses or have suffered from short term dementia, let us say. Otherwise, G20’s first communique after the financial crisis, and even subsequent communiqués have acknowledged that the financial conglomerates and their risky, greedy financial business practices have created the worst crisis. There was not a mention of trade imbalances contributing the crisis in G20 communiqués, yet Mr. Obama dared to spell it. If Obama likes to fix imbalances, that is well and good, but this type of miscalculations only contribute to rising trade tensions.
Trade Imbalances
The US and the EU have been accusing China for unfair undervaluation of its currency, Yuan. The US has been particularly critical of Yuan value. Its argument has been that China is able to amass trade surpluses due to artificially kept low Yuan value. It says Yuan should be allowed to appreciate freely in line with the market movements.
But, Germany has recently accused the US for announcing $600 billion of QE2, which it says is an indirect measure of devaluation of the dollar. The US has come under attack also from Brazil, India, China, Russia and Japan for its QE2 as it would encourage hot money to flow into emerging and even other developed economies putting upward pressure on their currencies there by providing competitive advantage to the US exports. The QE2 move has intensified fears over the supposed currency war.
In this background, currency war and trade imbalances have occupied top place in the main agenda of the G20 Seoul conference. A separate meeting between the two main constituents of the currency war, the US and China, did not produce any solution during G20 conference. Even the European leaders have been called in to help produce a solution to the ongoing heated debate over currency devaluations, but to no avail.
Vague Commitments
They finally have come out with vague statements of framing “indicative guidelines” to tackle trade imbalances. They have said they agreed to avoid “competitive devaluation” without stating any concrete steps to achieve that goal. The leaders have reportedly vowed to follow market determined exchange rates referring China’s Yuan value.
They have pledged not resort to competitive devaluation, perhaps a reference to the recent announcement of the QE2 by the Federal Reserve. In a bid to address the concern of the EMEs over the flow of hot money, they have been allowed to impose “carefully designed” control measures. One must wonder how these measures will look like. Perhaps, the EMEs need to be careful so that they may not disturb the free flow of globalized capital in the name of curbing hot money. And yet, they should curb hot money flow to prevent inflation, price rise and hence popular discontent in their countries. It is a very difficult task, indeed. And, that is the fate of the EMEs resulted from being the members of G20 and leaving G77.
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