[G20 SEOUL SUMMIT 2010/Editorial]G20:Hope For Global Economy

We expect the two-day G20 summit meeting being held in Seoul to go smoothly except, perhaps, for a few wrinkles such as currency issues.

Development and global financial safety net issues have almost been ironed out at the meeting of vice-finance ministers and sherpas that ended yesterday. The wording for the “Seoul Declaration” that will be adopted at the summit meeting is also being refined.

Regarding the exchange rate issue, G20 members have agreed to advance upon the results of the finance ministers’ meeting held in Gyeongju last month.

However, export leaders including China and Germany are strongly against having numerical guidelines to limit the size of a current account imbalance. If at the summit, members agree to keep the current account surplus at less than 4 percent of GDP, the two countries would have to drastically reduce the size of their exports.

China, Germany and Brazil are also criticizing the United States, saying its plan to pump US$600 billion into its economy in order to devalue the dollar is indirect currency manipulation.

If disagreements about exchange rates aren’t resolved in Seoul, trade barriers will increase. This will inevitably rattle the stability of the world economy which has just begun to clamber out of a worldwide recession. As Chancellor Angela Merkel of Germany said, the biggest danger is protectionism.

Judging from the vice-finance ministers’ meeting, the Seoul summit will postpone making any decisions on current account guidelines until next year’s G20 meeting in Paris, but will introduce an early warning system that keeps a close eye on excessive trade surpluses or deficits. Currency wars shouldn’t be one-sided and end up with winners and losers, but yield concessions and compromises.

Leaders of the G20 should seek out roles that each member state or group should play to resolve global economic imbalances. Economic experts suggest that the United States should increase its exports while China expands its domestic demand. In order to create a new economic order following the recent global financial crisis, concessions and trust are essential.

President Lee Myung-bak, as chaiman of the summit, should play a leadership role in order to win concessions at the bilateral meetings he will hold with member states of the G20.

The G20 should work on creating a global financial safety net, reforming the International Monetary Fund and outlining a practical program for sustainable and balanced development, Then it needs to see that it is all implemented.

A few discussions a year under rotating chairmanships won’t result in anything substantive. The G20 needs to be institutionalized as the highest global organization for economic discussions. As such, it should establish a permanent office to raise efficiency and ensure continuity and follow-through.