Korea plays bridge role in G20 meeting

By Kim Tong-hyung

The Group of 20 nations has agreed on a critical first step toward stabilizing trade imbalances, according to government officials here. However, it bears further watching whether the taut tension between major exporters like China and debt-pressed importers like the United States will affect the pace of progress.

In a two-day meeting of finance ministers and central bank governors in Paris, which represented the first G20 gathering under the French presidency, South Korea was seen once again attempting to bridge the interests between the feuding economic superpowers.

Eventually, a last-minute compromise by China allowed the G20 countries to hammer out a deal for adopting a set of indicators for measuring trade gaps and surpluses to save the world from another financial crisis, according to officials from Korea’s Ministry of Strategy and Finance.

The indicators include a nation’s public and private debt, savings and fiscal deficit. But exchange rates and currency reserves weren’t directly mentioned in the carefully-worded agreement announced by the G20, reflecting the unmistakable Chinese influence.

``Reaching an agreement on the indicators included in the `indicative guidelines’ is clearly the biggest achievement of this G20 meeting,’’ Korean Finance Minister Yoon Jeung-hyun told journalists after the meeting.

``The level of coordination achieved between the countries shows that the G20 remains firm and effective as a forum for formulating international policy. The next step is to agree on a finalized form of the guideline by the next G20 meeting in April at Washington, and that means picking which indicators from the initiative guidelines to assess.’’

Korea chaired the G20 process last year before handing off the presidency to France.

At one point during the meetings in Paris, the row between China and the U.S. over how fast the trade gaps should be narrowed threatened to grind the talks to a halt. The Korean delegates did their part in massaging the egos of Chinese policymakers, who were balking at several of the proposed indicators.

China, the world’s biggest exporter and main cause of global imbalances, has been defiant in defending its policies to keep its currency artificially cheap to further boost its exports. In Paris, the Chinese delegates rejected using the country’s massive currency reserves and real exchange rate as indicators and also argued against including current account balance as a consideration.

With the talks turning heated, Yoon said the Korean delegates suggested a compromised version of the draft that replaced currency account balance with narrower indicators like trade balance and transfers, which was found acceptable by their Chinese delegates late Friday.

The communique, announced after the conclusion of the meeting on Saturday, states that economic distortions will be assessed by factors including ``the trade balance and net investment income flows and transfers’’ and ``taking due consideration of exchange rate’’ and other policies.

The G20 countries also expressed caution against the ruthless capital movement they believe could threaten financial stability and the need to monitor the soaring prices of commodities and energy. The economic policymakers also sent a message of support to Egypt and Tunisia, vowing support reforms for the countries through international institutions and regional development banks.

``We believe that the credibility we have gained from both developed and developing nations, built up during the hosting of the G20 meetings last year, is proving to be an asset for us,’’ said Yoon, who claimed that the Chinese officials accepting the Korean suggestions was the breakthrough point in the negotiations.