By Cho Jin-seo
Experts warned Wednesday that the escalating protectionist sentiment in the United States and elsewhere could spoil the G20 Seoul Summit.
Kemal Dervis, vice president of the Brookings Institution, a U.S. think tank, said that it was possible for G20 members to fall apart and fail to deliver consolidated solutions for global economic growth.
The most apparent danger is that the fight between United States and emerging nations such as China, as U.S. politicians try to win voters ahead of the general election on Nov. 2, he said.
“U.S. politics is in a gridlock...... I think the danger is very real,” Dervis said, in a forum held at the Hotel Shilla in Seoul, Wednesday.
“The Chinese reaction could be quite strong as seen on other occasions. I really do believe there is a very serious risk for the world economy and for the summit itself. It has to be taken very seriously.”
Overall, the outlook for global friendship is less cheerful than it was earlier this year, and the problem is that the officials involved in the G20 are not recognizing the change, he warned.
“I think that four or five months ago, the world economy looked better than it looks now. I don’t think the (G20) working group grasps today’s serious risk. I hope it’s not too late.”
The remark could be painful or unpleasant advice to Seoul’s G20 Preparation Committee officials who were present at the forum. Sakong Il, the chairman of the committee, said he recognizes such worries but remained confident that the G20 can and should overcome the pessimism.
“That is the reason why we aim to show that the G20 is still functioning. Our main point is to disappoint the skeptics,” he said.
U.S. politicians and policymaker have again begun to raise their voice over China’s controlled foreign exchange rate, saying the Asian giant is keeping its currency cheap to help its exporters and, eventually, hurt American industries. Japan’s recent intervention into the currency market fueled the hostile sentiment on Asian countries’ currency policies.
Seoul’s officials have been working on pushing G20 members to produce a set of consolidated economic policies at November’s summit, which is named “the Framework.” But Wednesday’s forum itself attested that the process won’t be easy, as participants even attacked Seoul’s policies.
“You are not a poor country and you have a foreign exchange reserve you should not have,” said Paul Martin, former Prime Minister of Canada, to Ryu Sang-min of Korea’s Ministry of Strategy and Finance.
The Korean government has some $270 billion in reserves, which is the fifth largest in the world. Some experts think that the Asian practice of saving dollars is causing a “global imbalance” of wealth accumulation.
“How are you going to explain that to countries that do not have that level of reserves?” Martin asked, only to receive an ambiguous response from Ryu.
There was at least one participant who thinks the current situation is not so bad. Jacques Mistral, from the Institut Francais des Relations Internationales, said that the G20 will find some solace if it can look back into the far past.
“There is not element of strategic division between major economies of the world, compared to the 1920s and 1930s when Nazism and Stalinism were fighting against democracy,” he said, as he views today's global monetary and economic system in a histrical context.
The forum was organized by the Korea Development Institute. Some 40 experts participated in the 4-hour discussion.
The Seoul Summit is to be held on Nov. 11 and 12. France assumes the chairmanship after Korea.