G20: more than battleground for FX war

By Lee Tae-hoon

Australia’s top envoy to Korea warned Monday that the foreign exchange issue should not be allowed to dominate the debate at the G20 Seoul Summit, as it could grow into a full-blown trade war at the two-day forum.

“Currency reform is an important part of the G20 reform agenda, but it is not the only issue,” Ambassador Sam Gerovich told the press at the Australian Embassy in downtown Seoul.

He pointed out that the issue of currency rebalancing needs to be dealt within the context of broader structural reforms to promote sustainable growth in all economies.

Observers say international tension over currency concerns will peak at the Seoul summit slated for Nov. 11 and 12 as the United States has been pressuring China and other export-driven economies to allow their currencies to strengthen.

Many countries have used currency devaluation as a means to overcome the global economic crisis and boost exports, triggering trade rows and retaliatory capital curbs.

Ambassador Gerovich said the global currency disputes should not overshadow other major agenda items for the Seoul summit, such as development, a global financial safety net and IMF reform.

“Australia is pleased that Korea has made development a priority agenda item for the Seoul Leaders’ Summit,” the ambassador said, adding that his country recognizes the importance of ensuring that the G20 benefits all countries.

Gerovich said the G20 can play a role in narrowing the development gap, which is critical to its efforts to promote strong, sustainable and balanced growth.

“Australia strongly supports G20 outreach — critical to ensure a successful summit and to ensure future G20 credibility as the premier forum for international economic cooperation,” the ambassador said.

Gerovich said, along with Korea, Australia is to see the G20 Seoul Summit promote resilience in low-income countries, noting that “development challenges have been exacerbated by the global economic crisis, with 64 million more people living in extreme poverty as a result of it.”

The top envoy said the G20 must finalize IMF quota and voice reform at the Seoul summit in accordance with the agreement the leaders of the G20 made at the previous Toronto Summit in June this year.

“The key to ensuring G20 future credibility and legitimacy is to implement leaders’ commitments in a timely manner and secure global economic recovery,” he said.

Gerovich noted that Australia, as co-chair of the IMF Quarter and Governance Working Group with South Africa, is striving to ensure a successful outcome in Seoul.

Gerovich said Australia strongly supports G20 efforts to strengthen global financial safety nets through the IMF, as it has “sufficient authority and resources to assist countries experiencing temporary liquidity problems.”

However, he said it is important that the IMF retains sufficient monitoring and surveillance powers to properly assess borrowers’ financial positions.