G-20 Seoul Summit 2010

November 14, 2010

By Padmini Arhant

The G-20 Summit was held in Seoul, South Korea on November 11 – 12, 2010.

Among many important economic issues, the trade imbalances and currency devaluation had drawn the representatives’ attention.

The two leading economies – U.S. and China expressed concerns over the respective trade surpluses and deficits attributed to currency management.

Likewise, the U.S. Federal Reserve proposal to interject $600 billion for economic revival expected to weaken the U.S. dollar while strengthening exports was met with resistance from competing trade partners such as China, Germany, United Kingdom, Brazil…citing the undue advantages to U.S. in the overseas export market.

It is well known that China has benefited from maintaining renminbi under market value boosting its trade to different nations especially the United States due to MFN and the primary creditor status.

Accordingly, China’s trade surplus would be different when evaluated in real market conditions.

If United States were to pursue similar trend with Federal Reserve intervention then both economic powers would essentially contribute to trade anomalies with their trading partners across the globe.

The arguments on both sides are valid in terms of the policy’s impact on the individual and global economy. Arguably the importing countries, developing nations in particular would be drastically affected with cheaper exports flooding their market giving rise to trade deficits and inflation.

Balance of trade between nations enhancing mutual economic prospects is critical in the competitive global environment.

Therefore, the G-20 leaders’ general agreement on this issue to move toward market determined exchange rate systems deterring currency devaluation and exchange rate or capital flow volatility is a sensitive measure in dealing with trade or currency related disputes.

United States as a consumer economy with Germany and China being the export economy is another contentious issue demanding necessary adjustments to the disproportionate trading activities.

Further, U.S. economic recovery is vital for the global market dependent upon U.S. consumerism and offshore capital investments.

The advanced economies could perhaps share the burden with the United States by allowing imports from low income countries and entry to US manufactured high end goods in return for their shipment to US shores.

At the same time, U.S. targeting the emerging and developing nations for exports has a greater responsibility in adopting fair trade practices rather than free trade impositions such as NAFTA, DR-CAFTA…that is proved to be devastating for the vulnerable population in these regions.

The globalization concept is conspicuously embraced at the meeting with pronounced commitment to reject protectionism.

Yet, the irony is the trade and currency wars prompting decisions to stimulate domestic growth through local demand and supply as stated by China as well as the industrialized nations’ fervor to compete for national productivity unequivocally confirms protectionism.

Since the globalization era, the government and business focus has shifted from their domain to international markets as experienced in the United States that led to the manufacturing sector demise eliminating blue collar jobs and ultimately having a ripple effect on other industries especially the small business economy.

Additionally, the globalization woes were not restricted to the alarming unemployment in the United States and elsewhere. The financial sector deregulation for over three decades resulted in the worst hedge fund mismanagement nearly bankrupting the interlinked economies in the prevalent globalization.

As for the struggling economies, globalization through treaties deprived agriculture and small scale industries survival witnessed in Haiti, Mexico, other parts of Latin America and Africa.

Globalization is effective when trading between nations promotes economic growth for all unlike the purely profit oriented corporatization of developing nations for cheap labor and natural resources that mostly benefits the big corporations wielding power on the political systems.

Hence, protecting the agriculture, SME (small and medium enterprises), independent entrepreneurships is crucial for realistic economic gains and in achieving the UN adopted Millennium Development Goals.

In this respect, the G-20 Financial Inclusion Action Plan, the Global Partnership for Financial Inclusion and a flexible SME Finance Framework providing increased access to financial services and expanding opportunities for poor households and SME is praiseworthy.

Simultaneously, the IMF and World Bank elaborate coordination in assisting the national and regional economies is an important step to mitigate disparities and alleviate vast majority suffering.

However, the G-20 assurance translated into action could significantly improve the economic standards of the rapidly deteriorating middle and low income groups in the global society.

The G-20 strategies for the finance industry with a new financial regulatory framework comprising instruments and practical tools to avert the repeat erroneous undertakings,

Notwithstanding the oversight and supervision amid several preventive adaptations with financial assistance is a formidable structural reform.

Besides the macro prudential plan on fiscal, monetary, economic and trade policy to expedite economic and job resurgence would be comprehensive in addressing the universal challenges emanating from the complex global transactions.

The debate on deficit control and economic stimulus programs reflected the stark contrast positions across the Atlantic with Europe’s preference to slash national debt through austerity and U.S. reliance on deficit spending.

Although both methods are relevant in debt reduction and economic growth acceleration, extreme measures are counterproductive with an inevitable setback in the desirable objectives.

Adopting moderate course to obtain steady growth and deficit decline would guarantee the anticipated outcome.

Poignantly, France pension legislation passed despite the overwhelming public disapproval based on the bill’s detrimental effects is representative of mandatory implementations without due diligence not to mention the utter disregard for the republic financial security and personal well-being.

France government action to safeguard the minority interest at the majority plight is a misplaced priority exacerbating rather than resolving the economic situation.

Unfortunately, now the U.S. Congressional Republican members’ pledge to replicate the French authorities’ act by attacking Social Security and prolonging retirement age signifies a pattern designed to reverse progress.

American citizens across the political spectrum have a moral obligation to defend the retirement savings through Social Security. The elected officials attempt to jeopardize the only reliable source of income would drive the economy to the point of no return.

Regarding climate change – The G-20 affirmation to safeguard the marine environment is notable but the unwillingness to renounce fossil fuel use poses an impediment in combating global warming.

The unanimous clean energy application throughout the world is the only alternative to life sustenance on the planet.

By and large, G-20 scope to limit risks in the financial sector, stabilize the global financial markets, build a job generating economy, narrow the development gap, eradicate corruption, facilitate modern infrastructure are among the impressive immediate aspirations.

G-20 future meetings could broaden the aspects by specifying the programs in fighting hunger and disease through food distribution and affordable health care at the national and global front.

The political and business leaders’ consortium to recognize failures and devise constructive policies is commendable at the G-20 Summit.

Cooperation and sincere involvement for greater good would enable the G-20 nations in delivering the promise to the world.

Good Luck and Best Wishes to the honorable world leaders in reaching the milestones on global peace and prosperity.

Congratulations! To South Korean leadership on the successful G-20 summit hosting.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy 

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