With over 8 million children dying each year from preventable causes, a global financial transaction tax could be the solution
To be in South Korea as part of its hosting of the G20 summit which will be held on 11 and 12 November is to witness a piece of history.
In the lifetime of South Korea's leaders, and in a triumph of development, the country has gone from having a GDP per capita lower than much of sub-Saharan Africa to being one of the world's largest economies, and is now a larger aid donor than some European countries. It didn't get here by following the "guidance" of the international financial institutions. Instead, South Korean growth came from redistributing wealth, managing market engagement and making massive public investment in human capital.
Indeed, the success of east Asia, and the failure of the Washington Consensus, prompted me to ask the G20 representatives attending the recent High-Level Development Conference in South Korea earlier this month whether we should swap the Washington consensus for a Seoul consensus. The eclipsing of the G7/G8 by the G20 marks a change in the global political economy. It changes the culture of global meetings too. I'm pretty sure, for example, that this is the first time a host government of such a meeting has had an official pop song.
But for those who had hoped that the expansion of the old colonial G8 into the more inclusive G20 would bring a greater focus on poverty, there will be some disappointment. The G20 do not want to discuss aid or debt for example, and it was a struggle to even get development on the agenda. Even with development now an official topic of discussion, I had one (western) government representative at the meetings confess: "I don't know much about development, I'm an economist." And though the chairman of the African Union is invited as an observer, the AU is still not a permanent, equal member of the forum. "There has to be a balance between efficiency and inclusiveness," goes the mantra. Those who complained about the old G8 but made it into the G20 go along with this. All reminiscent of the natural human tendency that when you're waiting for a bus in the rain, you shout at the buses that keep driving past; but when you get into the bus, you join in with the others shouting to the driver that the bus is too full to keep stopping at all the stops to let rain-drenched passengers in.
The civil society groups attending the meetings of Civil G20 have taken a different approach, with more than 100 participants from across the world. It is a wonderfully diverse group: in my first five minutes at a meeting I met an obstetrician, a teacher, a lawyer and a priest. But it is a hard group to organise. At times we got a little sidetracked. Discussing a civil society submission paper to the G20, someone asked another participant: "Are you upset because of the comma?"
For those focused on global poverty, the most important issue being discussed at the G20 is the idea of an FTT, a financial transaction tax to help raise the money needed to fight poverty. It sounds wonkish, but at a rate of just 0.05%, and applied globally, this could raise between £256bn and £446bn annually, roughly four to seven times the current level of overseas aid. Among the G20 representatives, opinion is divided. A senior official from a major economy told a group of community activists from Asia, Latin America and Africa that while the idea of taxing irresponsible traders may seem attractive, in the end the costs would fall upon "ordinary people like me and you". In the middle ground was the government representative who acknowledged that the FTT was a good idea but declared that it would be "hard to do". (Can the world's "premier economic forum" not do hard things?) But a representative from another G20 country urged me: "Please keep pushing on the financial transaction tax. We need you to do so. It's like with the landmines treaty. Governments said it couldn't be done. You in the NGOs kept pushing. And it happened. This can happen too. It will happen – if you keep pushing us."
Civil society advocacy stands little chance when all governments are opposed to us – but when an issue is in contention, like this one, we can be the force that makes the difference, that pushes an issue beyond the tipping point. The world is short of more than 3.5 million health workers, and an FTT could help pay for them. For some of the more than 8 million children who die every year from preventable causes, that could mean life instead of death. An FTT won't be agreed this month or next month, but if we can keep it on the agenda, as the French start to organise for their chairing of the G20 in 2011, we can help to ensure that it does happen, and that we make another piece of history.
• Ben Phillips is Save The Children's Asia strategy director. Currently based in Bangkok, he has previously lived in India, South Africa, Japan, the Netherlands and the US. He is the author of Learning to Survive: How Education for All could prevent millions of deaths from HIV/Aids, and Must Try Harder: a school report on donors' aid for education. He tweets at http://twitter.com/atbenphillips
Source: Guardian
www.guardian.co.uk
10/25/2010
U.S., China discuss economic ties amid tension
Beijing, China (CNN) -- U.S. Treasury Secretary Timothy Geithner met China's Vice-Premier Wang Qishan on Sunday and "exchanged views" about economic relations between their countries, both sides said.
The meeting came shortly after Geithner publicly hammered China over its currency, which Washington says Beijing keeps at artificially low levels to boost exports.
Geithner had urged the world's leading finance ministers to take strong action to ensure emerging markets nations allow their currency to rise in value in line with the free market.
The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
He insisted that "countries that have traditionally run large trade and current account surpluses" -- which China has done -- needed to move "away from export dependence and toward stronger domestic demand led growth."
He said rich countries like the United States needed to play their part too by saving, investing and exporting more.
He was speaking at a meeting of finance ministers of the G-20 group of nations. Their two-day meeting wrapped up Saturday in Gyeongju, South Korea, with the ministers pledging not to engage in currency wars.
Geithner then flew on to China, where he met Wang at the Qingdao Airport.
They also discussed plans for the G-20 leaders meeting in Seoul, South Korea, next month, the Americans said.
In the G-20 finance ministers' closing statement, they said they would "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
The ministers added that the G-20 member nations would "continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade."
The G-20 stopped short of outright banning currency manipulation though.
The meeting was a precursor to the larger G-20 meeting taking place in Seoul on November 11 and 12. That summit will involve the heads of state from the G-20 nations. President Obama will attend.
Tensions about currency and trade are likely to be high at that meeting as well.
The G-20 acknowledged in Saturday's statement that the global economic recovery is currently advancing, but it was doing so in "a fragile and uneven way."
The ministers added that "growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies."
As further evidence of that, China announced earlier this week that its gross domestic product for the third-quarter rose at an annual rate of 9.6 percent.
While that's slower than in previous quarters, it is still far higher than the growth rates of the United States, Japan and nations in Europe.
China's central bank also announced earlier this week that it was raising a key interest rate for the first time in nearly three years.
That comes at a time when many expect the Federal Reserve to soon announce more details about how it intends to further ease its own monetary policies.
In a nod to the increased economic clout of China and other emerging markets, such as Brazil, India and Russia, the G-20 ministers also announced a deal Saturday that would give emerging markets countries more seats on the board of the International Monetary Fund.
By the CNN Wire Staff
Source: CNN
www.cnn.com
The meeting came shortly after Geithner publicly hammered China over its currency, which Washington says Beijing keeps at artificially low levels to boost exports.
Geithner had urged the world's leading finance ministers to take strong action to ensure emerging markets nations allow their currency to rise in value in line with the free market.
The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
He insisted that "countries that have traditionally run large trade and current account surpluses" -- which China has done -- needed to move "away from export dependence and toward stronger domestic demand led growth."
He said rich countries like the United States needed to play their part too by saving, investing and exporting more.
He was speaking at a meeting of finance ministers of the G-20 group of nations. Their two-day meeting wrapped up Saturday in Gyeongju, South Korea, with the ministers pledging not to engage in currency wars.
Geithner then flew on to China, where he met Wang at the Qingdao Airport.
They also discussed plans for the G-20 leaders meeting in Seoul, South Korea, next month, the Americans said.
In the G-20 finance ministers' closing statement, they said they would "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
The ministers added that the G-20 member nations would "continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade."
The G-20 stopped short of outright banning currency manipulation though.
The meeting was a precursor to the larger G-20 meeting taking place in Seoul on November 11 and 12. That summit will involve the heads of state from the G-20 nations. President Obama will attend.
Tensions about currency and trade are likely to be high at that meeting as well.
The G-20 acknowledged in Saturday's statement that the global economic recovery is currently advancing, but it was doing so in "a fragile and uneven way."
The ministers added that "growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies."
As further evidence of that, China announced earlier this week that its gross domestic product for the third-quarter rose at an annual rate of 9.6 percent.
While that's slower than in previous quarters, it is still far higher than the growth rates of the United States, Japan and nations in Europe.
China's central bank also announced earlier this week that it was raising a key interest rate for the first time in nearly three years.
That comes at a time when many expect the Federal Reserve to soon announce more details about how it intends to further ease its own monetary policies.
In a nod to the increased economic clout of China and other emerging markets, such as Brazil, India and Russia, the G-20 ministers also announced a deal Saturday that would give emerging markets countries more seats on the board of the International Monetary Fund.
By the CNN Wire Staff
Source: CNN
www.cnn.com
Trade imbalance targets elude G20
(FT) -- Leaders from the G20 group of leading economies will next month seek to agree specific guidelines on reducing global trade imbalances, in a fresh attempt to head off a potential "currency war".
Finance ministers and central bank governors, meeting this weekend in the South Korean city of Gyeongju, agreed on a policy framework to contain large current account surpluses and deficits, but a proposal to set specific targets ran into opposition.
The dollar traded near a one-week low against the euro or $1.3997 against the single currency in Asian time trading after the meeting, before coming back .
The meeting also announced significant progress in reforming the International Monetary Fund, shifting power away from Europe and towards emerging nations like China and Brazil.
Analyst reaction was muted. Eswar Prasad, a former IMF official now at Cornell University in the US, said a previous attempt to impose tougher IMF surveillance of current account imbalances had achieved little while the threat of such monitoring was unlikely to trigger policy changes in countries with large surpluses and deficits.
Todd Elmer, of Citigroup, said: "The meeting produced little pressure for the US to back away from its accommodative stance which has fuelled dollar depreciation, it does not call more strongly for increased flexibility in Asia and it appears to leave an out for some countries, like Japan, to pursue intervention or capital controls."
The US, which has been pushing China to allow its currency to rise and reduce its huge trade surplus, claimed victory. Tim Geithner, Treasury secretary, said after the meeting: "The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future."
But the statement issued by the ministers left unclear how the imbalances would be reduced. The communiqué also issued a clear warning to the US that loose monetary policy could continue to push volatile capital flows into emerging economies.
European nations agreed to surrender two of their seats on the IMF's 24-member executive board to make way for emerging nations, who will also receive a greater share of "quotas", which determine voting power. But the exact decisions on reorganising quotas was deferred until 2012.
Christine Lagarde, France's finance minister, agreed the shift to combating imbalances would offer a sense of purpose to the French presidency of the G20 next year. The US and South Korea had also sought to forge consensus on a numerical target for surpluses and deficits at this weekend's meeting, suggesting a cap of 4 per cent of gross domestic product. But the idea of a specific target ran into stern opposition from Germany, Brazil and Japan.
By Christian Oliver, Alan Beattie and Peter Garnham, FT.com
Finance ministers and central bank governors, meeting this weekend in the South Korean city of Gyeongju, agreed on a policy framework to contain large current account surpluses and deficits, but a proposal to set specific targets ran into opposition.
The dollar traded near a one-week low against the euro or $1.3997 against the single currency in Asian time trading after the meeting, before coming back .
The meeting also announced significant progress in reforming the International Monetary Fund, shifting power away from Europe and towards emerging nations like China and Brazil.
Analyst reaction was muted. Eswar Prasad, a former IMF official now at Cornell University in the US, said a previous attempt to impose tougher IMF surveillance of current account imbalances had achieved little while the threat of such monitoring was unlikely to trigger policy changes in countries with large surpluses and deficits.
Todd Elmer, of Citigroup, said: "The meeting produced little pressure for the US to back away from its accommodative stance which has fuelled dollar depreciation, it does not call more strongly for increased flexibility in Asia and it appears to leave an out for some countries, like Japan, to pursue intervention or capital controls."
The US, which has been pushing China to allow its currency to rise and reduce its huge trade surplus, claimed victory. Tim Geithner, Treasury secretary, said after the meeting: "The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future."
But the statement issued by the ministers left unclear how the imbalances would be reduced. The communiqué also issued a clear warning to the US that loose monetary policy could continue to push volatile capital flows into emerging economies.
European nations agreed to surrender two of their seats on the IMF's 24-member executive board to make way for emerging nations, who will also receive a greater share of "quotas", which determine voting power. But the exact decisions on reorganising quotas was deferred until 2012.
Christine Lagarde, France's finance minister, agreed the shift to combating imbalances would offer a sense of purpose to the French presidency of the G20 next year. The US and South Korea had also sought to forge consensus on a numerical target for surpluses and deficits at this weekend's meeting, suggesting a cap of 4 per cent of gross domestic product. But the idea of a specific target ran into stern opposition from Germany, Brazil and Japan.
By Christian Oliver, Alan Beattie and Peter Garnham, FT.com
10/23/2010
Geithner calls for cap on trade surpluses
Gyeongju, South Korea (FT) -- Washington has taken a fresh line of attack in attempts to get Beijing to allow its currency to appreciate, calling for the G20 group of leading economies to agree a cap on current account surpluses.
The U.S. has long sought faster and sustained appreciation of the renminbi but Beijing has consistently resisted specific targets.
In order to break this impasse, Timothy Geithner, U.S. Treasury secretary, said G20 finance ministers, meeting in the South Korean city of Gyeongju on Friday, should commit to limit trade deficits and surpluses that create imbalances in the global economy.
"G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand," Mr Geithner wrote in a letter to G20 ministers that was circulated among reporters.
Still, much of Mr Geithner's language was tailored to the challenge posed by the renminbi. By building up domestic demand and increasing imports, China would be inclined to allow a faster strengthening of its currency.
"Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals," he added.
G20 officials on Friday said the U.S. initially proposed that trade surpluses should be capped at 4 per cent of gross domestic product.
One senior G20 official said the letter, drafted after a proposal from South Korea, would not come as a shock to the Chinese because financial officials had been sounding out Beijing in earlier meetings.
The G20 official said the Chinese had cautiously welcomed the suggestion of shifting the debate away from the narrow focus on currency and could even be open to the 4 per cent target because it chimed with their own forecasts.
"I do not know whether the Chinese fully agreed in advance or not, but if the Americans decided to circulate the letter, it should be a sign they have already agreed something. The bigger worry is opposition from Germany and Japan."
China gave no immediate reaction. Cui Tiankai, Beijing's representative to the G20, last week said any U.S.-led offensive on Chinese currency would be "wrong" but said he was "cautiously optimistic" a final deal could be done if it took broad macroeconomic factors into account.
He said asking China to set targets on currency was tantamount to asking it to manipulate the renminbi. He repeated Beijing's assertions that it was already doing enough to stimulate domestic demand and that it was unfair to expect a sudden change in consumers' habits.
Jim Flaherty, Canada's finance minister, said Mr Geithner's proposal was helpful and added that it could be regarded as part of an action plan to be agreed by a summit of G20 leaders in Seoul on November 11. A French official told reporters that Paris was also sympathetic to the suggestion, which echoed its complaints about Germany's surpluses.
However, Yoshihiko Noda, Japan's finance minister, told reporters that numerical targets would be difficult to implement. A senior German official also reacted negatively, telling Deutsche Presse-Agentur that Germany's surplus could not be likened to that of China. He argued that Berlin's surpluses were unrelated to the euro and were simply a sign of trading strength.
Mr Flaherty held out hopes that an initial compromise could be reached by the end of the Gyeongju meeting on Saturday.
"No one wants to walk out from here without an agreement on an action plan," he told reporters.
It was unclear whether a demand for action on current accounts would be any more acceptable to Beijing as it argues it is already taking sufficient steps to stimulate domestic demand. "We are not just an exporter," Mr Cui told a conference in Seoul. "We are making our best efforts to diversify our economy to base economic growth on domestic consumption and we are going to import more."
Despite the growing divisions, Lee Myung-bak, South Korea's president, joked he would not let any of the ministers leave until a deal was done.
"If you do not reach an agreement, when you come to leave, we may not operate buses, trains or planes," he said.
By Christian Oliver and Song Jung-a,
www.FT.com
The U.S. has long sought faster and sustained appreciation of the renminbi but Beijing has consistently resisted specific targets.
In order to break this impasse, Timothy Geithner, U.S. Treasury secretary, said G20 finance ministers, meeting in the South Korean city of Gyeongju on Friday, should commit to limit trade deficits and surpluses that create imbalances in the global economy.
"G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand," Mr Geithner wrote in a letter to G20 ministers that was circulated among reporters.
Still, much of Mr Geithner's language was tailored to the challenge posed by the renminbi. By building up domestic demand and increasing imports, China would be inclined to allow a faster strengthening of its currency.
"Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals," he added.
G20 officials on Friday said the U.S. initially proposed that trade surpluses should be capped at 4 per cent of gross domestic product.
One senior G20 official said the letter, drafted after a proposal from South Korea, would not come as a shock to the Chinese because financial officials had been sounding out Beijing in earlier meetings.
The G20 official said the Chinese had cautiously welcomed the suggestion of shifting the debate away from the narrow focus on currency and could even be open to the 4 per cent target because it chimed with their own forecasts.
"I do not know whether the Chinese fully agreed in advance or not, but if the Americans decided to circulate the letter, it should be a sign they have already agreed something. The bigger worry is opposition from Germany and Japan."
China gave no immediate reaction. Cui Tiankai, Beijing's representative to the G20, last week said any U.S.-led offensive on Chinese currency would be "wrong" but said he was "cautiously optimistic" a final deal could be done if it took broad macroeconomic factors into account.
He said asking China to set targets on currency was tantamount to asking it to manipulate the renminbi. He repeated Beijing's assertions that it was already doing enough to stimulate domestic demand and that it was unfair to expect a sudden change in consumers' habits.
Jim Flaherty, Canada's finance minister, said Mr Geithner's proposal was helpful and added that it could be regarded as part of an action plan to be agreed by a summit of G20 leaders in Seoul on November 11. A French official told reporters that Paris was also sympathetic to the suggestion, which echoed its complaints about Germany's surpluses.
However, Yoshihiko Noda, Japan's finance minister, told reporters that numerical targets would be difficult to implement. A senior German official also reacted negatively, telling Deutsche Presse-Agentur that Germany's surplus could not be likened to that of China. He argued that Berlin's surpluses were unrelated to the euro and were simply a sign of trading strength.
Mr Flaherty held out hopes that an initial compromise could be reached by the end of the Gyeongju meeting on Saturday.
"No one wants to walk out from here without an agreement on an action plan," he told reporters.
It was unclear whether a demand for action on current accounts would be any more acceptable to Beijing as it argues it is already taking sufficient steps to stimulate domestic demand. "We are not just an exporter," Mr Cui told a conference in Seoul. "We are making our best efforts to diversify our economy to base economic growth on domestic consumption and we are going to import more."
Despite the growing divisions, Lee Myung-bak, South Korea's president, joked he would not let any of the ministers leave until a deal was done.
"If you do not reach an agreement, when you come to leave, we may not operate buses, trains or planes," he said.
By Christian Oliver and Song Jung-a,
www.FT.com
10/22/2010
G20 finance ministers resist US pressure over trade
US proposals that countries set targets to reduce trade imbalances appeared to be running into opposition at the G20 meeting of leading economies.
[justify]US Treasury Secretary [b]Timothy Geithner[/b] wrote to [b]G20[/b] members on Friday suggesting limiting surpluses and deficits to a percentage of output.
But Japan, Germany and Russia expressed opposition to what one delegate called "planned economy" thinking.
The proposal is seen as mainly directed at China, which had yet to comment.
Washington has for months been pressing China - without success - to let its currency appreciate.
Getting Beijing to tackle its large trade surplus would be an indirect way of forcing the yuan to rising in value.
In his letter to [b]G20[/b] colleagues on the opening day of a meeting of finance ministers in South Korea, Mr Geithner said countries should aim to reduce surpluses or deficits to a targeted share of gross domestic product.
US officials said the target would be 4% of GDP by 2015. China's current account surplus was 4.9% of GDP in the first half.
Japanese Finance Minister Yoshihiko Noda summed up the mood among other big exporters, including Germany, saying Mr Geithner's proposal was "not realistic".
Australian Treasury Secretary Wayne Swan said he was not sure a "one-size-fits-all" approach could work.
Tensions over exchange rates are like to dominate the meeting, being held ahead of a summit by heads of state next month.
Common approach
The [b]G20[/b] finance ministers are trying to find a co-ordinated path out of the financial crisis and avert what some leaders have called "currency wars".
Many countries have been happy to see the value of their currencies fall, as it boosts their export competitiveness.
The US has accused Beijing of resisting upward pressure on the yuan by buying dollars, thereby making America's exports to China more expensive.
However, China has expressed unhappiness at what it sees as foreign interference in what it believes is an internal matter.[/justify]
Source:BBC
www.bbc.co.uk
[justify]US Treasury Secretary [b]Timothy Geithner[/b] wrote to [b]G20[/b] members on Friday suggesting limiting surpluses and deficits to a percentage of output.
But Japan, Germany and Russia expressed opposition to what one delegate called "planned economy" thinking.
The proposal is seen as mainly directed at China, which had yet to comment.
Washington has for months been pressing China - without success - to let its currency appreciate.
Getting Beijing to tackle its large trade surplus would be an indirect way of forcing the yuan to rising in value.
In his letter to [b]G20[/b] colleagues on the opening day of a meeting of finance ministers in South Korea, Mr Geithner said countries should aim to reduce surpluses or deficits to a targeted share of gross domestic product.
US officials said the target would be 4% of GDP by 2015. China's current account surplus was 4.9% of GDP in the first half.
Japanese Finance Minister Yoshihiko Noda summed up the mood among other big exporters, including Germany, saying Mr Geithner's proposal was "not realistic".
Australian Treasury Secretary Wayne Swan said he was not sure a "one-size-fits-all" approach could work.
Tensions over exchange rates are like to dominate the meeting, being held ahead of a summit by heads of state next month.
Common approach
The [b]G20[/b] finance ministers are trying to find a co-ordinated path out of the financial crisis and avert what some leaders have called "currency wars".
Many countries have been happy to see the value of their currencies fall, as it boosts their export competitiveness.
The US has accused Beijing of resisting upward pressure on the yuan by buying dollars, thereby making America's exports to China more expensive.
However, China has expressed unhappiness at what it sees as foreign interference in what it believes is an internal matter.[/justify]
Source:BBC
www.bbc.co.uk
10/15/2010
Averting currency war tops G20 agenda
The pressure is on the world’s economic powers to negotiate a deal that will avert an all-out currency war amid wild fluctuations in global currency markets.
As the Canadian dollar hit parity with the U.S. greenback and the Japanese yen struck a 15-year high, a senior South Korean official said the currency upheaval – and the need to calm it down – has become the dominant issue for upcoming G20 meetings in his country.
n an interview with The Globe and Mail, South Korea’s ambassador to Canada warned that the credibility of the Group of 20 developed and emerging economies hangs on whether they can reach a new arrangement on exchange rates at fall meetings that begin next week.
Currency movements have become a pressing concern in recent months as the evidence mounts that economic growth is slowing in troubled developed economies. In the United States, growth is so slow that it has proven impossible to bring down the unemployment rate, which stood at 9.6 per cent in December. There are nearly 15 million unemployed people in the U.S., and more than 6 million of those have been out of work for at least six months.
A prolonged period of ultra-low interest rates, and massive deficit spending in most of the world’s biggest economies, has not been enough to stoke strong global growth. So some governments are now turning to one of the only tools they’ve got left – trying to devalue their currency, or at least keep it from going up, in order to make their exports more competitive.
That has caused some figures, most notably Brazilian Finance Minister Guido Mantega, to warn of the threat of an all-out currency war. Defusing such a battle wasn’t on the original G20 agenda as South Korea prepared to host, but it has shot to the top of the list since the organization last met formally in June in Toronto.
Finance ministers and central bankers of the G20 gather in Gyeonju late next week to take another crack at the currency dispute, after failing to resolve their differences last week in Washington at a meeting of the International Monetary Fund.
South Korea is well-placed to guide a debate that is largely focused on a disagreement between the world’s two superpowers: the United States and China. The U.S. insists China should allow the yuan to rise more quickly than it has, while China has warned that a major revaluation in currency would devastate its export-dependent economy, cause major unemployment and social upheaval.
Under pressure, China has recently allowed the yuan to rise a bit, and it hit a record high against the U.S. dollar on Thursday. But the pace is still much too slow for many in the U.S.
South Korea is a political ally of the West and hosts thousands of U.S. troops on its soil, yet it also has deep economic and social ties with China.
“We’re not sure whether we have that much power to bridge the gap between two major players, but as chair, as the host country, we’re just trying our best to encourage them to solve the problem,” said Chan-Ho Ha, South Korea’s ambassador to Canada, in an interview. “If we avoid this issue, then the legitimacy of G20 will be damaged because the whole world is watching very carefully.”
This week, Japan’s finance minister publicly questioned whether South Korea is able to guide talks on exchange rate policy, given its own recent actions to limit the rise of its currency.
“As the chair, South Korea and its role will be seriously questioned,” Yoshihiko Noda told Japan’s Parliament, a comment that drew objections from South Korea.
South Korea is among the countries – along with Brazil and China – that have limited the rise of their currencies in the past year, a general trend that has draw concern from the United States, the European Union and Canada.
On Thursday, the Bank of Korea left its borrowing rates unchanged in part because an appreciating won threatens export growth.
Bank Governor Kim Choong Soo said the issue of exchange rates “will and must be dealt with under the G-20 framework talks.”
Next Friday’s two-day gathering in Gyeonju is a precursor to the G20 leaders summit in Seoul in November. Meetings of the G20 were originally limited to finance ministers and central bankers, but grew to involve world leaders at the onset of the recession in 2008. The following year, the G20 declared itself to be the main platform for global decisions on economic policy, eclipsing the G7.
Combined, G20 nations account for 85 per cent of the world economy The fledgling forum is not without its critics, particularly from countries that did not make the cut. South Korea has heard many complaints from non-G20 nations who oppose the format, but Mr. Ha, the ambassador, says all the G20 can do is listen.
“If they open the door, lots of countries will just rush in,” he said. “So they cannot open the door now. So the solution is, we call it, outreach activities – trying to accommodate their views or their complaints.”
Mr. Ha said South Korea wants the G20 to focus on a new business-focused approach to developing emerging markets as a key part of the recovery.
“Some of the advanced economies have reached sort of a saturation point,” he said. “To expand further, demand should come from developing countries.”
Source: www.theglobeandmail.com
Lee warns against protectionism ahead of G20
By Lee Tae-hoon
President Lee Myung-bak expressed concern Friday that protectionism may rise and deal a blow to the Korean economy, as well as the global economy.
“I’m worried that a conflict of interests between countries may lead to protectionism,” President Lee said in a luncheon with managing editors of newspapers and broadcasters at Cheong Wa Dae.
“This is a problem that concerns us, as well as the world.”
However, he said Korea will likely be hit the hardest by an escalation of trade barriers as the fourth largest economy in Asia heavily depends on exports.
President Lee noted that Korea will host the G20 summit at a time when a growing number of countries are taking a different approach to finding solutions to their economic problems.
The G20 Seoul Summit is slated for Nov. 11 and 12.
“Korea will host the G20 at a difficult time,” he said. “It has become a much more important event than first thought as international cooperation has become of greater importance.”
The international tension on economic policies is expected to reach a climax at the summit as a general meeting of the International Monetary Fund (IMF) recently came to a close without any clear solutions to thorny issues, such as the reform of IMF governance and exchange rate rebalancing.
“To be honest, I’m very anxious,” President Lee said, noting that Korea will be judged based on the outcome of the summit. “Korea’s national prestige may soar or plummet.”
Lee said he wants the world to remember the G20 Seoul Summit for decades and praise Korea’s role in laying out the foundation for sustainable growth of the global economy.
President Lee Myung-bak expressed concern Friday that protectionism may rise and deal a blow to the Korean economy, as well as the global economy.
“I’m worried that a conflict of interests between countries may lead to protectionism,” President Lee said in a luncheon with managing editors of newspapers and broadcasters at Cheong Wa Dae.
“This is a problem that concerns us, as well as the world.”
However, he said Korea will likely be hit the hardest by an escalation of trade barriers as the fourth largest economy in Asia heavily depends on exports.
President Lee noted that Korea will host the G20 summit at a time when a growing number of countries are taking a different approach to finding solutions to their economic problems.
The G20 Seoul Summit is slated for Nov. 11 and 12.
“Korea will host the G20 at a difficult time,” he said. “It has become a much more important event than first thought as international cooperation has become of greater importance.”
The international tension on economic policies is expected to reach a climax at the summit as a general meeting of the International Monetary Fund (IMF) recently came to a close without any clear solutions to thorny issues, such as the reform of IMF governance and exchange rate rebalancing.
“To be honest, I’m very anxious,” President Lee said, noting that Korea will be judged based on the outcome of the summit. “Korea’s national prestige may soar or plummet.”
Lee said he wants the world to remember the G20 Seoul Summit for decades and praise Korea’s role in laying out the foundation for sustainable growth of the global economy.
Staggering' conditions on accused G20 ringleader
Alex Hundert’s words will not appear in this story.
Unlike other Canadians, he’s not allowed to speak to the press.
At least that’s how a court interpreted the new bail conditions placed on Hundert, an accused ringleader of violence during the G20 summit in June.
“It’s staggering in its breadth,” said John Norris, Hundert’s lawyer. “I’ve never heard of anything as broad as that.”
Hundert, 30, faces three counts of conspiracy pertaining to G20 activities, and was released in July on $100,000 bail with about 20 terms, including not participating in any public demonstration.
Shortly after his release, the Crown filed an appeal to revoke his bail. Superior Court Justice Todd Ducharme ruled against that appeal.
On Sept. 17, shortly after Ducharme’s decision, Hundert was arrested for participating in a panel discussion at Ryerson University — which police deemed to be a public demonstration.
On Wednesday Hundert agreed to the new, more stringent, bail conditions.
They include a clarification of the no-demonstration rule, to include a restriction on planning, participating in, or attending any public event that expresses views on a political issue.
Justice of the Peace Inderpaul Chandhoke told the court the new conditions also restrict Hundert from speaking to the media.
“I’ve never seen that before,” said Norris, who plans to appeal Hundert’s initial arrest for breach of bail conditions, as well as the newest rules put on his client.
Alan Young, a law professor at Osgoode Hall, says bail conditions are meant to prevent crimes from being committed — and a person’s rights can be infringed upon to a “reasonable” extent to ensure public safety.
But in this case, Young says, the court has gone too far.
“It’s basically putting a gag order on a citizen of Canada, when it’s not clear that the gag order is at all necessary to protect public order,” he said, of Hundert’s restriction from speaking to the media.
“People have to be able to air grievances, and the media is a primary tool in which people can air grievances effectively.”
Young called the strict bail conditions “astonishing” — something unheard of in modern-day Canada.
“It really seems to be a very severe deprivation of rights,” he said. “I’d be very curious to see how a higher court will respond.”
Nathalie Des Rosiers, of the Canadian Civil Liberties Association, says they plan to write the Attorney General in Hundert’s defence.
“Speaking to the media does not threaten public safety,” she said. “These bail conditions are only aimed at silencing speech.”
Unlike other Canadians, he’s not allowed to speak to the press.
At least that’s how a court interpreted the new bail conditions placed on Hundert, an accused ringleader of violence during the G20 summit in June.
“It’s staggering in its breadth,” said John Norris, Hundert’s lawyer. “I’ve never heard of anything as broad as that.”
Hundert, 30, faces three counts of conspiracy pertaining to G20 activities, and was released in July on $100,000 bail with about 20 terms, including not participating in any public demonstration.
Shortly after his release, the Crown filed an appeal to revoke his bail. Superior Court Justice Todd Ducharme ruled against that appeal.
On Sept. 17, shortly after Ducharme’s decision, Hundert was arrested for participating in a panel discussion at Ryerson University — which police deemed to be a public demonstration.
On Wednesday Hundert agreed to the new, more stringent, bail conditions.
They include a clarification of the no-demonstration rule, to include a restriction on planning, participating in, or attending any public event that expresses views on a political issue.
Justice of the Peace Inderpaul Chandhoke told the court the new conditions also restrict Hundert from speaking to the media.
“I’ve never seen that before,” said Norris, who plans to appeal Hundert’s initial arrest for breach of bail conditions, as well as the newest rules put on his client.
Alan Young, a law professor at Osgoode Hall, says bail conditions are meant to prevent crimes from being committed — and a person’s rights can be infringed upon to a “reasonable” extent to ensure public safety.
But in this case, Young says, the court has gone too far.
“It’s basically putting a gag order on a citizen of Canada, when it’s not clear that the gag order is at all necessary to protect public order,” he said, of Hundert’s restriction from speaking to the media.
“People have to be able to air grievances, and the media is a primary tool in which people can air grievances effectively.”
Young called the strict bail conditions “astonishing” — something unheard of in modern-day Canada.
“It really seems to be a very severe deprivation of rights,” he said. “I’d be very curious to see how a higher court will respond.”
Nathalie Des Rosiers, of the Canadian Civil Liberties Association, says they plan to write the Attorney General in Hundert’s defence.
“Speaking to the media does not threaten public safety,” she said. “These bail conditions are only aimed at silencing speech.”
G20 plans for 'too big to fail' banks
The Group of 20 leading economies (G20) meets in Seoul next month to agree a package of measures targeted at "too big to fail" banks.
The aim is to ensure that if any of the world's 30 or so "systemically important" lenders get into trouble, they can be dealt with quickly, at no cost to the taxpayer and without disrupting the broader financial system as well.
It is part of the G20's wider efforts to learn from the financial crisis that forced governments to stump up trillions of dollars to shore up banks.
Who is drafting these measure
The G20 has tasked the Financial Stability Board (FSB), made up of central bankers, regulators and treasury officials from its member countries, to draft the package.
The FSB meets in South Korea next week to finalise it.
Last year the FSB published an interim report on reducing the moral hazard posed by systemically important financial institutions or SIFIs in G20 jargon.
It outlines steps G20 countries could take within a "constrained discretion" framework, meaning a member country would have to show it was implementing enough measures listed to achieve the overall outcome for any SIFIs on its patch.
The Basel Committee of supervisors and central bankers from G20 countries agreed last month that SIFIs must hold additional "loss absorbing capacity" above new minimum global capital requirements known as Basel III being introduced from 2013.
What couild the package include
So far the FSB, regulators and policymakers have indicated several measures are likely:
capital surcharge: one idea is to force big banks to hold a capital buffer on top of Basel III.
contingent capital or CoCos, a bond that converts into equity when an agreed trigger point is hit as a bank gets into trouble.
creditor bail-ins: a bank's creditors agree in advance to have a restructuring imposed on them if the firm hits the skids so that the bonds they hold turn into equity.
more intensive supervision of bigger banks and more consistent supervision among different regulators.
resolution and "living wills": each country would be required to set up a mechanism for winding down collapsing banks efficiently to minimise disruption and uncertainty.
structural changes: if resolution mechanisms or living wills won't work because a bank is too complicated then structural changes should be considered.
Is a deal expected?
Yes and no.
G20 leaders will likely give general endorsement to the FSB package but say more work is needed to flesh them out -- a way of masking fundamental disagreements over some sections.
Countries are expected to select from the "menu" in the package but no item would be mandatory for everyone. This will be described as tailoring to an individual countries situation.
This is because some countries like Britain, the United States and Switzerland are sympathetic to a mandatory capital surcharge but Germany, France and Japan are against this.
A meeting of the Basel Committee, which would flesh out a surcharge to fit in with Basel III, failed to reach a consensus on this last month. Without everyone introducing a surcharge, some banks would end up disadvantaged.
Regarding CoCos, some countries like Switzerland and Britain are more sympathetic to their use but German and Spanish regulatory officials doubt how well they would work in a crisis.
There are also doubts if investors have an appetite for such hybrid debt and there is also debate over exactly when would the conversion to equity take place.
Structural remedies are also controversial. The United States has approved a Volcker Rule that requires some types of banks to spin off proprietary trading desks and hedge fund operations so that deposits are not at risk. European Union countries have opposed such a rule.
There is also disagreement over how banks should be wound up with US plans allowing parts of a failing bank to continue operating meeting with scepticism in Europe. Some regulators also say it may take many years to reach a foolproof way that can resolve cross-border banks, which are typically SIFIs.
The aim is to ensure that if any of the world's 30 or so "systemically important" lenders get into trouble, they can be dealt with quickly, at no cost to the taxpayer and without disrupting the broader financial system as well.
It is part of the G20's wider efforts to learn from the financial crisis that forced governments to stump up trillions of dollars to shore up banks.
Who is drafting these measure
The G20 has tasked the Financial Stability Board (FSB), made up of central bankers, regulators and treasury officials from its member countries, to draft the package.
The FSB meets in South Korea next week to finalise it.
Last year the FSB published an interim report on reducing the moral hazard posed by systemically important financial institutions or SIFIs in G20 jargon.
It outlines steps G20 countries could take within a "constrained discretion" framework, meaning a member country would have to show it was implementing enough measures listed to achieve the overall outcome for any SIFIs on its patch.
The Basel Committee of supervisors and central bankers from G20 countries agreed last month that SIFIs must hold additional "loss absorbing capacity" above new minimum global capital requirements known as Basel III being introduced from 2013.
What couild the package include
So far the FSB, regulators and policymakers have indicated several measures are likely:
capital surcharge: one idea is to force big banks to hold a capital buffer on top of Basel III.
contingent capital or CoCos, a bond that converts into equity when an agreed trigger point is hit as a bank gets into trouble.
creditor bail-ins: a bank's creditors agree in advance to have a restructuring imposed on them if the firm hits the skids so that the bonds they hold turn into equity.
more intensive supervision of bigger banks and more consistent supervision among different regulators.
resolution and "living wills": each country would be required to set up a mechanism for winding down collapsing banks efficiently to minimise disruption and uncertainty.
structural changes: if resolution mechanisms or living wills won't work because a bank is too complicated then structural changes should be considered.
Is a deal expected?
Yes and no.
G20 leaders will likely give general endorsement to the FSB package but say more work is needed to flesh them out -- a way of masking fundamental disagreements over some sections.
Countries are expected to select from the "menu" in the package but no item would be mandatory for everyone. This will be described as tailoring to an individual countries situation.
This is because some countries like Britain, the United States and Switzerland are sympathetic to a mandatory capital surcharge but Germany, France and Japan are against this.
A meeting of the Basel Committee, which would flesh out a surcharge to fit in with Basel III, failed to reach a consensus on this last month. Without everyone introducing a surcharge, some banks would end up disadvantaged.
Regarding CoCos, some countries like Switzerland and Britain are more sympathetic to their use but German and Spanish regulatory officials doubt how well they would work in a crisis.
There are also doubts if investors have an appetite for such hybrid debt and there is also debate over exactly when would the conversion to equity take place.
Structural remedies are also controversial. The United States has approved a Volcker Rule that requires some types of banks to spin off proprietary trading desks and hedge fund operations so that deposits are not at risk. European Union countries have opposed such a rule.
There is also disagreement over how banks should be wound up with US plans allowing parts of a failing bank to continue operating meeting with scepticism in Europe. Some regulators also say it may take many years to reach a foolproof way that can resolve cross-border banks, which are typically SIFIs.
10/07/2010
S.Korea Lee: G20 needs coordination on forex policy
Oct 7 (Reuters) - South Korean President Lee Myung-bak said on Thursday that foreign exchange policy was among the issues on which G20 economies needed to discuss coordination at next month's summit here.
"The world must coordinate, and in that context (countries) need to discuss international coordination on various pending issues including foreign exchange at the G20 Seoul summit," a statement from his office quoted Lee as saying at a lunch with advisers to Seoul.
Lee will chair the Nov. 11-12 summit of the Group of 20 developed and leading emerging economies. (Reporting by Yoo Choonsik; Additional reporting by Cheon Jong-woop; Editing by Chris Lewis)
"The world must coordinate, and in that context (countries) need to discuss international coordination on various pending issues including foreign exchange at the G20 Seoul summit," a statement from his office quoted Lee as saying at a lunch with advisers to Seoul.
Lee will chair the Nov. 11-12 summit of the Group of 20 developed and leading emerging economies. (Reporting by Yoo Choonsik; Additional reporting by Cheon Jong-woop; Editing by Chris Lewis)
France to seek G20 global monetary overhaul
By Jan Strupczewski and David Lawder
WASHINGTON, Oct 7 (Reuters) - France will start talks on overhauling the global monetary system during its G20 presidency to improve policy coordination and stem capital flows distorting exchange rates, Economy Minister Christine Lagarde said on Thursday.
France will take over the chair of the Group of 20 biggest developed and developing economies in November for the next 12 months at a time when many countries want to prevent their currencies from strengthening in order to help economic recovery.
"The international monetary system ... as it stands at the moment does not seem to be particularly effective," Lagarde said in a speech to the Carnegie Endowment, a Washington think tank. French President Nicolas Sarkozy has made similar comments.
"If you look at the variation of currencies that are taking place ... if you look at the liquidity that moved around without much control in some cases, if you look at capital flows in and out of developing countries in particular, clearly there is an issue," she said.
"If you look additionally at the latest moves that are taking place, whether from Brazil or from Japan for instance, let alone from China, you really wonder what kind of coordination there is," she said.
Brazil doubled the tax on foreign purchases of its paper to curb foreign capital inflows into its treasuries and stem the rise of the value of its real currency.
Japan intervened in currency markets last month to weaken the yen, which drew criticism from Europe that the move had not been coordinated as in the past.
Without referring specifically to currency intervention, Lagarde said France would seek to improve policy coordination.
"(There) is a need to coordinate, and coordinate better, because decisions that are unilateral are not going to be as efficient as if they were made, as in the past, on a much more concerted basis," she said.
China has long been keeping its yuan currency undervalued against the dollar and the euro to give its export-driven economy a competitive advantage, drawing fire from both the United States and the euro zone.
"So our purpose with this thinking process is that we want to kick-start it, without drawing a conclusion from the start, and without being quite certain that we will be somewhere before the end of the year," Lagarde said.
She indicated France would seek a discussion to widen the number of currencies in which investors can park funds, possibly through a bigger role of the International Monetary Fund's internal accounting unit called Special Drawing Rights, or SDR.
"Today there is a clear lack of diversification which induces in itself a level of risk that is associated with the currency variation," Lagarde said. "There are a lots of alternatives."
She said the G20 may not be the ideal forum for discussions on currency levels, but there was no other obvious grouping for such talks.
Lagarde also said France wanted to study commodity market organization, including the "massive financialization" of agricultural products markets through derivatives.
Source: http://www.reuters.com/
WASHINGTON, Oct 7 (Reuters) - France will start talks on overhauling the global monetary system during its G20 presidency to improve policy coordination and stem capital flows distorting exchange rates, Economy Minister Christine Lagarde said on Thursday.
France will take over the chair of the Group of 20 biggest developed and developing economies in November for the next 12 months at a time when many countries want to prevent their currencies from strengthening in order to help economic recovery.
"The international monetary system ... as it stands at the moment does not seem to be particularly effective," Lagarde said in a speech to the Carnegie Endowment, a Washington think tank. French President Nicolas Sarkozy has made similar comments.
"If you look at the variation of currencies that are taking place ... if you look at the liquidity that moved around without much control in some cases, if you look at capital flows in and out of developing countries in particular, clearly there is an issue," she said.
"If you look additionally at the latest moves that are taking place, whether from Brazil or from Japan for instance, let alone from China, you really wonder what kind of coordination there is," she said.
Brazil doubled the tax on foreign purchases of its paper to curb foreign capital inflows into its treasuries and stem the rise of the value of its real currency.
Japan intervened in currency markets last month to weaken the yen, which drew criticism from Europe that the move had not been coordinated as in the past.
Without referring specifically to currency intervention, Lagarde said France would seek to improve policy coordination.
"(There) is a need to coordinate, and coordinate better, because decisions that are unilateral are not going to be as efficient as if they were made, as in the past, on a much more concerted basis," she said.
China has long been keeping its yuan currency undervalued against the dollar and the euro to give its export-driven economy a competitive advantage, drawing fire from both the United States and the euro zone.
"So our purpose with this thinking process is that we want to kick-start it, without drawing a conclusion from the start, and without being quite certain that we will be somewhere before the end of the year," Lagarde said.
She indicated France would seek a discussion to widen the number of currencies in which investors can park funds, possibly through a bigger role of the International Monetary Fund's internal accounting unit called Special Drawing Rights, or SDR.
"Today there is a clear lack of diversification which induces in itself a level of risk that is associated with the currency variation," Lagarde said. "There are a lots of alternatives."
She said the G20 may not be the ideal forum for discussions on currency levels, but there was no other obvious grouping for such talks.
Lagarde also said France wanted to study commodity market organization, including the "massive financialization" of agricultural products markets through derivatives.
Source: http://www.reuters.com/
10/04/2010
Analysis: Sarkozy gambles on China in G-20 forex drive
(Reuters) - French President Nicolas Sarkozy is gambling on drawing China into a multilateral dialogue on currency stability as the centrepiece of his forthcoming presidency of the G20 economic leadership forum.
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