G-20 Summit Concludes without Much Resolution on Important Issues

Sources:
BBC: G20 to Tackle US-China Currency Concerns
Wikipedia: G20 Major Economies
Republic of Korea G20 Website: What is the G20?
Christian Science Monitor: Curtain Closes on G20 Summit
The Financial Times: G20 Shuns US on Trade and Currencies

The G-20 Summit in Seoul, South Korea came to a close last week. The G-20 group consists of the European Union along with the 19 countries that comprise the world’s leading economies. The countries are usually represented by their finance ministers and governors of central banks, and in more recent times, by the heads of state. Since 2008, the G-20 group has replaced the G-8 as the main global economic forum, mainly in response to the global financial crisis, but also in recognition of the need to include emerging countries in discussions about the global economy. The G-20 group represents two-thirds of the global population, 80% of all global trade, and 85% of the global gross national product. The group’s purpose is to address issues involving global economic stability and growth, as well as global development.

Tensions were high coming into the Summit because of the impending currency war between the United States and China. (See Currency Wars). During the Summit, the G-20 failed to reach any agreement concerning the “currency imbalances.” The G-20 Summit declaration did state that the world should move towards “more market-determined exchange rate systems” in order to enhance “exchange rate flexibility to reflect underlying economic fundamentals” and avoid “competitive devaluation” of global currencies. The declaration, which relied on G-20 existing policies, was well short of what the United States wanted– China to revalue its currency that would limit the United States’ trade deficits.

Because of the vast impact currencies and trade have on the global economy and the tensions going into a summit, it was unlikely China and the United States could reach an agreement; the Summit seemed doomed to fail. Indeed, many critics have categorized the 2010 G-20 Summit in Seoul as a failure. However, despite the G-20 group’s failure to resolve any of the major issues concerning the currency wars and imbalances of global trade, the group made some important progress. G-20 leaders did agree on the procedures that will increase emerging countries’ influence on the International Monetary Fund. Additionally, the G-20 group approved the Basel III standards on bank capital and liquidity. However, this progress may not be enough; many experts fear that without any resolution on the issues of trade and currency imbalances, the conflict between the United States and China will only escalate further and hinder global growth.

Discussion:
1. Was the G-20 Summit doomed to fail?
2. Why would the G-20 Summit rely on previous language and existing policies, rather than try to craft new ones?