IMF tackles global trade imbalances

(Source Article: IMF addresses trade imbalances - FT.com)

The US, Europe, Japan, China and Saudi Arabia will cooperate with the IMF’s efforts to resolve problematic trade imbalances in the world. These countries will engage in IMF’s first multilateral consultations on how to deal with the global economy’s trade imbalances in a way that won’t stifle economic growth.

The IMF said these countries were chosen because they had either large current account surpluses or deficits, and also possess a large share of the global economy. China’s surplus doubled in 2005, exceeding 7% of its GDP; Saudi Arabia, the world’s largest oil exporter, had an account surplus at a staggering 28% of GDP in 2005 and will represent oil producing countries and the Middle East—countries which have had the most surplus growth in the past few years.

The trade relation between the US and China is a major factor in itself—without the trade surplus from the US (about $100 billion), China would have a global trade deficit of about 6.25% of its GDP (see US-China trade imbalance).