Obama, rebuffed at summit, takes parting shot at China

McClatchy NewspapersNovember 12, 2010 

SEOUL, South Korea — Rebuffed by leading economic powers that wouldn't back his call for a plan to end global trade imbalances, President Barack Obama Friday lashed out at China over what much of the world thinks is currency manipulation to give it a home field advantage.

"The issue of the (yuan) is one that is an irritant not just to the United States, but is an irritant to a lot of China's trading partners and those who are competing with China to sell goods around the world," Obama told reporters at the end of a conference by the group of 20 leading and developing countries.

"It is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued," he said.

It was the harshest tone Obama has taken toward the world's second biggest economy behind the U.S., and came against a backdrop of Democrats on Capitol Hill pushing legislation that would label China a currency manipulator so that the U.S. can bring trade complaints.

Until now, the administration has been loath to charge China with undervaluing its currency to give an unfair trade advantage to its manufacturers — not only because Beijing is a major holder of U.S. debt, but also because it represents a vast burgeoning market that may hold the key to boosting U.S. exports. In addition, China could take retaliatory measures.

Obama and Treasury Secretary Timothy Geithner had hoped to push their call for restoring balance in world trade, during the two day Seoul talks, seeing a "rebalancing" as crucial for creating more U.S. jobs.

However, the final communique of the G20 conference contained only general language and a call for future review on two major areas — stopping export-oriented countries from devaluing their currency and establishing warning levels for nations' deficit and surplus levels.

White House officials described the document as a step in the right direction, but coming after Obama's inability to break the earlier impasse over a free trade agreement with South Korea, it added up to a modest advance if any.

The bruising series of meetings suggested that as the U.S. struggles to exit its economic downturn, and emerging economies continue to post big growth, the ability of U.S. leaders to push through the U.S. agenda on the world stage has been clipped.

"We have had outsized influence over world affairs for a century now," Obama told reporters. "And you are now seeing a situation in which a whole host of other countries are doing very well and coming into their own, and naturally they are going to be more assertive in terms of their interests and ideas."

Although Obama described that development as "a healthy thing," the G20 highlighted the tensions between the United States and China.

Many U.S. officials contend that China's decision to keep the value of the yuan low — some studies say by 20 percent versus the dollar — has both hampered the U.S. economy and fueled global trade disparities.

There'd been little expectation of big announcements about currency, because the Chinese government has made it clear it won't revalue quickly, and though the communique said the G20 nations agreed there should be a move toward market-driven exchange rates it gave no indication of when or how that might happen.

The communique was similarly vague about the issue of countries adopting targets to keep deficits and surpluses within a set percentage of their Gross Domestic Product.

The document cited a need for "indicative guidelines" to counter "persistently large imbalances," but it included no actual figures. Instead, the G20 leaders agreed to continue mulling the matter over "with progress to be discussed by our Finance Minister and Central Bank Governors in the first half of 2011."

Speaking with Canadian reporters, Prime Minister Stephen Harper noted: "I think it's fair to say we did not resolve those issues here."

A senior Obama official who met with reporters on the G20 sidelines, speaking on the condition of anonymity to give him more room to comment, repeated the administration line that the communique is imperfect but a good start.

"Of course ... the ultimate test over time is do countries actually change their policies at a pace and a level that increases the odds that we get stronger growth. So you won't know until you see how this develops over time," the official said. "But you have to start with the basic framework of consensus. And we think we achieved that."

The official added: "You've got to live in the real world."

China and Germany, the world's largest exporters, had signaled early on that they're unenthusiastic about adopting specific guidelines for trade balances. They repeatedly criticized the U.S. Federal Reserve's decision this month to buy $600 billion of Treasury bonds, saying the move was intended to lower the dollar and help American exports.

An article carried by Xinhua, the Chinese state newswire, said Friday that after the Fed move there were growing "concerns . . . about the stability of the U.S. dollar as a global reserve currency."

Still, Obama and his team said the G20 meeting should be viewed in the longer term.

The communique and its 38 pages of plans included agreement on revamping the International Monetary Fund to give emerging markets more of a voting share and a bigger presence on the IMF's executive board — the result of discussions at earlier G20 meetings. It also called for a long list of measures such as support for free trade, tax overhauls in developing countries and anti-corruption efforts — though without any powers of enforcement, the statements were more suggestions than edicts.

"We should not anticipate that every time countries come together that we are doing some revolutionary thing," Obama told reporters. "Instead of hitting home runs, sometimes we're going to hit singles. But they're really important singles."

Soon after, Obama said he had to leave to catch a plane — he was headed to Japan for the Asia-Pacific Economic Cooperation summit. So was Chinese President Hu Jintao.

(Kevin G. Hall contributed to this article from Washington.)

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McClatchy Newspapers 2010

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