G-20, the APEC yield little to correct the imbalances stem outflow concerns

The leaders of the world's biggest economies ended four days of talks without taking decisive action to address global imbalances that have fueled asset bubbles and the risk that leads to a protectionist backlash.

Asia-Pacific leaders in Japan yesterday pledged to take "concrete steps" toward creating a regional free trade agreement, without setting a target to achieve that goal. The meeting followed the November 11 to 12 Group of 20 in Seoul that "the actions of opposing trade protectionism," while failing to agree on a remedy to the distortions of trade and investment.

The officers entered the G-20 pledged to reduce global trade friction by agreeing not to weaken its currency to boost exports. Once there, the U.S. and China took turns blaming others for the exchange rate policy, with President Barack Obama calling the yuan "undervalued" and the Chinese authorities saying monetary easing by the Federal Reserve was undermining the dollar.

"The problem that people really care about the effects of U.S. monetary policy in terms of capital flows, addressed almost all," said Uwe Parpart, chief economist and Asia strategist at Cantor Fitzgerald HK Markets Capital. A solution that does not involve boosting domestic demand in China and the U.S. increased savings "refers to the symptoms, not the real cause," he said.

U.S., China Positions

Hu indicated that there was no change in monetary policy of their country in a November 13 speech, adding that the pressure for quick reforms "will not make a good international cooperation." The same day, National Security Adviser Thomas Donilon told reporters that the U.S. wants China to let the yuan rise more before Hu Jintao visits Washington in January.

Obama flew home yesterday after a 10-day trip designed to support its goal of doubling exports in five years. Pressed Hu to allow the yuan to strengthen at a 80 - minute meeting on November 11 that China has a record trade surplus with the U.S. $ 28,000,000,000 in August the biggest criticism that his government is keeping a lid on the currency unfair.

Yuan forwards fell after the summit, with the central bank set its daily reference rate weaker for the first time in five days. Delivery within twelve months fell 0.1 percent to 6.4595 per dollar as of 9:45 am in Hong Kong, reflecting the currency bets strengthened 2.75 percent in a year from spot rate of 6.6373.

China forex reserves

The yuan, also known as renminbi, has risen about 3 percent against the dollar since June 19, when China scrapped its two-year parity. China has 2.65 trillion U.S. dollars of foreign currency reserves, more than double any other country.

"The pressure from the U.S. is more likely to result in not so subtle threats about the dollar's reserve status," said Paul Donovan, deputy head of global economics at UBS AG in an email yesterday. "It is unlikely to accelerate the process of revaluation of the renminbi."

Obama told reporters after the G-20 that the Federal Reserve plan to buy an additional $ 600 billion of Treasuries was designed to boost growth. He said a stronger economy would help the U.S. reduce the budget deficit which reached 1.294 trillion U.S. dollars in the fiscal year ended September 30, surpassed only by the deficit of $ 1,415,000,000,000 in 2009.

Ireland debt concerns

The fragility of the global financial situation was underlined by concerns about debt in Ireland. The country is in talks with European officials on "market conditions" as Germany pushed to accept a ransom. The International Monetary Fund is ready to help Spain if necessary, Managing Director, Dominique Strauss-Kahn said November 13 in the APEC.

The G-20 statement said that emerging markets face a wave of capital flows can take regulatory action to address, providing coverage to limit currency fluctuations and stem asset bubbles. Finance ministers of the G-20 will work next year on a set of indicative guidelines call designed to identify the major economic imbalances and the necessary actions to solve them, the leaders said in a statement.

"The decision to create a framework is a useful step, because it can show the relative importance of imbalances in each country and provide an indication that adjustments should be done," said central bank governor of the Philippines, Amando Tetangco in a phone message yesterday.

APEC

Leaders of 21 APEC economies, which represent over 50 percent of the global economy and nearly 45 percent of their trade, said the region "is recovering from the recent economic and financial crisis, but uncertainty remains. " Echoing the G-20 of the statement, the group called for greater exchange rate flexibility, and warned against volatile movements in the currency market that can disrupt economic growth.

"We will move towards more market-determined rate of change" and "refrain from competitive devaluation of currencies," said the statement. Developed countries will remain vigilant to "help mitigate the risk of volatility in capital flows to some emerging market economies."

"The APEC meeting was overshadowed by the G-20, where countries were divided on the yuan and other policies of the coin," said Koji Murata, a professor of international relations at Doshisha University in Kyoto. "The result was vague and lacking in substance."

Trade Negotiations

U.S. pushed for the completion of the Trans-Pacific Partnership nine countries next year's meeting of APEC in Honolulu, the sales representative, Ron Kirk, said yesterday in an interview in Yokohama, Japan. That set the stage for a broader agreement that includes China, he said.

Obama on 13 November, said "well received" interest of Japan to join talks on the PCC, which would be the biggest U.S. trade deal since 1994 Free Trade Agreement with Canada and Mexico. The talks now include the U.S., Australia, Singapore, New Zealand, Brunei, Chile, Vietnam, Peru and Malaysia.

Japanese Prime Minister Naoto Kan, who favors talks to join the TPP, faces resistance within his own party amid a backlash from farmers who benefit from tariff protection. His Cabinet last week agreed to start preliminary talks only about the negotiations.

"We just want to keep the foot to the pedal and see how far you can go to close by the time they convene next year," Kirk said, adding that five rounds of talks is scheduled for 2011. "What we are creating will ultimately become the Free Trade Agreement of Asia-Pacific."