SEOUL, South Korea — The world’s economies stand on the brink of a trade war as leaders of rich and emerging nations gather in Seoul.
A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession.
Hopes had been high that the Group of 20, which includes wealthy nations such as Germany and the U.S. and rising giants such as China, could be a forum to forge a lasting global economic recovery. But so far, G20 countries haven’t agreed on an agenda, let alone solutions to the divisive problems.
G20 leaders were expected to issue a communique detailing results of the summit today.
The delegates have clashed in particular over the value of their currencies. Some countries, such as the United States, want China to let the value of the yuan, rise. That would make Chinese exports costlier abroad and make U.S. imports cheaper for the Chinese to buy. And it would shrink the United States’ trade deficit with China, which is on track this year to match its 2008 record of $268 billion.
But other countries are irate over the Federal Reserve’s plans to pump $600 billion into the sluggish American economy. They see that move as a reckless and selfish scheme to flood markets with dollars, driving down the value of the U.S. currency and giving American exporters an advantage.
For now, the G20 countries are expected to agree on noncontroversial issues, such as an anti-corruption initiative. But they’re finding no common ground on the most vexing problem: how to address a global economy that has long been nourished by huge U.S. trade deficits with China, Germany and Japan.
Exports to the United States powered those countries’ economies for years. But they’ve also produced enormous trade gaps for the U.S. because Americans consume far more in foreign goods and services than they sell abroad.
President Barack Obama told fellow leaders that the U.S. cannot just keep borrowing lavishly and sending its money overseas. It needs other countries to buy more exports from the United States and elsewhere so Americans can afford to buy other countries’ goods, he said.
“The most important thing that the United States can do for the world economy is to grow because we continue to be the world’s largest market and a huge engine for all other countries to grow,” Obama said at a news conference in Seoul.
