The United States wants Group of 20 finance chiefs to commit to allowing market forces to set currency values and will discuss using targets for trade to measure progress, a senior U.S. Treasury Department official said on Wednesday.
Ahead of weekend G-20 meetings in Gyeongju, South Korea, the U.S. official made clear Washington wants currency levels to be a focal point of the meetings and sees current account surpluses and deficits a vital part of the discussion.
"It's something that we think will be front and central in our conversations this weekend and going forward is how the G-20 can play an effective role in helping to undergird cooperation on these exchange rate issues and these external sustainability issues which are inherently matters for multilateral cooperation," the official told a news briefing.
U.S. Treasury Secretary Timothy Geithner leaves on Wednesday for the gathering of G-20 finance ministers and central bank governors where global currency tensions are expected to get a thorough airing as many countries take steps to keep their currencies from rising.
China was not mentioned by name at the U.S. briefing. But the United States and others are unhappy China, which now has the world's second largest economy, is reluctant to let its yuan currency appreciate more rapidly and is piling up huge trade surpluses and foreign exchange reserves.
The official said the United States was willing to save more by strengthening exports but others had to cooperate in permitting global economic imbalances to correct by allowing their currencies to rise in value.
Asked if China might be more willing to discuss current account targets — possibly that a country's current account should not exceed some agreed percentage of national output — than exchange rates, the U.S. official first suggested asking China but then stated the United State's opinion.
"From our perspective we believe these issues are fundamentally, inherently linked and that it is important for the G-20 to be able to undertake cooperative action facilitating orderly adjustment of imbalances and also ensuring more effective adjustment of exchange rates in line with economic fundamentals," the official said.
"So, we think those things are quite related and both important goals for the G-20."
The U.S. official's comments implied that Geithner will try to rally support within the G-20 for more unity around the necessity for letting currencies appreciate though it remains unclear whether any specific agreement will be possible.
"In terms of what we think would be appropriate and would be important at this juncture within the G-20 is to emerge with a clear commitment to cooperate to facilitate and not impede orderly current account adjustments ... (and) on the part of emerging market surplus countries, to facilitate and not impede exchange appreciation in response to market forces while working to reduce the risks of capital volatility," the official said.
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