Tuesday, February 07, 2023

'We must act together'

by Martin Crutsinger
| June 20, 2010 9:00 PM

WASHINGTON - President Barack Obama is appealing to the world's major economies not to waver in their efforts to support a sustained rebound from the near collapse of the global economic system in the fall of 2008.

"We must act together to strengthen the recovery," Obama said in his letter to other leaders of the Group of 20 major industrial countries, written in advance of next week's summit meeting in Toronto.

But Obama's appeal for unity underscored a number of divisions that have developed between the major powers. Many European nations, rattled by the debt crisis that had engulfed Greece, have started to trim their own budget deficits while China has rejected calls by the United States to allow its currency to rise in value as a way to boost sales of American and other foreign products in China.

Obama referred in an oblique way to those disagreements in the letter, avoiding mentioning other countries by name.

"Our highest priority in Toronto must be to safeguard and strengthen the recovery," he said in the letter, which the White House released on Friday. "We worked exceptionally hard to restore growth; we cannot let it falter or lose strength now."

Obama called on the other nations to "reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong."

The president noted that "significant weaknesses" linger among the major and developing economic powers. He told his summit partners "it is essential that we have a self-sustaining recovery that creates the good jobs that our people need." The White House released a copy of the letter on Friday.

In the letter, Obama said that the June 25-27 summit should also focus on efforts to stabilize public deficits in the "medium term," a reference to the administration's position that governments need to run huge deficits currently to provide the stimulus needed to ensure a sustained recovery but then move in future years to deficit reduction efforts.

But several European nations including Germany, France and Britain are already moving to attack high deficits in an effort to calm global financial markets which have stumbled in recent weeks over concerns that Greece or other highly indebted nations could default on their loans.

Obama is having a tough time making the argument for increased deficit spending at home as well. The Senate has blocked a scaled-down jobs bill with critics complaining that the $120 billion pricetag is still too high.

In his letter to the G-20, Obama said: "I am committed to the restoration of fiscal sustainability in the United States and believe that all G-20 countries should put in place credible and growth-friendly plans to restore sustainable public finances."

"But it is critical that the timing and pace of consolidation in each economy suit the needs of the global economy, the momentum of private sector demand and national circumstances."

The recovery from recession in the United States has been erratic and uneven.

In his letter, Obama also called on his G-20 partners to promote "balanced global demand" and said he remained concerned about the "continued heavy reliance on exports by some countries with already large external surpluses."

While not mentioning China by name, that comment was an obvious reference China's trade surpluses and continued resistance to U.S. demands that it allow its currency, called the renminbi, to rise in value against the dollar.

A stronger Chinese currency and a cheaper dollar would make U.S. goods more competitive in China and provide Chinese consumers with cheaper products. American manufacturers contend that China is manipulating the value of its currency to gain unfair trade advantages and some U.S. lawmakers are pushing legislation to impose stiff penalties on Chinese imports unless Beijing allows its currency to appreciate.

White House spokeswoman Amy Brundage said Friday that the administration will review the status of a long-delayed report on China currency after the G-20 meeting. The report should have been released April 15, by law, but Treasury Secretary Timothy Geithner delayed it to give more time for discussions with the Chinese.

"We will take stock of where we are with the foreign exchange report after the G-20," she said.

The Obama administration is under heavy pressure from Congress to name China a currency manipulator, a designation that would trigger talks between the two countries and could ultimately lead to U.S. trade sanctions against China.

There had been hopes that China would move on the issue before the Toronto summit but on Thursday Chinese Foreign Ministry spokesman Qin Gang told reporters that "we believe it would be inappropriate to discuss the renminbi exchange rate issue in the context of the G-20 meeting."

Qin reiterated the government's position that it would gradually reform its exchange rate policies at a timing of its choosing and not in response to pressure.

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