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Geithner Backpedals on Trade Imbalance Target

Sunday, 07 Nov 2010 02:51 PM

So does the United States want a numerical target for trade imbalances or not?

The question was thrown at U.S. Treasury Secretary Timothy Geithner from multiple angles on Saturday after a meeting of finance chiefs from the Asia-Pacific Economic Cooperation countries.

The answer, roughly: No, but we're still working on it.

Geithner denied widespread reports among media that the United States was pushing for Group of 20 leaders in Seoul to endorse a plan next week to limit their countries' current account surpluses and deficits to about 4 percent of gross domestic product.

"That is not our intention," Geithner told Japanese newspaper reporters. "What our intention is, is to keep trying to build support for this and to allow the experts to do the detailed hard work, to build a framework that people will have some confidence in over time.

"There's nothing on the table except for 'indicative guidelines,'" he added.

APEC finance ministers in a statement after the meeting endorsed language agreed by the G20 finance ministers last month in Gyeongju, South Korea, to maintain current account imbalances at sustainable levels as a means to promote balanced growth.

The United States wants to establish a method to measure when imbalances can cause problems in the global trading system and become unsustainable. Geithner called it an "early warning system" that might indicate adjustments in policies are needed.

Geithner said one of the other G20 member countries put forward a 4 percent of GDP figure as an idea of where several large countries were headed, including China, which had a current account surplus of around 9 percent of GDP in 2008.

The 4 percent level quickly gained traction in the media. The U.S. Treasury chief himself endorsed that level as a "benchmark for the future" in a Bloomberg Television interview after the Gyeongju meeting.

But in Kyoto, Geithner spent considerable effort distancing himself from a single numerical target for current account imbalances.

At a news conference, he said reducing large external imbalances was "not amenable to limits or targets".

Circumstances are very different for commodity exporting countries or small countries with a large share of trade as a component of GDP, he said.

"How do you judge what's excessive? There is no single number that makes sense for countries across time," he said.

Another senior U.S. Treasury official said later that a lot of technical work needs to be done before "indicative guidelines" for sustainable current account deficits and surpluses can be defined.

There are many factors that will go into defining what is a sustainable path for an economy, including how government policies affect savings and investment decisions and currency movements, among other things.

It is far too soon for G20 heads of state to consider specific language on guidelines for imbalances, the official said.

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So does the United States want a numerical target for trade imbalances or not? The question was thrown at U.S. Treasury Secretary Timothy Geithner from multiple angles on Saturday after a meeting of finance chiefs from the Asia-Pacific Economic Cooperation countries.The...
global,trade,imbalance,g-20,g20,geithner,seoul,apec
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2010-51-07
 

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