The U.S. wants emerging markets to show progress toward greater flexibility in their exchange rates at the Group of 20 summit next week, said Lael Brainard, the Treasury Department’s undersecretary for international affairs.
“We’re going to look for more progress on the part of key emerging market economies in moving to market-determined exchange rates based on economic fundamentals,” Brainard said today at a briefing at the White House. She said exchange rates must be tackled by the G-20 as a group, so that some countries don’t bear an “unfair burden” of letting their currencies rise while other nations stay on the sidelines.
Still, the Obama administration doesn’t expect to resolve its differences with China over currency at the meeting in Seoul, Michael Froman, President Barack Obama’s deputy national security adviser, said at the briefing.
Currency disputes are set to dominate the G-20 summit, which begins Nov. 11. Obama and China’s President Hu Jintao are scheduled to meet one-on-one on the opening day, with currency and the balance of trade between the two countries on the agenda.
China is being urged by major trading partners, including the U.S. and Europe, to let its currency appreciate faster. In the U.S., the administration is under pressure from Congress to combat what the U.S. says is an undervalued yuan that gives Chinese exporters an advantage.
The yuan was 0.3 percent weaker at 6.6906 per dollar today, the biggest decrease since the two-year peg to the dollar was removed in June.
China has curbed the yuan’s rise to about 2 percent against the dollar since the pledge to introduce more flexibility, arguing anything other than a gradual appreciation could cause social and economic disruption. The U.S. also is pushing China to reduce its reliance on exports.
“There are a whole host of policies that China will be undertaking, and should be undertaking, to rebalance its demand toward domestic sources of growth. And those are very important in this framework,” Brainard said.
The U.S. will press the G-20 to add details to the agreement on trade imbalances that finance ministers and central bankers reached in Gyeongju, South Korea, last month. Brainard said the U.S. wants to add “flesh on the bones” of the deal, such as specific guidelines on how to determine when a trade deficit or surplus is unsustainable.
Current Account Goal
The U.S. doesn’t think “a target is appropriate,” she said, when asked whether Obama would push for an across-the- board current account goal. Instead, she said the U.S. will seek a “range of sustainability” that, if exceeded, would trigger “an attempt to look for what kinds of corrective actions can be taken.”
In addition to the currency and trade balance issues, Obama also will press ahead with efforts to finish a free-trade agreement between the U.S. and South Korea. Froman said U.S. negotiators were still struggling on talks with Congress, industry and their South Korea counterparts on contentious issues, including autos and beef.
“Those discussions are under way,” Froman said. “I can’t predict at this point how they will proceed, but we’re going to put every effort into achieving an acceptable agreement, a satisfactory agreement, by the time the president comes to Seoul.”
The free-trade pact, which was signed by the two countries in 2007 but never implemented because of opposition in Congress, has been reopened.
In the current talks, the U.S. is urging that South Korea accept American car safety and emissions standards, on vehicles sold in that country. Ford Motor Co. and the United Auto Workers say South Korea has used tax and regulatory barriers to block sales of U.S. automobiles in that country.
If a deal is reached and approved by Congress, it would be the largest free-trade accord since the North American Free Trade Agreement in 1994, and may help Obama achieve his goal of doubling U.S. exports in five years.