SEOUL, South Korea – President Barack Obama, arriving here Wednesday for a two-day economic summit, is seeking to bolster the sagging U.S. economy by negotiating fundamental changes in the global economy.
But he faces increased resistance to his calls for trade and currency changes because, at least for now, what’s good for the United States at the moment may not be good for some of the other economic giants, including China and Germany.
While the U.S. economy still struggles to recover from recession, some of its chief competitors are growing briskly again and in no mood to sacrifice on Washington’s behalf. In particular, they are increasingly outspoken against rapid action on currency reform. Obama’s hand has been further weakened by the Federal Reserve’s move to pump billions of dollars into the U.S. financial system.
The central bank’s goal is to spur growth by making financing cheaper. As a byproduct, if the value of the dollar declined further, U.S. products could become more competitive in world markets – a prospect that exporting juggernauts such as China and Germany do not welcome.
As a result, the Group of 20 heads are meeting at a critical juncture: After cooperating to avert a global economic collapse, they are riven by deep divisions as they turn to the task of charting course for the post-recession period.
“For the past quarter century, U.S. consumers have powered the growth in the global economy,” said Mark Zandi, chief economist at Moody’s Analytics. After the recession, “that is over,” he said. “But that transition, that global rebalancing, is very difficult. It’s a long process.”
Obama’s mantra at the G-20 table is that future global growth will depend on a rebalancing of global trade, which means other countries should buy more of their own products at home – and import more – while selling less to over-indebted Americans.
Although G-20 leaders nod that a rebalancing is needed in the long run, they don’t all share Obama’s urgency. Embracing Obama’s prescription right now would likely mean slowing down the economies of the major exporting countries – something their leaders are loath to do.