WASHINGTON – Officials of the world’s major economic powers agreed Saturday to take steps to head off what one nation has warned could become a currency war, but the Obama administration fell short of securing an agreement to correct large trade imbalances threatening the global economy.
Concluding two days of talks in South Korea, Treasury Secretary Timothy F. Geithner and other finance ministers of the Group of 20 leading economies also moved to give emerging nations such as China and India a bigger voice in the International Monetary Fund.
Geithner’s top priority at the talks, before a summit of G-20 leaders next month in Seoul, was to persuade his counterparts to accept a new set of policies and mechanisms aimed at reducing the large U.S. trade and investment deficits while curbing surpluses of China and other countries that have long relied on Americans as the consumers of last resort.
In the wake of the global financial crisis and devastating recession, U.S. officials have pressed harder for export-dependent countries to import more and expand their economies by boosting domestic demand.
The shift, officials contend, is necessary for sustained growth of the global economy and to prevent a recurrence of the worldwide crisis.
While agreeing to the general principles of this framework, some key American allies and trading partners opposed the U.S.-backed proposal to set global curbs on the current account surpluses and deficits of major nations, underscoring the difficulties ahead in restoring stability to the global economy.
At the meeting in South Korea’s southern city of Gyeongju, U.S. officials sought to set a cap for each country’s deficit or surplus at 4 percent of its economic output by 2015.
The idea drew support from Britain, Australia, Canada and France, all of which are running trade deficits, as well as South Korea.
But the proposal got a cool reception from export powerhouses such as China, which has a current account surplus of 4.7 percent of its gross domestic product; Germany, with a surplus of 6.1 percent; and Russia, with a surplus of 4.7 percent.