G20 leaders talked up prospects for a deal to remodel the world economy Friday but China's firm objections to any brakes on its export machine looked set to hobble attempts to redress global trade.
The United States, nursing a hangover from its worst recession since the 1930s, was ploughing a lonely furrow in pushing proposals to fix the large and growing gap between deficit and surplus nations.
G20 negotiators, already harried from a week of non-stop talks in Seoul, met far into the night to try to hammer out a declaration that their leaders can adopt at the conclusion of their two-day summit later Friday.
"There has been big progress," South Korean President Lee Myung-Bak said at the start of Friday's talks, held in a giant convention centre surrounded by a 50,000-strong security deployment.
|French President Nicolas Sarkozy (L) meets Chinese President Hu Jintao (C) at the start of the Opening Plenary Session at the G20 Summit in Seoul on November 12, 2010.|
Lee did not elaborate, but the summit hosts want the leaders to endorse an agreement by G20 finance ministers last month to avoid currency devaluations and rein in trade gaps.
But any consensus document that emerges could well be toothless, shorn of US proposals for firm targets on national current accounts, following a fierce counter-offensive from China, Germany and others.
British Prime Minister David Cameron conceded late Thursday that the G20 was not in a "heroic phase" after its determined response to the 2008 financial crisis, and that "a lot more work" was needed to fix economic imbalances.
President Barack Obama, hoping to salvage a deal at the G20 after suffering an economy-linked drubbing in US elections last week, said Thursday his administration wanted to boost growth via "prudent" economic policies.
"It is difficult to do that if we start seeing the huge imbalances redevelop that helped to contribute to the crisis that we just went through," he said.
"I don't think this is a controversial proposition."
But controversy is rife in the G20 after the Federal Reserve instituted a 600-billion-dollar attempt to reflate the US economy, in a radical monetary step that foreign critics say will trigger tit-for-tat currency devaluations.
German Chancellor Angela Merkel said a US proposal to limit the current account surpluses of big exporters to four percent of gross domestic product was dead in the water.
Instead, she said late Thursday, G20 finance ministers will be asked to work with the International Monetary Fund to look at broader, structural economic indicators such as population changes and labour laws.
"The time-frame for this is still very much disputed," she said, while adding: "I personally don't want to put it off endlessly. I think we will get a common communique in the end -- including the US."
Chinese officials sought to throw the onus back on the United States by arguing that Beijing has an "unswerving" commitment to reform its much-criticised currency regime, but needs stability in the world economy.
"If you're sick yourself, don't ask others to take medicine," commerce ministry spokesman Yu Jianhua said, demanding the debt-ridden United States fix its own house first.
China's growing assertiveness in a variety of international fora, including the failed Copenhagen climate summit at the end of last year, appeared evident anew in Seoul.
"China is being very difficult in finalising the texts, so there might be brackets left for the leaders to fill in after all," a German government source said.
The United States wants the G20 to agree to curtail "excessive imbalances" as a back-door way of forcing China to realign its currency, which critics say is kept deliberately cheap to support Chinese exporters.
But the proposal has run into trouble not just from China but from an array of nations including Germany, Europe's export champion, which insists its own trading prowess has nothing to do with any currency chicanery.
"To set political limits on trade surpluses and deficits is neither economically justified nor politically appropriate," Merkel told a G20 business summit.
Confronting US critics head-on, Treasury Secretary Timothy Geithner said the United States would "never" manipulate the dollar and hit back at a surprise attack on Washington's economic approach from former Federal Reserve chairman Alan Greenspan.