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G20 Leaders Disagree on Benchmarking Imbalances

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Disagreement heralded the Friday opening of the meeting of the G20, as disputes on Thursday over how to identify and benchmark trade imbalances kept bankers and ministers from reaching an agreement.

Reuters reported that efforts have so far failed to reach a preliminary accord in Paris about measures used to identify and deal with economic mismatches that could signal future financial woes.

Christine Lagarde, France’s economy minister, characterized the effort to come up with an accord as major progress. She told a conference of the Institute of International Finance, “This is something which is highly debated at the moment and will be in the next couple of days, because some countries do not want to be identifiable as doing such and such a policy.” She went on to add, “We will already have taken a big step forward if we get an agreement in principle … on the elements that allow us to measure imbalances.”

An unidentified source was reported as saying that the dispute at a preparatory meeting among deputy finance ministers and officials centered on whether or not indicators should be used that identified aspects of the balance of payments, trade, real exchange rates and currency reserves.

France advocated including in the initial list of factors for consideration the current account deficit, the real exchange rate and currency reserve levels. China and Germany were opposed to their economies being identified in the future as carrying excessive current account surpluses. The U.S. and France are advocating developing a group of indicators by midyear so that global policies can be coordinated to deal with imbalances large enough to endanger the world economy.

An emerging country delegate to the G20 was quoted as saying, “I don't think we can have benchmarks ready by April. I think a more realistic deadline could be the October ministerial meeting, but the Paris communique would perhaps mention this action plan.”