G20 Seoul Summit Fleshes Out Action Plan for Shared Growth

G20 leaders agree on a watered-down deal to make indicative guidelines to address current account imbalance issues

Heads of state from the Group of 20 (G20) nations have adopted the “Seoul Declaration” calling for introducing guidelines to ease current account imbalances by next June to stabilize the global economy.
According to the statement, issued after wrapping the two-day G20 Seoul Summit 2010 on Nov. 11-12 in Seoul, the G20 leaders agreed that the “indicative guideline” on current account balances will be initiated and undertaken in due course.
It stipulates that “Today, the Seoul Summit delivers: the Seoul Action Plan composed of comprehensive, cooperative and country-specific policy actions to move closer to our shared objectives.” The action plan calls for making indicative guidelines to identify big trade imbalances, committing to moving toward more market-determined exchange rates, resisting protectionism in all its form and reaffirming the willingness to fight climate change, among others.

At a news conference at COEX, the venue of the summit, to announce the Seoul Declaration at 4 p.m. on Nov. 12, Korean President Lee Myung-bak said, “The G20 Seoul Summit was successful and has achieved meaningful outcomes by pursuing strong, sustainable growth.”
The leaders agreed to set up a detailed timetable to form guidelines to address exchange rate and current account imbalance issues by the first half of next year. Lee said that the most remarkable achievement was that the G20 leaders delivered the outcomes of the previous G20 gatherings into the Seoul Action Plan.
President Lee said the G20 leaders agreed to implement market-determined foreign exchange policies through the action plan.
The G20 leaders decided to shift 6 percent of quota and voting power in the International Monetary Fund (IMF) from advanced economies to developing countries, as was discussed by the G20 Finance Ministers and Central Bank Governors’ Meeting in Gyeongju, Gyeongsangbuk-do, on Oct. 23. They agreed to ease conditions for IMF loans by creating a Flexible Credit Line (FCL) and Precautionary Credit Line (PCL) as new preventative means to address future crises. Thanks to these reforms, President Lee said, the IMF will play a larger role not only in crisis resolution, but also in crisis prevention. The agreement was owed to Korea’s initiative for introducing global financial safety nets by reflecting on its lessons arising from the nation’s experiences during the 1997 Asian financial crisis. Lee said the G20 reaffirmed its political will for an early settlement of the World Trade Organization (WTO) Doha Development Agenda (DDA) as a “successful, ambitious, comprehensive and balanced conclusion.”
President Lee said the G20 leaders endorsed the G20 Anti-Corruption Action Plan to create a transparent and fair business environment. He also expressed his hopes that the Seoul G20 Business Summit will become “one of most important parts of future summit meetings.”
The leaders affirmed their finance ministers’ agreement that advanced economies, including those with reserve currencies, would be vigilant against excess volatility and disorderly movements in the exchange rates. “These actions will help mitigate the risk of excessive volatility in capital flows facing some emerging countries,” the statement said.
As proposed by Seoul, the leaders agreed that “the Seoul Development Consensus for Shared Growth sets out our commitment to work in partnership with other developing countries, and LICs in particular, to help them build the capacity to achieve and maximize their growth potential, thereby contributing to global rebalancing.” “The Seoul Consensus complements our commitment to achieve the Millennium Development Goals (MDGs) and focuses on concrete measures as summarized in our Multi-Year Action Plan on Development to make a tangible and significant difference in people’s lives including, in particular, through the development of infrastructure in developing countries,” the statement said.
True to the summit’s catchphrase “Shared Growth Beyond Crisis,” Korea took the initiative in putting development issues on the agenda of the G20 Seoul Summit as the summit’s chair nation and has been striving to serve as a bridge between developed and developing countries. “As far as development issues are concerned, Korea has its own profound experiences and expertise and wanted to share them with developing countries,” said Kwon Haeryong, director-general in charge of trade and international cooperation at the Presidential Committee for the G20 Seoul Summit, ahead of the summit.
U.S. President Barack Obama applauded the outcome of the summit, saying, “What is remarkable is it that we actually made real progress.” Making his own assessment of the summit, Korean Minister of Strategy and Finance Yoon Jeung-hyon said in an email message to his ministry officials that the G20 leaders have agreed on action plans to pave the way for strong, sustainable and balanced growth. “The G20 Seoul Summit has created a new global navigation for the future direction of the global economy through mediation and coordination under Korea’s stewardship,” said Yoon, adding, “Now we have made a new path for the future of the global community.”
However, the G20 leaders failed to reach a consensus on the U.S. proposal to adopt specific numerical guidelines on the ration between current account imbalances and GDP in the face of opposition from China, Germany and other major export-oriented economies. Instead, they agreed on a vaguely worded version to have their finance ministers and the IMF work out indicative guidelines on current account imbalances by the first half of next year, to be adopted by the next G20 Summit slated for next November in Paris.
“These indicative guidelines composed of a range of indicators would serve as a mechanism to facilitate timely identification of large imbalances that require preventive and corrective actions to be taken,” the G20 leaders’ statement said after their two-day meeting in Seoul. nw

Korean President Lee Myung-bak chairs the G20 Seoul Summit 2010 held in Seoul on Nov. 11-12.

G20 leaders wave during a group photo session as they wrap up the Seoul Summit.

U.S. President Barack Obama and Korean President Lee smile following their talks on the sidelines of the G20 Seoul Summit on Nov. 11.

(Courtesy on the Presidential Committee for the G20 Seoul Summit)