A good start to G-20 SummitFinance ministers and central bank governors of Group of 20 nations reached a crucial agreement over the weekend in Gyeongju to prevent a currency war of global proportions.
In the communique issued Saturday after the meeting - which was held to set the agenda for the Nov. 11-12 G-20 Summit in Seoul - officials from developed countries agreed to work toward “more market-determined exchange rate systems that reflect underlying economic fundamentals and to refrain from competitive devaluation of currencies.”
They also pledged to “pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels.”
The communique wasn’t as specific in targeting the appreciation of certain currencies as the Plaza Accord cemented in 1985 among the Group of Five nations. But it represents the best possible solution to stave off the threat of nations turning their currencies into ammunition, which could devastate the global economy.
Many observers expect the upcoming G-20 Summit in Seoul to become a battlefield over currency issues.
If the finance ministers and central bank governors attending last weekend’s meeting had failed to ink an agreement, there’s a chance that the G-20 Summit could have ended disastrously regardless of Korea’s efforts to lead the event.
The Korean government responded to recent events quickly and tactfully by putting the controversial foreign exchange rate issue on the agenda of last weekend’s meeting and working diligently to help craft an agreement.
The countries involved in the meeting also reached a significant breakthrough by reorganizing the power structure and voting interests of the International Monetary Fund, giving greater voice to emerging nations.
Korea was able to demonstrate its full potential by exercising leadership on global affairs at the Gyeongju gathering. But that does not guarantee success at the G-20 Summit.
The agreement resulting from the Gyeongju meeting signifies that member countries all want to work together to avoid a worst-case scenario. Individual countries must now follow it up with specific action plans to fix global imbalances.
The G-20 Summit in Seoul should serve as a venue to unveil these action plans.
As the host country, Korea must strive to ensure that the summit produces substantial and concrete results.