Lee speaks about G-20, economics and the North
Q. Expectations for the G-20 Summit have been increasing following the G-20 finance ministers and central bank governors meeting in Gyeongju. What issues need to be discussed at the Seoul summit? Would you give your opinion about what role the G-20 could play in the global financial situation, particularly in connection with the currency exchange rate issue?
A. The building blocks for fruitful results that can be expected at the Seoul summit have already been put in place for such issues as reform of the IMF and the financial sector, the establishment of financial safety nets, ways to address global imbalances and international cooperation on the exchange rate issue. In just a few days from now at the Seoul summit, these issues will need to be endorsed, and their implementation will be monitored. As for the issue of global imbalances, those at the Gyeongju meeting agreed to draw up a guideline to evaluate the situation. At this juncture, we are coordinating the positions of member countries so that what has been agreed to thus far will take concrete shape at the summit.
I think it is a tremendous success that the G-20 members agreed on the principles to use the guidelines. All the interested parties - the United States, China and European countries - have agreed. What we should to at the summit is not find a target in numbers, as each country’s situation and standards vary. It is impossible to define the specifics of the guidelines during such a short period between the Gyeongju meeting and the Seoul summit. We are forming a working-group now, and it will take months for us to complete the work.
This Seoul summit will be a great success if the leaders can agree on principles on how to define the standards. I believe we will have a very enthusiastic discussion on this issue at the summit.
On the development issue, which will be discussed as a major item on the G-20 agenda, focus will be placed on economic growth in developing countries through capacity-building efforts. To this end, relevant action plans should be adopted to construct infrastructure, develop human resources and enhance trade capabilities.
As the premier forum on economic cooperation, the G-20 has been called the board of directors for the world economy. It will play a pivotal role in setting out the future direction for the global economy and in bringing about sustainable, balanced growth.
The business summit will be held before the G-20 bringing together the CEOs of the most influential businesses in the world. The business summit will serve as a good opportunity for business leaders to participate in discussions on surmounting the crisis and achieving sustainable growth.
The Korean government is known to have been striving to make the G-20 Summit the most influential one held to date. As the chair nation, what concrete measures or ideas does Korea envision to mediate the divergent positions of the participating countries on key agenda items and to encourage them to reach agreement?
It is unrealistic to expect that countries will have uniform positions on every key issue because each of them has a different economic situation and policy background. What really counts is to demonstrate a spirit of concession and compromise through concerted efforts. As a matter of fact, the strength of the G-20 lies in the fact that even though the process of reaching a consensus is difficult, the impact and ripple effect of any agreement will be enormous.
In addition, Korea, in its capacity as a chair, is working hard to engage in outreach activities in non-G20 countries in regions such as Africa in tandem with the United Nations. It has also invited five non-G-20 nations to the Seoul summit and related events so that a variety of opinions can be reflected in the G20 process.
There are some countries curious about how Korea has been able to rapidly recover from the global financial crisis. If leaders from other countries ask you that question at the Seoul summit, how would you answer them?
The key to Korea’s success in overcoming the crisis can be narrowed down to the following three elements.
First, the government has made proactive efforts to respond to the crisis on the basis of policy coordination with the G-20 nations. Building on the strength of the government’s fiscal position, an expansionary fiscal policy was implemented right after the crisis to make up for the shortfall in demand, and emergency liquidity was swiftly provided to stabilize financial markets. With these measures, the benchmark interest rate dropped from 5.25 percent to 2 percent, and fiscal outlays have gradually expanded over the years since 2008, but have now stabilized and will return to balance in 2013.
Second, restructuring efforts that began in 1997 when the foreign exchange crisis hit Korea have helped strengthen the fundamentals of the Korean economy. Thanks to such endeavors, the government, banks and corporations have maintained a high level of financial soundness, thus policy measures to respond to the crisis could take effect. For instance, as of 2007, Korea’s debt to GDP ratio remained at 30.7 percent while the average in G-20 nations was as high as 62.4 percent. In 2009, Korea also became the world’s sixth largest holder of foreign exchange reserves, with 300 trillion won ($270 billion).
Third, Koreans have self-confidence and have trusted that they would be able to successfully overcome the latest economic crisis because they already had a similar experience more than a decade ago.
We would like to ask you about the present situation regarding the Korea-U.S. Free Trade Agreement. Is it imminent that a deal will be struck? Will we be able to hear the news of conclusion before leaving Korea (after the G-20 Summit)?
It is my view that the sooner the better it is to conclude the Korea-U.S. FTA. From the U.S. perspective, the deal is very positive, because more jobs will be created. When I had a phone conversation with U.S. President Barack Obama a few days ago, we had promised the best efforts to conclude the deal during the upcoming summit (on Thursday). Working-level talks are ongoing, and I believe it is possible to keep the promise.
Since the Seoul summit is to be held in a divided nation, it will serve as an occasion to let people across the globe understand issues surrounding the Korean Peninsula. What kind of discussions concerning North Korea are you planning to have with participating leaders? What are the ways to make use of the G-20 Summit in addressing North Korean issues?
Leaders of five of the participants in the six-party talks will attend the Seoul summit. I plan to have bilateral talks with each of them. On these occasions, I will have in-depth discussions on the problem of North Korea’s nuclear development and inter-Korean relations.
The simple fact that global leaders sit together at the G-20 Summit to discuss and make decisions on economic cooperation will deliver an important message to North Korea. No country in the world can progress in isolation. Among other things, the development and cooperation agenda that Korea put forward will serve as an opportunity to seek economic development models tailored to each developing and underdeveloped nation. North Korea needs to realize that it can also benefit from such development models.
To resume the six-party talks, the North’s sincerity to give up its nuclear arms program is a precondition, but in terms of inter-Korean issues, the Cheonan’s sinking is a grave matter because it was an incident in which the North took South Koreans’ lives.
Our consensus now is that we will not participate in talks that will only allow the North to buy more time. We will only resume talks when the North shows its true willingness to give up nuclear arms. North Korea must know that it will not be able to achieve anything without the South’s consensus. The time has come now for the North to give a clear-cut answer.
I would like to ask if the apology is a precondition to resume the six-party talks, because it is almost obvious that North Korea will not apologize.
We cannot rule out that the North won’t apologize. It is a great time for North Korea to change. I urge the North to learn from China. I believe China’s open-door policy and subsequent improvement in the quality of lives through economic growth are a great model for the North to learn a lesson from. All the issues in the international community cannot be concluded by a single factor. The focus now is how the North changes its attitude. When it does, then it will make a comment on the Cheonan.
Do you believe it is possible to hold a South-North summit during your term?
Just to hold a summit for its own sake is not the ultimate purpose. Instead, it should serve as a means to resolve important inter-Korean issues. It is necessary for the North to be prepared mentally. The key to holding another summit is the North’s determination to dismantle its nuclear programs and its attitude concerning the Cheonan attack.
By Ser Myo-ja