US says G7 needs more growth to cut imbalances
WASHINGTON, Apr 19 (Reuters) The United States wants the rest of the world to boost domestic demand and share more of the burden of reducing huge global trade and other imbalances, a senior US Treasury official said today.
''The US is doing its part and the other major economies must do theirs as well,'' Tim Adams, Treasury's under secretary for international affairs, said at a briefing ahead of a Friday Group of Seven finance ministers' gathering in Washington.
Adams was setting out the US agenda for a series of meetings including not only the finance ministers but also sessions next weekend of the International Monetary Fund and World Bank where the Bush administration wants changes made.
He fended off an IMF criticism that the Bush administration was half-hearted about cutting its budget deficits, saying it couldn't do more without imperiling global growth by curbing free-spending US consumers' ability to keep buying.
''Addressing global imbalances is a shared responsibility and we will emphasize that the best approach to adjustment is one that continues to support strong global demand,'' he said.
Adams repeated that China, which has been racking up huge trade surpluses with the United States and other G7 members, was ''moving far too cautiously'' in letting market forces play a larger role in setting the value of its currency, the yuan.
The G7 comprises the United States, Britain, Canada, France, Germany, Italy and Japan. They meet on Friday afternoon and conclude with a series of evening news conferences before weekend sessions of the global lenders.
Adams had fairly specific prescriptions for what others -- G7 countries or not -- needed to do to spur their economies.
NEED MORE GROWTH ''Japan and Europe need to undertake structural reforms to improve their growth prospects,'' Adams said. ''Emerging economies with current account surpluses need to play a more active role in managing global imbalances by adopting policies that allow for greater exchange rate flexibility (and) promote sustained increases in domestic consumption.'' Adams complained that China was racking up excessive foreign reserves while keeping its yuan from appreciating in value. US manufacturers say the Chinese currency remains undervalued by as much as 40 percent, giving Chinese imports an unfair price advantage.
He also said China's practices were preventing other Asian countries from adopting flexible currency regimes for fear that they would lose export business to China.
Adams said the United States has invited officials from Russia, China, Saudi Arabia and the United Arab Emirates to join the G7 for an informal dinner. In addition, Australia has been invited for the first time to speak to G7 members.
Reforming the IMF is also on the agenda, and Adams said he considers its ''most basic purpose'' is to monitor the international system of exchange rates, promoting greater flexibility in how such rates are set.
In response to questions, he said the United States would be willing to yield some of its ''quota,'' or membership share, in the IMF to give emerging-market countries more say if that would be useful.
In its World Economic Outlook released earlier on Wednesday, the IMF criticized the Bush administration's pledge to cut its fiscal deficit in half by 2009 as ''unambitious,'' provoking a wry response from Adams when asked about it.
''The IMF has never been shy about making comments on US fiscal policy,'' he said. ''We would just hope they would apply that same kind of energy with other aspects with the agenda, including foreign exchange surveillance.'' He said if the United States became more ''aggressive'' about cutting its budget deficits, ''that puts global growth in peril'' because there is no other country to take up the slack.
REUTERS SC PM0210