China prevails, G20 waters down resolution on trade imbalances

Chandra Shekhar

Paris, Feb 20 (PTI) China prevailed upon the G-20grouping to water down a resolution to correct global economicimbalances, even as India raised concerns about risingcommodity and energy prices.

The final G-20 communiqu� that was issued after two daysof hard bargaining was a compromise worked out between themember countries, as it excluded key indicators like foreignexchange reserves and fiscal deficit at the insistence ofChina.

"There were differences, therefore in this communiqu�, itwas agreed that we will try to identify and complete theprocess (of selecting indicators) by April," Indian FinanceMinister Pranab Mukherjee said after the G-20 meeting ofFinance Ministers and Central Bank Governors.

"It has not been simple. There were obviously divergentinterests, but we were able to reach a compromise on a text,"French Economy Minister Christine Lagarde said.

Sitting on huge foreign exchange reserves, China doesnot want these to be included as one of the parameters fortracking and correcting structural flaws to reduce globaltrade imbalances.

China is sitting on USD 2.8 trillion worth of forexreserves and is accused by the US of manipulating itscurrency, the yuan. "Our aim is to agree, by our next meetingin April" on a set of indicative guidelines to ensure orderlyeconomic growth, the communiqu� said.

Taking on board India''s concerns over rising commodityprices, the resolution called for stepping up investment inthe agriculture sector of developing countries.

Faced with double-digit food inflation, India alsopressed for a coordinated approach to tackle food, commodityand oil price volatility, which make emerging economies"vulnerable".

The issue was raised by Mukherjee, who said that "Indiadid not contribute to the build-up or persistence of globalimbalances", but "found no room for comfort in tackling foodinflation" in the backdrop of high international prices.

Commodity prices increased by 20 to 30 per cent in 2010,according to International Monetary Fund (IMF) estimates.

The communiqu� issued said: "We discussed concerns aboutthe consequences of potential excessive commodity pricevolatility... We reiterated the need for long-term investmentin the agriculture sector in the developing countries."

The ministers also agreed on a plan to strengthen theinternational monetary system (IMS) with regard to disruptivecapital flows and disorderly movement in exchange rates, amatter of great concern to India. .