The Multilateralist

Return to sender? The U.S. letter to the G-20

At the ongoing G-20 ministerial meetings in South Korea, U.S. Treasury Secretary Tim Geithner circulated a letter to his G-20 colleagues calling for the group to "rebalance" the world economy. Specifically, he asked that countries running persistent deficits pledge to increase savings and that countries in surplus commit to boost domestic demand. He sought a ...

At the ongoing G-20 ministerial meetings in South Korea, U.S. Treasury Secretary Tim Geithner circulated a letter to his G-20 colleagues calling for the group to "rebalance" the world economy. Specifically, he asked that countries running persistent deficits pledge to increase savings and that countries in surplus commit to boost domestic demand. He sought a pledge that G-20 countries would "refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing appreciation of an undervalued currency."

Geithner also proposed a new role for the IMF in monitoring progress on these commitments. Specifically, he suggested that the Fund publish a semiannual report monitoring progress on these commitments and how national policies — including exchange rate policy — are affecting them. For several weeks now, Geithner and other U.S. officials have suggested that expanded IMF oversight might help key countries navigate out of the current impasse. For his part, IMF managing director Dominique Strauss-Kahn has been active in shuttle diplomacy on the issue and seems eager to see his institution take a more central role.

Reaction to the Geithner proposals thus far has been mixed. There appears to be limited enthusiasm for the U.S. proposals, with traditional allies including Britain, Canada, and Australia being most favorable. U.S. officials I’ve heard from today, however, contend that there is more support for the ideas behind closed doors. They also insist that Geithner’s proposals are the only serious ones on the table.

Update: A U.S. official reports that France, Japan, and Korea have come on board.

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