Spit and polish: Financial Express Editorial 13th November 2010

Did we really expect the G20 meet to provide solutions to the present
problems of currency wars that are dominating our mindspace? The
answer is probably no, because issues that have not been sorted out
over months cannot be resolved in two days. But, if we have to take a
positive view of things, then we can say that this meet got the
concerned parties together to at least agree that there is a problem
that has to be sorted out. As there are two diametrically opposite
stances taken by the US and the emerging markets (also sensationalised
to a Barack Obama vs Hu Jintao conflict), the solution, if at all, was
going to be a compromise. The communiqué is naturally filled with
bromides and motherhood statements that, at best, cogently state the
obvious. The joint statement blows hot and cold on the actual action
points. There is agreement not to have competitive devaluations, and
Obama has reiterated that exchange rates should reflect reality. By
harping on sustainable growth, the US has in a way defended the QE2
and other actions that may follow to resuscitate the US economy. But a
kind of blinking green light has been provided for (developing)
countries to consider capital controls when there are currency issues.
Five areas have been brought into focus for policy debate under the
indicative guidelines that were issued: monetary issues, exchange
rates, trade and development, fiscal and financial reforms. But we
still have no idea as to how these objectives are to be met as there
has been no numbers attached to any goal. That would have meant
commitment and in such gatherings, no country would like to shoulder
this responsibility.

Were there any good takeaways from this meet? Obama averred that
nothing that is done in such meets would be dramatic, while the UK PM
David Cameron maintained that pressures over currencies and trade
imbalances can never be solved overnight. French President Nicolas
Sarkozy, who takes over G20 leadership next year, felt that the summit
had allayed the tension that existed before its start, which was an
achievement. Also, China nodded at the indicative guidelines and
maintained that the polices that it was pursuing were anyway always
consistent with these guidelines! More specifically, while there were
fractious discussions for these two days, the good thing was that
these had not broken up into acrimony. Remember WTO? The focus will
now shift to 2011, which will be important for two deadlocked
issues—WTO and, now, G20.