The dispute this time however, had to do with trade imbalances in general and China in particular.
The fight was over a single 53 word sentence. 19 countries agreed to the statement but China would not. At the last moment, France (which is part of the G-20 through the EU) managed to come up with a wording change China could agree to.
G-20 Deal Reached, No One Knows What The Agreement Says
The Wall Street Journal reports G-20 Deal Reached, but Outcome Open to Interpretation
Negotiators from the world's leading economies haggled all night over seemingly technical details regarding how to measure global economic imbalances. They eventually produced a 53-word sentence intended to appease all sides�and open to interpretation by all sides.The Agreed Upon Sentence
All 20 countries must agree on any technical detail for there to be a deal. If one country walks away, no deal.
The key agreement they came up with on Saturday�one sentence in the four-page "communiqu�"�essentially says that exchange rates and fiscal and monetary policies will be taken into consideration when determining whether a country's policies lead to imbalances.
To draft that sentence, officials from the U.S., Canada, France, Germany, China, Russia, Indonesia, Brazil and India were just some of the members who weighed in�at times with much different views�according to several people present. The sentence had one colon, one semi-colon, three commas, and the word "and" appeared six times. And officials acknowledged that it could create as much confusion as it does attention.
Just before the deal was reached, officials from three different countries said talks had collapsed and perhaps everyone would regroup in Washington in two months.
Ultimately, officials from France and a number of other countries convinced China to agree to a deal if the wording was altered significantly.
The result was the convoluted 53-word sentence, which says exchange rates and fiscal and monetary policies will be taken into "due consideration" as part of a broader measurement when determining whether a country's policies lead to imbalances.
"The way it's written, the French can say it's an indicator and the Chinese can say it's not really," said one G-20 official after the meetings.
"It means what it means what it means, just like a rose is a rose is a rose," Christine Lagarde, France's finance minister, told reporters after emerging from the Group of 20 talks.
Amazingly the Wall Street Journal did not even give the final sentence that took 3 days to produce. I tracked it down in the complete G20 Communiqu�.
The sentence causing so much consternation is in red.
3. We reaffirm our commitment to coordinated policy action by all G20 members to achieve strong, sustainable and balanced growth. Our main priority actions include implementing medium term fiscal consolidation plans differentiated according to national circumstances in line with our Toronto commitment, pursuing appropriate monetary policy, enhancing exchange rate flexibility to better reflect underlying economic fundamentals and structural reforms, to sustain global demand, increase potential growth, foster job creation and contribute to global rebalancing. We discussed progress made since the Seoul Summit and stressed the need to reduce excessive imbalances and maintain current account imbalances at sustainable levels by strengthening multilateral cooperation. We agreed on a set of indicators that will allow us to focus, through an integrated two-step process, on those persistently large imbalances which require policy actions. To complete the work required for the first step, our aim is to agree, by our next meeting in April, on indicative guidelines against which each of these indicators will be assessed, recognizing the need to take into account national or regional circumstances, including large commodity producers. While not targets, these indicative guidelines will be used to assess the following indicators: (i) public debt and fiscal deficits; and private savings rate and private debt (ii) and the external imbalance composed of the trade balance and net investment income flows and transfers, taking due consideration of exchange rate, fiscal, monetary and other policies.
Please note the apparent goal was to set guidelines to assess indicators for the next non-binding meeting a year from now. No targets were set, just a hope to produce "indicative guidelines" at some point in time.
But hallelujah, we have a meaningless agreement for now. Unfortunately, no one knows exactly what the agreement to agree really means other than what they say it means. This means there will be a major disagreement in a year.
Agreement? What Agreement?
In light of the above, I find this Bloomberg headline rather amusing G-20 Agrees on Yardsticks for Imbalances as U.S. Seeks Leverage on Yuan
�It wasn�t easy, there were obviously diverging interests,� French Finance Minister Christine Lagarde told reporters after chairing the Paris meeting. The goal is �to test economic policies and determine to what extent they are favorable for all countries together and not just the basis of domestic economic policy.�Deft Diplomacy or Deft Idiocy?
In what Geithner called �deft diplomacy,� the French hosts massaged the statement to include the current account�s components -- trade and investment income -- while labelling it the �external imbalance� to appease Chinese sensitivities.
As with the Wall Street Journal, Bloomberg failed to produce the key sentence or a link to the communiqu�. Why is it so hard for news organizations to link to sources they are quoting?
Look at the entire communiqu�, it should be crystal clear there is no agreement to do anything, and even if there was, the agreement is not binding.
Nonetheless, we can be 100% certain that Geithner and President Obama will be trumping up the "deftly" worded non-agreement.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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