Obama calls for global balance

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(China Daily)
Updated: 2009-09-22 07:13

US President Barack Obama plans to push world leaders this week toward reshaping the global economy in response to the deepest world financial crisis in decades.

"We can't go back to the era where the Chinese or the Germans or other countries just are selling everything to us. We're taking out a bunch of credit-card debt or home-equity loans, but we're not selling anything to them," Obama told CNN late Sunday before the Group of 20 summit in Pittsburgh on Thursday.

Chen Fengying, an expert on trade law with the China Institute of Contemporary International Relations, said the balance of trade issue is a problem in China, too. But she warned against a quick fix.

Chen said it will take at least 10 years to better-balance world trade because the imbalance has existed, and been sustained, for a long time. In addition, an increasing number of emerging markets have become global players since the 1990s.

"China cannot rely heavily on exports in the next 30 years, as it did in past decades, because of the rising cost of labor and environmental reasons," she told China Daily yesterday.

The United States favors a broad new economic framework that it hopes the G20 will adopt, according to a letter by Obama's top G20 adviser, Michael Froman.

Obama, meanwhile, said the US economy was recovering, despite high unemployment.

But, he said, the time was right to rebalance the global economy, following decades of over-consumption in the US.

Economists had warned about the danger of an unbalanced global economy for several years before the financial crisis began in 2007.

Pang Zhongying, an international relations expert at Renmin University of China, said it would not be possible for China to change its export-oriented economy quickly because that would saddle it with massive unemployment.

"Also, Americans can't change their lifestyle easily," he said. "So, a US shift away from consuming to saving will not happen overnight."

Pang said Obama hopes to see economic imbalance top the G20 agenda "because the US considers it to be the origin of the economic crisis. But he also needs to take others' concerns into consideration".

China, for example, will want to see G20 nations discuss fighting protectionism, Pang said.

President Hu Jintao arrived in New York yesterday at about 10:45 pm. He is scheduled to meet new Japanese Prime Minister Yukio Hatoyama and French President Nicolas Sarkozy this morming.

The G20 summit is the third occasion in less than a year where leaders of countries accounting for 85 percent of the world economy could meet and coordinate their response to the crisis.

With US consumers holding back on spending after the collapse in house prices and rising unemployment, Washington wants other countries to become engines of growth.

The West has been urging China to find ways to get its people to spend and consume more.

However, China may be reluctant to offer a significant change in economic policy.

Without naming specific countries, Froman's letter says nations that export a lot should rely less on those exports. It also calls on Europe to make structural changes - possibly in areas such as labor law - to make itself more attractive to investors. And it supports Beijing's call for developing countries to have more say at the International Monetary Fund (IMF).

Some economists have said new US import duties against Chinese tires could make it hard for leaders to talk about protectionism, let alone discuss a major rethink of the world economy.

Nonetheless, calls for change are growing.

"We need to have a rebalancing of growth and an increase in consumption in the emerging markets to have enough growth in the short term," IMF chief Dominique Strauss-Kahn told the Financial Times.