While Obama is seated at the same table with China's President Hu Jintao, they and their colleagues will focus on commercial issues that are sensitive enough without having to deal with Chinese protests over U.S. warships in the Yellow Sea.
South Korean defense officials, who were hoping the fearsome U.S. aircraft carrier the George Washington, would venture there soon after the sinking of the corvette the Cheonan in those waters in March, reluctantly concede the wisdom of putting off exercises involving the carrier at least until next year. By then, they predict, either tensions will have risen high enough to justify another round of war games or North and South Korea may be moving toward reconciliation.
More immediately, U.S. strategists, led by Treasury Secretary Timothy Geithner, may be thinking there's a chance the Chinese will act on demands to elevate the value of the yuan, which some analysts believe is pegged by as much as 40 percent below what it's worth. Certainly he was talking as if he had really made some headway with the Chinese and others after two days of tense negotiations in a luscious resort area on the outskirts of this ancient capital of the Silla kingdom that dominated much of the Korean peninsula a millennium ago.
"The most important thing we achieved is agreement on a framework for curbing excess trade imbalances," he said after the assorted ministers and central bank governors were done hammering out a communique that was predictably long on nice phrasing and short on actual commitment. "Countries that have traditionally run large trade and current account surpluses," he said, had to "get away from export dependence" and move toward "stronger domestic-led growth."
Geithner was rebuffed at the outset when his counterparts from countries ranging from Germany to Japan, from India to Russia, rejected his proposal for restricting current accounts surpluses to 4 percent of gross domestic product (GDP). In other words, he wanted every country to promise that the net balance from trade, transfers of money from abroad and interest and dividend payment would remain within that band.
The purpose was to restrain China, whose current account surplus is nearly 5 percent of the net balance, and Germany, with a surplus of approximately 6 percent, from overwhelming markets with exports while taking far fewer imports. The U.S. by contrast is running a current account deficit of 3.2 percent, third-highest among G-20 nations after Turkey and South Africa.
Geithner betrayed no sign of disappointment, telling reporters here: "We found agreement that we have to set thresholds" and "we found a lot of support." At the least the Americans hoped that negotiations here managed to stave off the immediate threat of a "currency war" a term introduced last month by Brazil's finance minister Guido Mantega.
Interestingly, Mantega himself did not attend the meetings here, sending a vice minister to represent him instead. The only absentee among G-20 finance chiefs, Mantega may have wanted to show his discontent with talks that he believed would only solidify the hold of major powers, notably his North American neighbors, over the global economy and wind up in meaningless cliches. He may have been right, judging from the communique in which participants committed themselves to such generalities as promising to "pursue the full range of policies" for "reducing excessive imbalances" and vowing to "resist all forms of protectionist measures."
The session, however, did produce one substantive result. The ministers agreed on giving emerging market countries, notably China and India, far more influence over the International Monetary Fund (IMF).
The Washington-based IMF in the past two years has vastly increased its power to assist countries on the brink of financial disaster, providing "flexible" and "precautionary" credit lines, but it has been widely criticized for representing the views basically of established economies.
Under the deal reached here, Europe is giving up two seats on the 24-member board to emerging markets while the voting shares of emerging market countries go up by 6 percent. The United States still has the highest voting share, but China now has the third-highest voting share and India the eighth.
"The IMF is playing an increasing role of being an honest broker," said the fund's managing director, Dominique Strauss-Kahn. "It's a big day for Korea and a big day for the IMF. We don't have a day like this every time" an allusion to recent talks in Washington in which the IMF seemed mired in disagreements.
As for Geithner, he promptly followed up the talks with his G-20 colleagues by flying to the Chinese coastal city of Qingdao for an unexpected meeting with China's top finance official, Wang Qishan, vice premier in charge of economic affairs. Their rendezvous on Sunday at the Qingdao airport was reportedly brief, however, and is not believed to have gone further than the wording of the communique that wound up the G-20 talks in Korea.
All a U.S. official would say was the two "exchanged views" and also talked about the upcoming G-20 summit. The just-finished meetings in Korea were a prelude to that event a chance for ministers to settle on the kind of verbiage that heads of state will confirm in whatever "action statement" emerges from the November summit.
As alarming as failure to resolve the "currency war", however, was the reception the North Koreans were giving a Chinese military delegation. While Geithner and Wang were chatting it up at Qingdao, the North's vice marshal Ri Yong-Ho hosted a dinner in Pyongyang that seemed to be in honor of North Korea's youngest general, Kim Jong-Il's son and heir, Kim Jong-Un.
Amid signs of North Korean preparations for yet another nuclear test, Pyongyang's Korean Central News Agency quoted Ri as praising the Chinese for all they were doing by way of "building a great, prosperous and powerful nation". Such cooperation, said KCNA, was "true to Songun", that is, the "military first" leadership of Kim Jong-Il.
Other countries might worry about trade imbalances, but North Korea over the weekend boasted of its own "treasured sword", its nuclear stockpile. China's ties to North Korea had to be a consideration in appeasing Beijing or at least restraining the North from a nuclear test or other mayhem designed to cast a pall over the G-20.
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