In their uninspiring communiqué from Seoul, leaders of the Group of Twenty (G20) sought to put a favorable gloss on their disappointing summit. But their "pledge to continue our coordinated efforts and act together" could not paper over a sorrier reality: The further the G20 gets from the financial crisis, the farther apart its members drift.
On the big issues--like tackling global imbalances, reconciling exchange rate policies, and advancing global trade liberalization--Seoul exposed widening fissures among the world's most important nations. G20 members rebuffed U.S. efforts to set firm targets for current account imbalances, promised vaguely to move toward "more market-determined exchange rate systems," and offered a by-now-familiar commitment to "promptly" conclude the Doha round of negotiations.
The fractious Seoul summit suggests that policy divergences are the shape of things to come. At the depth of the global crisis, world leaders stared into the abyss and took unified steps to stabilize the global economy. But today, that solidarity is missing. The result, as President Barack Obama conceded in Seoul, was that "Instead of hitting home runs, sometimes we're going to hit singles."
Three big take-aways from the Seoul summit:
First, confidence in U.S. global economic leadership continues to wane. The Fed's decision to embrace more "quantitative easing" undercut Obama's position at the summit. By exploiting its role as the issuer of the world's dominant currency to improve its competitive position--rather than focusing on the stability of the global financial and economic system--the United States appeared to be engaging in just the sort of currency manipulation it had complained so bitterly about in China's case.
Second, the G20 is not an effective forum to pressure China, at least to date. U.S. officials had hoped to marshal support from countries hurt by an artificially undervalued renminbi. But--as at the June G20 meeting in Toronto--China deftly turned the tables, joining others in attacking U.S. monetary policy. And, as at Toronto, some of the most vigorous disagreements were not between the historic G8 and the G9-20 newcomers, but between the United States and partners like Great Britain and Germany.
Third, internal politics--including in the United States--will constrain G20 collaboration moving forward. Barack Obama arrived in Seoul immediately after his party was trounced in midterm elections, making his G20 counterparts skeptical of his ability to deliver on global commitments and, indeed, undermining his willingness to make bold moves that might backfire either with his Democratic base or the GOP majority in Congress. One obvious casualty was the failed Korea-U.S. free trade agreement, which the White House had hoped to announce at the summit.
At their third summit in Pittsburgh, G20 members styled themselves as the world's "premier steering group" for global economic coordination. To live up to this billing--much less expand its purview to address a wider array of global issues--the G20 will need to resurrect the solidarity it found during the financial crisis.