Free Trade Agreement Stalled at G20 Bilateral Meeting

Presidents Barack Obama and Lee Myung–bak of the United States and South Korea today met at a bilateral meeting before the official opening of the G20 Summit later this evening to discuss the free trade agreement between the two countries.  Officials announced after the meeting that due to US carmakers concerns over access to the South Korean auto market the countries were unable to move forward on the free trade agreement.

“We have asked our teams to work tirelessly in the coming days and weeks to get this completed and we are confident that we will do so, and President Lee in fact asked his team to come to Washington in the near future to continue these discussions,” stated President Obama.

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G20 Summit: Leaders Arrived In Seoul & Bilateral Meetings Concluded

Leaders of the G20 arrived in Seoul for two days in talks on the Global Economy.  Although the talks officially begin tonight, many bilateral meetings were held today.  One bilateral meeting was that of the Korean and American Presidents in reference to free trade which failed to move forward their respective countries’ agreements.  US officials stated that the main reason for the disagreements were over US carmakers access to the South Korean auto market. 

What is expected at this G20 summit is a set of tough new rules on bank regulations that is part of efforts to prevent a repeat of the Global Financial Crisis, although there is disagreement on the closing statements on the issues of trade imbalances and foreign exchange rates.

Outside the G20, several protestors denounced the summit.  A woman was even arrested after she threatened to ignite herself on fire according to the police.

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G20 Opposed To Fed QE2

Reuters reports in an article entitled G20 Finds Common Ground Opposing Fed that the Fed announcement to purchase 600bn in treasuries does not share in the ideal of the members sharing common ground in terms of responsibilities toward the global economic recovery, fearful that the Fed move will cause large capital inflows into countries like China and Brazil and make their exports less competitive.

Although these arguments at face value are good arguments, if thought about with rationale for more than just a second any validity is thrown like money from a helicopter. First, because the Fed is not a government entity and this is not government stimulus. Contrary to popular belief, the Fed only shares a common mission with the U.S. government in it’s recent announcement to purchase treasuries and that is to hopefully stimulate the economy and put Americans back to work.

Another very important factor is that the Sino-US trade imbalance has been growing for almost a decade and the deliberately manipulated currency of China, who maintain tight currency controls, is a leading factor. Notwithstanding the fact that introduced as congressional testimony for years running, the US government has failed to take action declaring China a currency manipulator before the WTO, an action that could ignite cold war style sentiments between the two largest economies of the world.

Finally, leading the global recovery are precisely China, Brazil and even Germany, the countries that complain about the Fed announcement the most, countries that while experiencing high levels of GDP growth do not appreciate the Fed effort of elevating the US out of a stagnant or stalled recovery.

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