G20 leaders have wrapped up their summit in Seoul but fell short of resolving a bitter dispute that has the potential to end in an all-out currency war.

Prime Minister Stephen Harper waves with his Spanish counterpart Jose Luis Rodriguez Zapatero, top, and China's President Hu Jintao during a photo session at the G20 summit in Seoul on Friday. (Stefan Rousseau/Reuters)

Instead, the leaders of the world's major economies issued a joint statement in which they pledged to refrain from "competitive devaluation" of their currencies.

The U.S. had been pushing for tougher wording that would have taken direct aim at China's currency policy. The Americans have accused China of keeping its currency artificially low in a bid to boost exports.

The U.S. — backed by Canada — says China needs to let the yuan appreciate to bolster its domestic economy so it's not so dependent on exporting to the U.S.

The U.S. position, however, has been undermined by the actions of its own central bank — the U.S. Federal Reserve — which has embarked on a $600-billion bond-buying spree that critics say amounts to a de facto currency devaluation.

Observers say the dispute over who may be manipulating their currencies to gain a trade advantage has the potential to erupt into an escalating round of protectionism.

Even though the various delegations talked well into the night to arrive at a more meaningful compromise, the leaders ended up agreeing only to work on reaching some as yet undefined "indicative guidelines" to signal economic dangers for the global economy — a process that will last well into next year.

Prime Minister Stephen Harper, who had urged the leaders to take firm steps to avoid having the global economy sink back into recession, was clearly disappointed.

'These are not going to be easy issues to resolve.'—Prime Minister Stephen Harper

"Look, I think it's fair to say we did not resolve those issues here today," he told reporters as the summit ended.

"We cannot get out of this with beggar-thy-neighbour policies. We need instead to continue to co-ordinate our actions going forward," he said.

Despite the absence of any concrete agreement on the currency or trade fronts, Harper did say there was at least a framework for continuing to further talks.

"We have got a process for continued engagement. We've got a timeline around that," Harper said. "These are not going to be easy issues to resolve. But I think we've got everyone talking the same language."

U.S. President Barack Obama, South Korea's President Lee Myung-bak and Prime Minister Stephen Harper attend the G20 SME Finance Challenge Award Winner ceremony during the G20 summit. (Jim Young/Reuters)

The Canadian delegation had been trying to get the G20 to take specific steps to ensure that global trade imbalances don't lead to disastrous rounds of tit-for-tat currency devaluations. Instead, the final communiqué featured vague platitudes on the trade and currency fronts and no timetables for firm action.

"Uneven growth and widening imbalances are fuelling the temptation to diverge from global solutions into unco-ordinated actions," the G20 leaders stated in their joint statement. "However, unco-ordinated policy actions will only lead to worse outcomes for all."

The leaders also committed to move toward more market-based exchange rates.

Economies with reserve currencies — the United States and Europe — also pledged to refrain from doing anything that would cause big fluctuations in their exchange rates.

"These actions will help mitigate the risk of excessive volatility in capital flows facing some emerging countries," the communiqué said.

U.S. President Barack Obama said the China currency issue was an "irritant" for the U.S. and many of its trading partners. "We have to understand that this is not solved overnight," he told a wrap-up news conference. "But it needs to be dealt with and I am confident it can be."

Harper echoed that sentiment. "These things don't happen overnight," he told reporters.

"What we're trying to do is achieve something where we will maximize the potential for the global economy in the long term.

"To really realize the maximum the potential of the global economy going forward, we really do have to [have] an agreement on this framework and a resolution of the global imbalance problem," Harper said.

Harper then flew to Japan, where leaders are gathering for the Asia-Pacific Economic Co-operation forum.

The APEC summit runs until Sunday in Yokohama, near Tokyo. Leaders will address a number of issues, including free trade and human smuggling.

With files from The Canadian Press and The Associated Press