Business

Harper wants G20 focus on deficits, trade

Prime Minister Stephen Harper warned G20 leaders Friday not to let the struggling global recovery distract them from cutting budget deficits and trade imbalances.

Prime Minister Stephen Harper warned G20 leaders Friday not to let the struggling global recovery distract them from cutting budget deficits and trade imbalances.

In a letter to the G20 leaders before their summit in Korea next week, Harper reminded them of promises made during an earlier summit in Toronto in June to cut deficits and debt and a month ago to agree on guidelines for their current accounts.

Prime Minister Stephen Harper, shown during question period Thursday, has told G20 leaders to focus at their coming summit in Seoul on deficits and trade imbalances. ((Adrian Wyld/Canadian Press))

Current accounts refer to the amount of money a country as a whole owes, or is owed, by the rest of the world.

"In Seoul, we will need to take bold and concerted action, building on progress achieved in Toronto and previous summits," Harper wrote, in excerpts of the letter released by officials.

"As a first step, we must acknowledge the role played by the persistence of large and unsustainable current account imbalances, in deficit and surplus countries," he said.

The lopsided nature of global trade and investment that was partly the cause of the recession in the first place is getting worse again, he said.

"In Seoul, we should have a frank discussion on how to narrow these imbalances."

In particular, he wrote, China needs to allow its currency to appreciate more quickly. That way, China would import more and export less and ease its massive trade surpluses. The move would also help the United States with its massive debts.

Emerging markets have complained that the United States is exacerbating currency instability by engaging in a second major round of economic stimulus — a program of buying $600 billion US in American government debt by the U.S. Federal Reserve that increases the money supply and keeps interest rates down.

Since Canada hosted the June summit, negotiators have been able to agree to a package of tough reforms and financial rules and regulations for the global banking industry.

They've also been able to figure out how to reform the International Monetary Fund so that it better reflects the new global balance of power, giving a larger voice to China and other emerging markets, and a smaller voice to Europe.

Harper will leave Tuesday for the two-day summit in Korea and then travel to Japan for the Asia-Pacific Economic Co-operation summit.

There, leaders will talk further about trade balances and currency, but also about food security and free trade.

With files from The Canadian Press

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