Treasury’s Paulson Says More Work Needed on Trade Imbalances
USINFO Special Correspondent
Washington – U.S. Treasury Secretary Henry Paulson says the Group of Seven (G7) nations - the world's major industrialized democracies - have made progress toward reducing global trade imbalances, but that "more needs to be done."
Paulson gave his generally upbeat assessment of the world economy, including a healthy U.S. economy that is "making a transition to a sustainable expansion," in a statement following an April 13 meeting here with finance ministers and central bank governors from Canada, France, Germany, the United Kingdom, Italy and Japan.
Citing the need for "strong domestic demand in major economies such as Japan and Europe," Paulson also stressed the role that China and oil exporting nations must play in redressing the imbalances that still adversely affect the global trade picture.
"Greater exchange rate flexibility and stronger domestic demand in China are critical parts of rebalancing, and it is crucial that China move now with greater urgency," Paulson said. And, he added, "Oil exporters also need to undertake measures to increase investment and consumption." (See related article.)
Paulson reported that he and his fellow finance chiefs had held serious discussions on how to proceed at what he termed "a critical juncture for progress" in the World Trade Organization’s ongoing Doha Development Round of trade negotiations.
"Substantial progress on services, including financial services, must be [an] integral part of a development round, so finance ministries need to work together to reinvigorate the financial services negotiations," he said. "Progress must be based on a substantive break-through."
Notwithstanding the "positive backdrop" provided by the current global expansion, Paulson noted, "we remain aware of risks to the world economy." Those risks, he said, include high and volatile fuel prices, rising protectionist pressures, and the vulnerability of global financial markets to reversals of the sort experienced earlier in the year. Still, he said, "the system has proved to be resilient and adjustments orderly" in the wake of those reversals.
Paulson cited a need for reforms in the structure of the International Monetary Fund (IMF) and improvements in its exchange rate surveillance procedures, declaring that G7 members, as major shareholders, "must make the IMF look more like the world economy in which it operates." (See related article.)
He said it was essential to "be bold and follow through with fundamental reform of IMF quotas," adding that he thinks "there is a path forward that could achieve this objective, but doing so will require a rededication by many countries to the understanding that a strong IMF benefits us all."
Paulson cited the need for continuing efforts to promote development in low-income countries, "especially ways to address debt sustainability concerns." He said the development of responsible lending policies and practices remains central to this effort, and he called on creditor nations to incorporate the IMF/World Bank Joint Debt Sustainability Framework into their lending practices.
The secretary reported that the finance chiefs had reaffirmed their commitment to combating money laundering, terrorist financing, and similar threats to the stability and integrity of the international financial system.
And Paulson reaffirmed the U.S. commitment to "improving energy security and tackling the important issue of climate change," saying he had urged his G7 colleagues "to explore creative policies to address these issues that will engage developing countries." (See related article.)
He cited the need to speed up use of low-carbon energy technologies. "Solving climate change is fundamentally a technology challenge, so we must consider how best to achieve this goal," Paulson said.
The text of Paulson’s statement can be found on the U.S. Treasury Department’s Web site.
For more information on U.S. policy, see Group of Eight.