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G20 vows to combat oil, economy risks

XIANGHE (China) — The G20 group of rich and developing nations vowed yesterday to adopt whatever policies necessary to combat sky-high oil prices and other threats to global economic prosperity.

Meeting near Beijing, G20 finance ministers and central bank governors voiced concern about both the inflationary risks from oil and the dangers from rising protectionist tendencies and economic imbalances such as the U.S. deficit.

“We are concerned that long-lasting high and volatile oil prices could slow down growth and cause instability in the global economy,” a draft statement said.

Rodrigo Rato, head of the International Monetary Fund, said global growth this year should remain solid at 4.3 per cent but that the world could take a bad hit because of oil and other cracks in the system.

“These imbalances pose serious risks to prosperity, because they are clearly unsustainable, and if they are corrected in a disorderly way, through an abrupt decline in the U.S. dollar and rise in U.S. interest rates, growth and prosperity all over the world will be threatened,” Rato said.

Rato was attending the two-day G20 gathering with ministers and bankers from all the world’s wealthy industrialised nations as well as rising stars such as China, India and Brazil.

A joint statement was being prepared for publication at the end of their meeting on Sunday, a draft version of which showed on Saturday they were keen to secure a collective commitment to coordination of policy.

“We are resolved to implement the necessary fiscal, monetary and exchange rate policies (and) accelerate structural adjustments to resolve these imbalances and risks,” the draft said.

While Americans’ willingness to borrow and spend, and other countries’ willingness to lend, is helping to fuel world growth, economists say the situation is unsustainable, but they are not the only ones blamed for putting the economic system at risk.

U.S. Treasury John Snow came to China demanding that Beijing do more to let the market decide the value of the yuan currency as cheap Chinese exports make a breakthrough on world markets.

But Chinese President Hu Jintao said a steady hand was vital for world stability and the finance ministers of Britain, Japan and France all took a softer line, commending China on the currency reform it had implemented so far.

The veneer of cooperation also looked thin on trade issues.

World Bank President Paul Wolfowitz, also attending the G20 talks, called on rich countries to make painful concessions in world trade talks. But France said it believed EU concessions to Washington may have already gone too far as far as farming — the key issue — was concerned.

Wolfowitz said the talks would fail unless all countries gave ground to reach an outline deal at a meeting in Hong Kong in December of the 148 member nations of the World Trade Organisation.

“It’s not an exaggeration to say that 1.2 billion people living in extreme poverty need a result from Hong Kong,” Wolfowitz told reporters. On oil, the G20 stressed the need to promote energy saving and alternative sources of energy and to reduce subsidies on oil products.