Vice finance ministers from the Group of 20 nations remain divided over how to resolve current account imbalances, despite agreeing on the need to reduce destabilizing uncertainties, sources said Tuesday.
The first day of their talks on Monday highlighted sharp differences in how G-20 members viewed the current account imbalance issue that is directly linked to the currency dispute, sources at the summit preparation committee and the finance ministry said
The closed-door gathering to finalize the Seoul Declaration at the end of the two-day summit on Friday focused on the initial draft sent to member countries over the weekend, with the results of the discussions being forwarded to the leaders from the world's 20 prominent advanced and emerging economies.
"There was broad understanding that currency disputes between such countries as the United States and China were a source of concern and all sides need to cooperate on this matter," said an insider, who did not wish to be identified.
He, however, said setting a cap or guidelines on current account surpluses or deficits in proportion to gross domestic product (GDP) has run into opposition, although countries agreed on the plan at the Gyeongju finance ministers meeting last month.
Linking deficit and surpluses to the GDP can effectively deal with allegations that some countries have tampered with foreign exchange rates to boost exports.
At the meeting, G-20 finance ministers agreed to move toward a more market-determined exchange system that reflects underlying economic fundamentals and refrains from competitive devaluation of currencies. They said countries should pursue a full range of policies conducive to reducing excessive imbalances to sustainable levels.
"Countries such as Germany stressed that their current account surplus is due to their competitiveness and not artificial exchange rate policies," the official said.
Seoul, as chair of the summit, proposed offering allowances to reflect various individual conditions for natural resource exporters and countries that have trade surpluses but do not engage in currency control. Countries such as Saudi Arabia have large surpluses since they export crude oil, which is vital for the global economy, he said.
The official, however, hinted that a rough guideline on limiting the size of the current account imbalance may be possible when leaders meet later in the week since all G-20 countries understand the need to take such measures.
"Even China did not object to this plan in Gyeongju," he said, hinting that some sort of agreement could be reached on guidelines.
The United States, which posts a chronic trade deficit, called for a 4 percent ceiling on the size of a deficit or surplus that may be reflected as a reference point at the summit.
In addition to the currency issue, vice ministers are checking the so-called Seoul Action Plan to lay the framework for strong, sustainable and balanced growth, and related review process to make certain policies of one country do not hurt growth of others.
Other issues such as the "Korea Initiative" to set up a global financial safety net and reforming the International Monetary Fund had run into no opposition and should be outlined in the final statement.