The Seoul Declaration, a statement to be announced at the end of next week's G-20 summit, will likely call for an end to the currency dispute that can hurt global efforts for balanced sustainable growth, government sources said Thursday.
The local summit preparation committee and finance ministry officials said the summit set for Nov. 11-12 will confirm headway made at the Gyeongju finance minister meeting that called for refraining from competitive devaluation of respective currencies and reigning in excessive current account imbalances.
"If last month's ministerial meeting halted the currency standoff from getting out of hand, next week's summit could lead to an understanding and pledge for cooperation on this critical issue," an official, who declined to be identified, said.
The currency issue has made headlines in recent weeks as countries like the United States and those in the European Union pressured China to allow the yuan to float more freely on the foreign exchange market.
Beijing countered that it did not engage in currency manipulation and made clear it will not bend to outside demands although it decided to raise key interest rates that could cause the yuan to appreciate against the U.S. dollar.
The insider said that while nothing has been decided at present, depending on talks carried out by vice finance ministers starting Monday, the final declaration could include wording on how countries can pursue more market-determined exchange rate systems. It may also provide guidelines to cope with current account imbalances that have the potential to fuel protectionist policies and trigger a full-fledged trade war.
He hinted that more details may be added to Seoul's proposal to reduce imbalances by placing a cap on the size of a current account surplus or deficit compared to a country's gross domestic product (GDP) at the summit.
South Korean sources said they have moved to categorize the G-20 members into four large groups to reflect different economic circumstances. The groups are divided into countries that are crude oil producers, those that do not have indigenous oil reserves, nations that rely heavily on trade and economies that receive a large influx of overseas investments.
The categorization will permit some leeway to be exercised if a numerical understanding can be reached on linking a deficit or surplus with the GDP. Last month Washington called for surplus or deficit limit of 4 percent of the GDP although it was not accepted mainly due to objections raised by export-oriented countries.
"Any recommendations to resolve the imbalance issue will likely be centered on countries with large trade deficits like the United States and those that maintain chronic surpluses such as China," the official said.
Other issues to be included in the declaration may call for a standstill on protectionist measures that can adversely affect trade and hinder ongoing economic growth. Such a call from countries representing 85 percent of the world's total GDP may have added benefit of prodding the World Trade Organization (WTO) to do more to reach a breakthrough on the stalled Doha Development Agenda.
The Gyeongu ministerial communique released on Oct. 23 made clear that G-20 members should resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade.
The finance ministry, meanwhile, said international organizations such as the Organization for Economic Cooperation and Development, International Labour Organization and World Bank plan to make reports on growth and job market conditions around the world and benefits of free trade on economic development.
The United Nations Conference on Trade and Development and WTO also plan to release data on investment trends, trade in the service sectors and various trade barriers around the world as part of a broader process to get countries to open their markets to competition.