G20 in war of words on trade

World leaders Thursday start two days of summit talks dominated by an ill-tempered drive to rebalance the lopsided global economy and resolve fractious currency disputes.

Two years after their first summit, held in the depths of the global banking crisis, leaders of the Group of 20 advanced and emerging economies have been locked in a war of words over how to power growth in future.

Signs were emerging of a compromise agreement in Seoul on global imbalances arising from China’s stellar expansion and America’s deficit woes even if it is only an agreement to keep negotiating.

Talk of a “currency war” when countries jostle for trade advantage by massaging their exchange rates lower had diminished after G20 finance ministers last month vowed to avoid forex one-upmanship.

But the controversy has reignited in recent days, and U.S. President Barack Obama and other leaders still have to firm up a ministerial vow to limit surpluses and deficits in current accounts the broadest measure of trade.

The United States and Europe have long accused China of keeping the yuan grossly undervalued to boost exports. 

Washington has itself attracted widespread and stinging criticism after the Federal Reserve decided to pump an extra 600 billion dollars into the fragile U.S. economy, in a drastic stimulus policy known as “quantitative easing”.

Critics say this amounts to an effective dollar devaluation, and has the potential to trigger a 1930s-style trade war if other countries respond in kind.

But launching a staunch defense of the Fed, Obama said in New Delhi Monday that “the worst thing that could happen to the world economy, not just ours...