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5/12/2020 Statement of Secretary Timothy F. Geithner U.S. DEPARTMENT OF THE TREASURY Press Center Statement of Secretary Timothy F. Geithner 10/23/2010 G-20 Press Conference Gyeongju, Korea GYEONGJU, KOREA--U.S. Treasury Secretary Timothy F. Geithner today delivered the following statement at a press conference at the conclusion of the G-20 Finance and Central Bank Deputies Meeting & G-20 Finance Ministers and Central Bank Governors' Meeting. Remarks are prepared for delivery. "Good afternoon and thank you for joining me here today. First of all, thank you to our gracious host, Korea, and the city of Gyeongju. "We met here against the backdrop of a world economy that is gradually healing from the damage caused by the financial crisis. The world is growing, and overall we believe the recovery will gradually strengthen in the coming months. "We still face very substantial economic challenges across the advanced and developing economies. We need stronger growth in the major economies. Emerging economies are facing the very different challenge of managing the pressures associated with very strong growth. "We spent the last few weeks exploring ways to strengthen our cooperation on exchange rate and other economic policies. The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future. Why this focus on balance, and why is this important? "The world economy is going through a necessary, but complicated process of adjustment. The major economies are all in varying stages of working through the large financial imbalances – excess borrowing relative to income, overinvestment in real estate, unsustainable leverage in the financial sector -- all of which contributed to the crisis and will slow the pace of recovery. Emerging market economies are expanding at a rapid pace, and are attracting substantial flows of capital. "If the world is going to be able to grow at a strong, sustainable pace in the future, if we are going to be successful in building a more stable global financial system, and if we are going to be able continue to expand opportunities for trade and preserve an open trading system, then we need to work to achieve more balance in the pattern of global growth as we recover from the crisis. "This requires a shift in growth strategies by countries that have traditionally run large trade and current account surpluses, away from export dependence and toward stronger domestic demand led growth. This entails a range of policy changes, as you can see in the very broad range of domestic reforms being undertaken by China. An important part of this transition is a gradual appreciation of these emerging market currencies relative to the major currencies as a group. "And these changes by surplus economies, both emerging and advanced, need to be complemented by reforms in countries like the United States to increase savings--including restoring fiscal sustainability-- to shift growth from consumption to investment and to exports. "The adjustments now underway will happen, but if they happen in a framework of international cooperation, they will be achieved with stronger overall global growth rates, less risk of financial instability, and less protectionist pressures at the national level. "The framework of cooperation we agreed to today recognizes that none of us can accomplish this alone. This is inherently a multilateral challenge. I want to emphasize three key points: "First, we have agreed that it is important to limit the overall level of external imbalances across the global economy. Those imbalances are lower today than they were before the crisis. Where they are still high, it is important that we implement sound policies, consistent with reducing imbalances, and to prevent them from expanding again to levels that could threaten future growth and stability. "Second, we have agreed to cooperate more closely on exchange rate policy. Countries with significantly undervalued exchange rates committed to move towards more marketdetermined exchange-rate systems that reflect economic fundamentals, as China is now doing. The countries responsible for the dollar, euro and yen recognized the importance of preserving stability among the major currencies and avoiding excess volatility and disorderly exchange rate movements. We all committed to refrain from competitive devaluation, or undervaluation. Together, these commitments should help reduce some of the pressure being experienced by those emerging economies that are appropriately running more flexible exchange rate systems and have already seen their currencies move significantly higher. "Third, we agreed to give a greater role to the IMF in implementing these commitments. The IMF was created to play this role, but its ability to do so in practice has been constrained by the reluctance of its members to expose themselves to a candid, independent, external assessment of the effects of their policies on the global economy as a whole, and to allow the IMF staff and management to offer broad judgments on exchange rate misalignments. This must change, and we want to see the IMF act on the mandate it received here today. "This is important, for without a strong, independent mechanism for encouraging cooperation, countries will feel more pressure to take action on their own to protect their interests. "The value of this framework to limit trade imbalances is that rights and responsibilities are aligned and balanced. Countries with surpluses and countries with deficits, the advanced economies and the large emerging economies, all have a responsibility to play their part in contributing to stronger and more sustainable growth. "Alongside these changes, we agreed to a very strong set of reforms to the International Monetary Fund. These changes improve the ability of the IMF to help its members deal with future crises. They change the governance structure to give emerging economies a greater voice in the institution and more seats on the Board. I want to acknowledge in particular the willingness of the Europeans to make this possible by giving up two of their seats. https://www.treasury.gov/press-center/press-releases/Pages/tg920.aspx 1/2 5/12/2020 Statement of Secretary Timothy F. Geithner "Together these reforms recognize that greater representation for the emerging economies in international institutions comes with greater responsibilities for making the institutions, and the global economy, work better. "We were honored to have South Korea's President Lee Myung-Bak come to Gyeongju and we appreciate the role of the Korean presidency in helping us all achieve the concrete outcomes of the meetings. Thank you." https://www.treasury.gov/press-center/press-releases/Pages/tg920.aspx 2/2
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