The United States struggled on Friday to win backing for its proposal of setting numerical targets for external imbalances as a way of pressing surplus countries such as China to let their exchange rates rise. In a letter to fellow finance ministers of the Group of 20 leading economies, U.S. Treasury Secretary Timothy Geithner said countries should implement policies to reduce their current account imbalances below a specified share of national output.
Diplomats said the Treasury chief was proposing to limit surpluses and deficits on the current account -- the broadest measure of trade in goods and services -- to 4 percent of gross domestic product. But Geithner's proposal met a cool reception on the first day of a two-day meeting meant to smooth the path for a G20 summit in Seoul on November 11-12. German Economy Minister Rainer Bruederle warned of falling back into "planned economy thinking," while Russian Deputy Finance Minister Dmitry Pankin said the draft communique to be issued on Saturday would stay clear of numerical targets.
"The communique is very politically correct. There's nothing sharp in it," Pankin said. "In the long term the focus should be on the exchange rates reflecting market conditions. Excessive state interference in currencies should be avoided."