JIM LEHRER: And we turn again to the G20 summit and to Judy Woodruff.
JUDY WOODRUFF: To discuss the takeaways of the meetings, we’re joined once more by Eswar Prasad.He’s a professor of trade policy at Cornell University.He’s also a senior fellow at the Brookings Institution and a former economist at the International Monetary Fund.And Zanny Minton Beddoes, she’s economics editor of “The Economist” magazine.
It’s good to you have both back with us.We had you here earlier this week to preview the G20.Now let’s talk about what happened.
Zanny Minton Beddoes, to you first. We just her Sewell Chan tell Jeff in that interview that almost nobody thought this was a roaring success, but did anything positive come out of this meeting?
ZANNY MINTON BEDDOES, economics editor, The Economist:Well, they had a photo-op.They didn’t have any huge public spats.
But I think, actually, there was progress, but it was such inching forward on difficult issues as probably to be almost imperceptible to all but the most kind of devoted followers of these things.
And I think, as Sewell pointed out, there was progress on this thorny issue of imbalances.But the progress was simply that they agreed to find a mechanism — they called it indicative guidelines, which is a means of trying to measure whether imbalances are excessive or not.They didn’t actually agree to any limit.
The U.S. had been pushing a few weeks ago to have a limit, a numerical limit, for what would be too big an imbalance. They refused to agree to that. But they are going to try and find some process of these guidelines to measure what it might be in the future.
It is not a huge breakthrough.It’s not revolutionary, as the president said, but it is progress.And I think we — as we were saying earlier this week, that is what these summits do.They make progress relatively gradually.
JUDY WOODRUFF: Eswar Prasad, now, I think you have a more critical view.
ESWAR PRASAD, professor, Cornell University:I think there has definitely been progress on some fronts, in terms of ratifying issues relating to banking regulation, IMF reforms, a new model for development.That’s all very good.
But the issue of the day is about currency disputes and what happens to macroeconomic policies.And there, I think we’re facing a real tension.We do have this parallel tracks, with the advanced economies moving forward very, very slowly.They need more stimulative policies.The emerging markets, on the other hand, are moving much faster.They need tighter policies, now, the tighter policies, like tighter interest rates, for instance.
And the problem is that both these groups of economies are very large, and the world economy has become more interconnected.So there are spillovers.And making these policies consistent is very difficult.And I don’t think this G20 meeting gave us confidence that these conflicts can be resolved very easily.
JUDY WOODRUFF: Zanny Beddoes, why isn’t that something to worry about?
ZANNY MINTON BEDDOES: Of course it is something to worry about, but what Eswar had laid out is the state of the world right now.He’s absolutely right that emerging economies are growing much faster than the more stagnant rich world.And that does create issues.It does create tensions.
Those tensions haven’t gone away because of this meeting.The question — I think the way to judge whether these meetings are successful or not is whether it puts in place a process that helps us manage this.
And I would submit that it — we have inched forward in that process.We certainly haven’t gone backwards.And I think we have moved to slightly better zone, where it is no longer just the U.S. and China arguing about their bilateral exchange rate.There is now much more of a discussion about imbalances broadly.
And, sure, this is going to be a very long road.There’s going to be probably setbacks.I don’t think this summit was a setback.I just don’t think it made as much progress as one might have hoped.
JUDY WOODRUFF: But, Eswar Prasad, speaking of currency and the U.S. and China, the U.S. did go in trying to get the other countries to agree to pressure China harder to let its currency rise.
And, meanwhile, you had the Fed action, which all of the countries, the other countries, were ganging up on the U.S. over. Where does all that stand after…
ESWAR PRASAD: So, the U.S. was in a somewhat isolated position, because there was a sense that what the U.S. was doing was in its own interests, and that it wasn’t very concerned about the spillover effects of its policies on other countries.
And the reality is that, in the U.S., the benefits and risks of quantitative easing, of flooding the economy with money, are unclear.
JUDY WOODRUFF: This is the Fed policy.
ESWAR PRASAD: The Fed policy of putting more money into the economy.
But, to the rest of the world, the risks are very clear and apparent and the benefits much more tenuous.So, the U.S. started off on the back foot already.In addition, China has very effectively controlled the narrative on this issue arguing that the fundamental imbalance in the world economy right now is caused by loose U.S. monetary policy and loose U.S. fiscal policy, the very high levels of public debt that we are building up.
So, in a sense, the U.S. was cornered and I don’t think achieved its objective of bringing other countries around to the point of view that Chinese currency policy was an important problem to be fixed as well.
JUDY WOODRUFF: So, how much of a setback is that for the U.S.?
ZANNY MINTON BEDDOES: I think that the theatrics of this were a bit of a setback for the U.S.
And I think it was actually for — for one reason that was completely unrelated to the G20, which was this failure to agree, a bilateral trade agreement with Korea, because I think that that showed somehow that the U.S. couldn’t get something that was dear to its heart.
And I think that the — there was a lot of criticism behind closed doors as well of the Fed’s policy, probably more publicly.But people in — outside the U.S. are worried about this.And I think there is a sense — there is a real sense that the U.S. is doing what is in its interests or what it perceives to be in its interests, rather than the world’s interests.
JUDY WOODRUFF: But the — on the trade question, this was something the United States had been pushing for.President Obama came out of that meeting and said, we don’t have it yet.
He is sounding optimistic that it’s going to happen.What do you think the prospects are?
ESWAR PRASAD: This was a sore disappointment for both countries.
JUDY WOODRUFF: And we should say what it is about. It is dairy. It’s cattle, and it’s…
ESWAR PRASAD: Beef and autos are the two major sticking points between the two economies.
JUDY WOODRUFF: Right.
ESWAR PRASAD: And both economies really wanted it, because it would have given them very good momentum going into the summit.Unfortunately, the political differences turned out to be very difficult to bridge, because, again, as with many other policies, there are very strong domestic pressures.
It requires a fair amount of political leadership to overcome those domestic political pressures.And leaders on both sides ended up not being able to do it.And there was a hope that, when the two presidents got together, they would be able to bridge the differences.But the baggage they were bringing to these negotiations just made it very, very difficult to conclude.
JUDY WOODRUFF: What about this sense — there was a lot of speculation, Zanny Beddoes, going into and coming out of the summit that the United States, President Obama, his hand weakened because of what happened in the midterm elections in the United States last week.
ZANNY MINTON BEDDOES: There certainly was. And I think there is a perception in the rest of the world that that is the case. I’m not sure how accurate it is on things like these broad imbalances, where I just think the problem is more intractable, perhaps.
I mean, it is incredibly difficult, intractable problem.And it will take a long time to unwind.And I don’t think one midterm election makes a huge difference to that.
But where I think there are — you know, there are — in areas other than just the amounts, if you look at fiscal policy, for example, where the rest of the world looks at the U.S. and says, you know, their medium-term fiscal policy is a mess.Why can’t they sort it out?We’re doing austerity programs, if you look at Europe.
And you just have very different views about how economies should be managed.
JUDY WOODRUFF: Are we over focusing on this in the United States, do you think?
ESWAR PRASAD: No, this is a serious, because the U.S. is seen as creating a major problem.It has got loose monetary policy.It doesn’t seem, as Zanny said, to be in any position to fix its trade problem — its deficit problem.
And then, on the trade issue, it doesn’t look like the president has a great deal of interest or backing.So, all of these put together suggests that the U.S., although it has actually been doing a lot on the multilateral front, may not be able to contribute that much to these global agendas.So, I think is hurting the president’s effectiveness.
ZANNY MINTON BEDDOES: I’m wondering whether it is not that it doesn’t contribute that much.It just can’t — it can’t run the agenda in the way that it used to.And there is a clear shift there.
And I think, you know, the U.S. is this global economic leader.And a lot of — it sets the agenda, or used to — certainly used to set the agenda of a lot of these summits.And I think, this time, it’s — really, the agenda has very much followed the U.S. again, too, but that there is a subtle shift happening, which is that the rest of the G20, you know, need to be brought on board.
And it’s no longer quite as easy for the U.S. to push its way, in the way that it used to.
JUDY WOODRUFF: All right, very quickly, while I have you both here, some — during — in the middle of this G20 meeting, some of the European leaders broke away to look at what is happening in Ireland.
Deepening credit crisis, how big a problem is that?What should we expect there, Eswar?
ESWAR PRASAD: The Europeans want to keep it within the family and they want to make sure that nobody strays too much.And that actually is creating an additional set of problems, because it puts a lot of pressure on Ireland, because Germany, for instance, has made it very clear that it doesn’t want to give a bailout in very easy terms to the Irish.
The real concern is not just what happens in Ireland, but how quickly this problem could spread to other very vulnerable economies in Europe.So, I think it is a potentially serious problem.
JUDY WOODRUFF: How do you see that?
ZANNY MINTON BEDDOES: I think the problem with the periphery economies, the small economies in Europe, is a huge problem.
But I think, actually, what happened this week is kind of an interesting case on the — what can happen if you sound tough.I mean, one of the reasons the Irish debt blew out this week was because the Germans had said, we want the rules changed in Europe, so that next time there is a bailout, that bondholders actually have to pay a bit, too.We don’t want governments bailing out bondholders.
And so everybody thought, oh, my goodness, this means that they are not going to get their money back.And so the spreads on Irish debt blew out.And the meeting was basically about the finance minister saying, no, no, no, we’re not going to do this right now.Don’t worry.It is all going to be OK.
JUDY WOODRUFF: One more thing to worry about and one more thing to cover at the G20.
ZANNY MINTON BEDDOES: This crisis is going to — the acute phase of the crisis may be over, but the ramifications are going to go on a long time.
JUDY WOODRUFF: Well, we appreciate you both coming back. Zanny Minton Beddoes, Eswar Prasad, thank you both.
ZANNY MINTON BEDDOES: Thank you.
ESWAR PRASAD: My pleasure.