G7 nations pledge free trade

Finance ministers say protectionist measures will only worsen economic downturn.

    Geithner, right, said all nations must commit
    to open trade despite the downturn [AFP]

    A stimulus plan for the US economy, which was passed by the US congress on Friday, has been criticised by other governments as it contains billions of dollars for building projects that are required to use US materials.

    Germany and Britain warned that the world risked seeing a repeat of the damaging protectionist spiral during the Great Depression, the global economic crisis that followed a stock market crash in 1929.

    US 'obligations'

    Alistair Darling, Britain's finance minister, said he had discussed the "Buy American" issue with Timothy Geithner, the US treasury secretary.

    "The world economy is close to recession. The advanced countries are in deep recession"

    Dominique Strauss-Kahn,
    IMF chief

    "I think the US is very aware of its obligations to the world," he said on Friday.

    In a statement issued after the meeting, Geithner said: "All countries need to sustain a commitment to open trade and investment policies which are essential to economc growth and prosperity."

    The pledge came as the International Monetary Fund (IMF) warned that the world's advanced economies were in a "serious" and "deep" recession.

    "The world economy is close to recession. The advanced countries are in deep recession," Dominique Strauss-Kahn, the IMF chief, said.

    "We don't see any signal for the time being showing that 2009 could be better than we expect."

    Conciliatory tone

    The G7 nations also adopted a conciliatory tone towards China after the US said Beijing was manipulating its exchange rate to its advantage. 

    The statement said that the G7 countries welcomed China's commitment to a more flexible currency and expected the yuan to continue to appreciate.

    One official suggested that the change in tone was due to the need to be supportive of Beijing's attempt to stimulate its economy, a major driver of world growth in recent years.

    "The more conciliatory tone on China is the key departure from previous statements," Geoffrey Yu, a UBS Bank analyst, said.

    "The G7 has realised that China needs to be brought into the fold of the global financial system rather than be treated as a pariah just because of CNY [yuan] inflexibility."

    The G7 meeting came before a meeting of the G20 nations - which icludes China, India and other emerging economies - in April.

    SOURCE: Agencies


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