The recent APEC summit in Japan came to a close on November 14, following a meeting of the G20 in South Korea. Like most high-profile international meetings conducted since the beginning of the global financial crisis, both events are already being criticized as wastes of time. Much of the blame is being apportioned to US President Barack Obama, who spent 10 days on the road in Asia, but brought little to the table and left with even less. "Obama gets smacked down at G20," read one headline. "No concrete plans from APEC summit," read another.
The first to administer smackings were Chinese negotiators. The irony is that many had originally expected that China, not the US, would be on the receiving end of multilateral discipline. Concerns shared by China’s neighbors and trade partners about the country’s recent aggressive moves on trade and territory gave Obama a strong support base from which to push China to appreciate its currency.
But the US Federal Reserve Bank and the Obama administration alienated this base by pouring US$600 billion into the US economy through the latest round of quantitative easing (QE), applying downward pressure on the dollar. This move was unilateral, arguably hypocritical, and had the effect of irritating every single trading partner the US was counting on to push China on the renminbi.
China was particularly enraged: Rumors hold that a side meeting between Chinese and American negotiators grew so acrimonious that negotiators from other countries had to intervene. The move confirmed Beijing’s worst suspicions about US economic policy. Chinese policymakers have publicly worried that the US would devalue the dollar and thus the value of China’s dollar-denominated foreign exchange holdings. QE proved them right. At the same time, China’s central bank fears the lower dollar will increase flows of foreign capital into China.
The degree of failure of the two meetings should not be overstated. It was never likely that the G20 would successfully persuade China to substantially revalue the renminbi on any schedule other than its own. And China’s inflation problem has more fundamental domestic sources – blaming US monetary policy may be convenient, but hot money flows are an irritant, not a disaster.
The enduring impotence of multilateral summits has led some wonks to suggest that the established international order itself is dissolving into regional orders dominated by organizations of smaller scope. According to this argument, forums like the UN, G20, WTO and even APEC are becoming structurally irrelevant as countries and politicians look for institutions capable of delivering more concrete results with fewer parties at the negotiating table. The real recipient of the smack-down in Seoul was not the US or China, but the G20.