NEW DELHI—U.S. President Barack Obama, returning fire in a heated exchange between the U.S. and Germany, added his voice to U.S. efforts to reduce the massive German and Chinese trade surpluses and increase pressure on China to let the value of its currency rise.
Tensions have flared between German and U.S. economic officials ahead of the summit of the Group of 20 industrial powers, which begins Wednesday night in Seoul. U.S. Treasury Secretary Timothy Geithner has been pressing member nations to adopt targets to lower trade surpluses and trade deficits. In return, German officials have publicly lectured Washington about the wisdom of its economic policies.
In a joint news conference with Indian Prime Minister Manmohan Singh in India’s capital, the U.S. president came close to defending the U.S. Federal Reserve’s decision to pump $600 billion into the economy by buying U.S. Treasury bonds in a bid to keep interest rates low and spur consumer demand. The Federal Reserve is independent of the administration, and by tradition White Houses have strained to avoid any appearance of collusion on Fed and administration policies.
Mr. Obama said the administration doesn’t comment on particular actions of the U.S. central bank, then said, “I will say the Fed’s mandate, my mandate, is to grow our economy, and that’s not just good for the U.S. That’s good for the world as a whole.”
Also Monday, in a speech before India’s parliament, he called on Pakistan to eliminate terrorist safe havens within its borders, a move likely to be greeted well by critics in India, even as it touches on a sensitive area in U.S.-Pakistan relations.
German officials have accused the United States of joining other countries in a currency war designed to drive the value of currencies down, cheapen their products and boost exports. German Finance Minister Wolfgang Schäuble lashed out at U.S. pressure on Berlin to rein in the country’s surging exports, accusing Washington of hypocrisy and telling Der Spiegel magazine, “the American growth model … is stuck on a deep crisis.”
“It doesn’t add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank’s printing presses, artificially lower the value of the dollar,” he said.
Data released Monday by Germany’s federal statistical office showed the country’s trade surplus shot up to €16.8 billion in September from €9 billion in August, much larger than the €12 billion economists had anticipated and further evidence that the German economy continues to rely on exports to drive its recovery.
Mr. Obama didn’t back down. “We can’t continue situations where some countries maintain massive [trade] surpluses, other countries have massive deficits and, never is there an adjustment with respect to currency that would lead to a more balanced growth pattern.”
And he enlisted a key ally in Mr. Singh, an economist whose country, along with Brazil and China, is wielding increasing influence at the G-20. Responding to Mr. Schäuble’s denunciation of the Fed move, the prime minister said, “Anything that stimulates the underlying growth impulses of entrepreneurship in the United States would help the cause of global prosperity.”
The G-20 is shaping up as a showdown between the exporting powers and nations like the U.S. that are struggling to emerge from recession and high unemployment by tapping export markets. Mr. Geithner, facing continuing resistance from China on the currency issue, has shifted his focus to trade surpluses, which can be exacerbated by artificially low currency prices as well as other policies. That was meant to lift some of the pressure from China and spread it to other nations, especially Germany.
But Mr. Geithner has backed off demands that the summit produce numerical targets for countries to strive for in reducing trade surpluses after Berlin made it clear it wouldn’t accede. The U.S. president made it clear the issue would still top his demands when he presses for “balanced and sustainable growth.”
Mr. Obama, at the press conference, repeated his remarks of the day before in which he encouraged expanded peace efforts between India and Pakistan and he praised Mr. Singh’s dedication to resolving the outstanding issues between the two neighbors.
In a speech to Parliament later Monday, Mr. Obama plans to again prod New Delhi to pursue confidence-building measures as a prelude to broader peace efforts. The U.S. president is also expected to endorse India’s push for a permanent seat on the United Nations Security Council.
Mr. Singh gave a cautious response to the encouragement of talks, repeating India’s line that Pakistan needs to do more to combat terrorism before it can expect a wide-ranging discussion with India.
He said that “the terrorism machine is as active as ever” in Pakistan and that “once Pakistan moves away from this terror-induced question, we will be very happy to engage productively with Pakistan to resolve our outstanding issues.”
Mr. Obama also defended his rhetoric against the outsourcing of jobs to India and China, saying “I don’t think you’ve seen me making outsourcing a boogey man during the course of my visit.”
Since his arrival Saturday, the president has spoken instead of economic stereotypes on both sides of the Indo-American relationship that have outlived their usefulness. But he spoke often of jobs being shipped “from Boston to Bangalore” on the campaign trail before his party’s drubbing last Tuesday in U.S. midterm elections.
Mr. Singh, for his part, said the India is “not in the business of stealing jobs” from America—a frequent critique of outsourcing from some in America.
In a speech later Monday before Parliament, Mr. Obama addressed several of the most sensitive issues confronting the two nations. He reassured the Indian Parliament that the U.S. “will not abandon the people of Afghanistan—or the region—to the violent extremists who threaten us all.”
He addressed Pakistan directly on terrorist organizations that operate on its soil, something some Indian commentators repeatedly have called on him to do since he arrived Saturday.
“We will continue to insist to Pakistan’s leaders that terrorist safe havens within their borders are unacceptable, and that the terrorists behind the Mumbai attacks be brought to justice,” he said
Mr. Obama also said he looked forward to overhauls at the United Nations that could include India’s having a permanent seat on the United Nations Security Council. Undersecretary of State William Burns said such a process is underway but he acknowledged “it is bound to take a considerable amount of time.” He also said the U.S. has yet to lay out its vision of what that reconstituted Security Council will even look like.
Mr. Obama called on India to press to be more vocal in opposing the military dictatorship in neighboring Myanmar, where India and China are vying for commercial and political influence but where the U.S. sees major human rights abuses and political suppression. “If I can be frank, in international fora, India has often avoided these issues,” Mr. Obama said. “But speaking up for those who cannot do so for themselves is not interfering in the affairs of other countries. It’s not violating the rights of sovereign nations. It’s staying true to our democratic principles.”
Write to Jonathan Weisman at email@example.com