GYEONGJU, South Korea (MNI) – Canadian Finance Minister Jim
Flaherty said Friday that Canada agrees with the proposal by U.S.
Treasury Secretary Tim Geithner to link the pace of reducing current
account imbalances to a share of GDP.

He also told reporters that one of the issues major economies are
trying to refocus on is ways to make China’s currency regime more
flexible.

“There are some actions that have been taken recently by some
countries that are of concern because countries are moving to protect
their currencies, there is a threat of some trade retaliation. These are
all protectionist type measures that we all agree that we will avoid,”
he said.

Flaherty said Geithner’s letter addressed to his G20 colleagues was
“helpful” as “it sets out a possible way forward.”

In his letter dated Oct. 20, Geithner said that “G20 countries
should commit to undertake policies consistent with reducing external
imbalances below a specific share of GDP over the next few years.”

“This means that G20 countries running persistent deficits should
boost national savings by adopting credible medium-term fiscal targets
consistent with sustainable debt levels and by strengthening export
performance,” Geithner said. “Conversely, G20 countries with persistent
surpluses should undertake structural, fiscal, and exchange rate
policies to boost domestic sources of growth and support global demand.

“We agree because it fits with strong, sustainable and balanced
growth that we need to accomplish. I had a useful discussion with the
minister of finance of China this morning on that subject,” said
Flaherty.

Asked if there will be an agreement on the proposal, he replied,
“It is directionally useful. I think we all agree on the direction.”

“No one wants to be confrontational here. No one wants to walk away
from here without an action plan,” he said, referring to a blueprint by
top G20 financial policymakers to be presented to their leaders for
their G20 summit in Seoul next month.

In measuring imbalances, Flaherty said the current account balance
is one measure but not the only one.

“There is some discussion about whether or not we will be able to
agree on a quantitative measure like current account balances,” he said.

Flaherty, who chaired the Group of Seven meeting of finance
ministers and central bank governors on Friday, described it as an
“informal, flexible, excellent exchange of views.”

“We had a frank exchange of views, which I think was quite useful.
It will be reflected in the discussions we are starting to have this
afternoon as a group in the G20,” he said.

msato@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: MT$$$$,M$$CR$,MGX$$$,M$$FX$,MI$$$$]