Paris: French President Nicolas Sarkozy takes his campaign for greater global food price and currency stability to Washington this week when he seeks Barack Obama’s support for France’s goals as head of the Group of 20 powers.
Soaring food prices and riots in Algeria and elsewhere offer Sarkozy ammunition to press for more coordination among G20 governments to combat wild swings in vital commodity prices as well as exchange rates against the long-dominant US dollar.
Sarkozy wants to use his run at the G20 helm in 2011 to start, if not finish, reforms of the monetary system at a time when many countries are tempted to let their currencies drop to promote exports and growth after the worst downturn since World War Two—even if that is at each others’ expense.
Brazil’s finance minister warned of a “trade war” if countries kept pushing down exchange rates and said the United States and China were among the worst offenders. He said Brazil would take further steps to damp down the rise of its currency.
Paris is also pressing for international efforts to impose greater transparency in commodity market trading and pricing, and for tougher regulation of commodity derivatives trade along the lines pursued for other investment derivatives in the wake of the financial market crisis that began in 2007.
“As we sense it, more multilateralism is the best answer to the increased instability in the world,” a Sarkozy adviser said of a meeting on Monday in Washington, where Sarkozy will be accompanied by wife Carla Bruni-Sarkozy as well as his finance and defence ministers.
“We want to broach this thinking with the Americans and see if they are willing to join in such an approach, whereafter we can produce more precise proposals,” said the adviser, who spoke to reporters on condition of anonymity.
South Korea, which has just handed the rotating presidency of the G20 to France, said on Friday working-level meetings had already begun on food price rises that have revived fears of a repeat of the 2008 food crisis.
The problem is moving up the political agenda in Asia, where China has recently sold corn, sugar, rice and other commodities out of state reserves to cool prices.
Crowds of youths clashed with Algerian police over food prices and chronic unemployment this week.
Some of the concrete ideas being considered for G20 talks include obliging commodity investors to trade through exchanges rather than less transparent over-the-counter transactions and pressing for better sharing of data and crop forecasting.
French Prime Minister Francois Fillon underlined the point last week when he told a conference that one of France’s top G20 priorities was to find a collective response to “excessive volatility” in commodity prices, notably for food and energy.
The French president, who played a key role in coordinating a European response in the earlier stages of the financial crisis, is also keen to make headway on his view that the time has come to wean the world off decades of dollar-dependence.
“For us this is not about reducing the dollar’s role. We want the dollar to continue to play a major role but exchange rate forces are inexorably set to change, which brings with it phases of major financial tension and great instability,” said the Sarkozy adviser.
With the rise of the likes of G20 members China and Brazil, Sarkozy is trying to rally the group to the idea of a more diversified monetary system after decades in which the US dollar has served as the world’s reserve currency and a major unit of international trade settlement.
“We want to encourage the international development of other currencies, such as the yuan,” said the adviser.
Brazil has been blazing a trail to curb speculation and a recent rise in its own currency.
“This is a currency war that’s turning into a trade war,” finance minister Guido Mantega told the Financial Times.
“There are some problems as China is a big competitor in manufactured goods... of course we would like to see a revaluation of the renminbi (yuan).”
He said Brazil was preparing new measures to prevent the rise of the real, and the government would target the futures market to stem upward pressure.
Brazil’s central bank announced further measures last week that increased banks’ reserve requirements when betting that the real will strengthen against the dollar.
Obama is expected to visit France in May for a meeting of the G8, which includes the wealthy Western countries of the G20 economic forum plus Russia. The G20 has become the forum of preference for fighting the global economic crisis.
A White House spokesman said Sarkozy and Obama would also confer on security issues during their Monday meeting.
“As close allies, the presidents will also review the situations in Afghanistan, Lebanon, Iran, Ivory Coast, Sudan and Middle East Peace efforts,” he said.
“They will also discuss counterterrorism cooperation.”