President Obama predicted that leaders of the world's most powerful economies will reach "a broad-based consensus" on trade and currency issues, despite sharp differences among member nations as the G-20 summit began Thursday.
The first session of the two-day meeting in Seoul yielded few if any tangible gains for an American president hoping to sell world leaders on policy changes that could help revive a flagging U.S. economy and bolster job growth.
And the meager signs of progress added to concerns that, after pulling together during the global economic crisis, leaders of the major economies — who are, after all, competitors as well as potential allies — are now intent on their own immediate interests.
Obama pressed his counterparts in the other major economies to move quickly to make currency and other policy changes he says are necessary to sustain a global recovery that can no longer rely on American consumers.
But the concessions Obama sought, while potentially beneficial to all the developed and developing countries in the long run, could rein in growth for countries that have rebounded from the recession faster than the United States — notably China, Germany and South Korea.
The limits of Obama's bargaining power — eroded by the frail domestic economy and devastating Democratic losses at the polls — was reflected in the president's failure to wrap up a new free trade agreement with South Korea. Continuing disputes over beef and auto imports and other issues forced him to abandon a self-imposed deadline of wrapping up the long-stalled deal before the summit.
Obama held separate meetings Thursday with the heads of China and Germany — two export powerhouses whose stronger recoveries and differences in economic policies have put them in opposition to Obama's agenda.
In particular, Obama sought to persuade Chinese President Hu Jintao to speed up the rise of their currency, the yuan, against the dollar, which could help the United States both on exports and on jobs. Hu told Obama that China was committed to having a more flexible exchange-rate system, officials said.
But the 80 minutes of talks produced no new signs of progress, suggesting that the G-20 leaders will struggle to find common ground as they prepare a joint statement to be issued at the close of the summit Friday.
Germany's leader, Chancellor Angela Merkel, who also met separately with Obama, did not give any ground in her opposition to an earlier U.S. proposal to set concrete limits on trade imbalances. That now appears to be off the table.
In Seoul, Obama is visiting his third nation in less than a week, part of a four-country swing through Asia aimed at strengthening American relations and presence in this fast-growing region — in both economic and national security terms.
The president began the day Thursday visiting U.S. troops stationed here and later took on North Korea, saying the rogue regime must demonstrate its sincerity about giving up its nuclear weapons program if new diplomatic talks are to begin.
"We have to see a seriousness of purpose by the North Koreans in order to spend the extraordinary time and energy that's involved in these talks," Obama said at a news conference with South Korean President Lee Myung-bak.
Their joint conference at South Korea's presidential Blue House took on a somber tone after the two leaders announced there was no free trade deal yet. The agreement has languished for more than three years as Democratic lawmakers have sought stronger market openings for American auto and beef producers — and even after furious round-the-clock negotiations, the two sides remained divided.
The failure to secure a deal at the summit, when the world was focused on Seoul, was a bitter disappointment to Lee, who has staked his political fortunes by making a free-trade pact with the United States a top priority.
"This failure may have doomed the FTA altogether for good," said Jae H. Ku, director of the U.S.-Korea Institute at the John Hopkins School of Advanced International Studies.
Politically, that is unlikely to cost Obama nearly as much as Lee. With labor and many Americans deeply suspicious about the benefits of global trade, Obama has been careful to tailor his message during this 10-day Asia tour as a mission to create American jobs, not an all-out embrace of free trade.
Over the decades, the U.S. economy — namely its consumers — has driven global economic growth and enriched export-centered nations such as Japan, South Korea and Taiwan.
But a devastating recession has exposed the indebtedness of American consumers and left the nation with unstable economic growth. Consumers in the U.S. are pulling back on purchasing.
Obama has repeatedly said that requires other countries to step up and expand their domestic spending to offset the reduced demand in the U.S.
By the International Monetary Fund's measures, among G-20 members Germany is running the largest trade surplus as a percentage of its overall economy. Germany's economy is built around exports, and its schools, financing and government policies support the nation's focus on manufacturing. Much the same can be said for China, Japan, South Korea and other export-driven economies. Change will take considerable time, and nations will insist on moving at their pace without having their hands tied.
The U.S. negotiating position has been weakened by overseas opposition to the Fed's decision to print billions of dollars to support the economy, a move that critics say is deliberately aimed at devaluing the dollar to gain an advantage in global trade.
Treasury Secretary Timothy Geithner on Thursday tried to counter the growing concerns.
"We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy," Geithner, who also is in Seoul, told CNBC. "It's not an effective strategy for any country and it's not for the U.S. We'll never do that."
But the Fed's move is clearly a source of tension between the U.S. and some other major economic powers, including China and Germany, said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington and former Fed official. The U.S. central bank's action, coming shortly before the summit, has made it difficult for the Obama administration to advance its export proposal there, he said.
"It allowed foreign officials to divert attention away from Geithner's agenda," Reinhart said. "They're trying to steer it back toward that, but once the air comes out of the balloon, it's really hard to re-inflate."
Times staff writer Jim Puzzanghera contributed to this report.