AP: ‘Embarrassing Setback’ for Obama on Job-Creating Trade Agreement With S. Korea

By Erica Werner | November 12, 2010 | 5:01 AM EST

President Barack Obama shakes hands with China's President Hu Jintao during the photo session at the G20 Summit in Seoul, South Korea, on Thursday, Nov. 12, 2010. (AP Photo/Philippe Wojazer, Pool)

Seoul, South Korea (AP) - President Barack Obama said Friday the global economy is "back on the path to recovery," although he and his G-20 summit partners must work further to resolve differences over trade and currency issues.

While Obama talked optimistically about world economic prospects, he cautioned that "we risk slipping back into the old imbalances which created the economic crisis in the first place." He said that "the 20 major economies gathered here are in broad agreement on the way forward."

The president said that means keeping the focus on "balanced and sustained growth" across the globe. He said that "countries with large surpluses must shift away from unhealthy dependency on exports" and said that exchange rates "must reflect economic realities."

On another issue, Obama said he needs "extra time" to reach agreement with longtime ally South Korea on a new free-trade agreement. He said he "wasn't interested in making an announcement" just to send a signal of success and said he thinks any such pact can -- and must -- can be a "win-win" deal for the United States.

Of the global economy generally, Obama said that while improvements have been made in a number of areas, he and other leaders recognize "progress hasn't come quickly enough," particularly in the area of job creation.

"We have a recovery," he said when asked about lingering high joblessness in America.

"It needs to be speeded up. Government cannot hire back the 8 million people that lost jobs," he said. "That needs to be done by the private sector," he said of the economic woes back home in the United States.

Obama rejected suggestions that he had been weakened on the world stage by election losses at home. He said that leaders around the world -- particularly in Asia -- are eager to work with America on economic and security matters.

Asked about continuing differences with China over what the United States considers as unfair trade and currency practices, Obama said he has long spoken out for a growing and vibrant China.

"It is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued," he said of China's currency.

Obama started this Asian trip in the wake of a political battering at home, as Republicans recaptured the House and significantly curbed the Democratic majority margin in the Senate.

Although he had some déjà vu moments in visiting Indonesia, where he spent four years growing up, and announcing a series of confidence-building agreements with both India and Indonesia, the president struck out in his attempt to close a new free-trade pact with Seoul.

It was an embarrassing setback for a president who stressed that the top objective of this trip was to cement agreements that would help create jobs at home, particularly through new trade opportunities with fast-growing economies like China, India and Indonesia.

Obama will confront the same vexing trade and currency issues when he arrives in Yokohama, Japan, later Friday for the summit of the Asia-Pacific Economic Cooperation, which is expected to move on creation of a Pacific-wide free trade zone that would encompass more than half the world's economic output.

He sought to deflect talk of missed opportunities.

"The work that we do here is not going to seem dramatic. It is not always going to be world-changing. But step to step, what we're doing is building stronger international mechanisms and institutions" that will help stabilize the world economy "and reduce tensions" among nations," Obama said.

"The easiest thing for us to do would be to take a passive role and just let things drift," the president said. He acknowledged that "some countries push back" in response to his suggestions about global economic strategy, but said that he will continue to push "to bring about changes."

On the question of extending Bush era tax cuts at home, he said, "I want to make sure that taxes don't go up for middle-income families on Jan. 1. That's my top priority." He reiterated that he opposes a permanent extension of those tax breaks for the wealthy.

"I'm not going to negotiate here in Seoul on those issues, but I've made very clear what my priorities are," he said.

Obama said he believes the reporting on the G-20 summit has been "all about conflict," and said much was accomplished here. Obama said G-20 leaders, among other things, developed a system to give "the international community the ability to monitor and see what countries are doing," and particularly gives the world a mechanism to determine whether countries are engaging in unfair practices with their trading partners.

Obama also addressed criticisms the United States has heard at the G-20 summit about the move by the Federal Reserve Board to buy $600 billion worth of U.S. government bonds to help stimulate consumer demand and ease borrowing.

Critics have said the action represented the very kind of "currency manipulation" that Washington has criticized in connection with China, because it could have the effect of devaluing the dollar and making U.S. exports cheaper.

The president noted that he has been reluctant to talk about the actions of the Fed, an independent body, but he also said he felt the board's move "was not designed to have an impact on the currency, the dollar. It was designed to grow the economy."

Of the summit that is ending here, he said "we've made enormous progress."

Obama says global economy and U.S. on 'path to recovery'