Geithner says U.S. needs G20 cooperation

U.S. Treasury Secretary Timothy Geithner testifies before the Senate Foreign Relations Committee hearing on ''The U.S. and the G-20: Remaking the International Economic Architecture ” on Capitol Hill in Washington November 17, 2009. Weaning the global economy off its reliance on U.S. consumers will help rebalance growth and support attempts to bring down unemployment, Geithner said on Tuesday.

WASHINGTON (Reuters) - Weaning the global economy off its reliance on U.S. consumers will help rebalance growth and support attempts to bring down unemployment, U.S. Treasury Secretary Timothy Geithner said on Tuesday.

The two biggest players in that rebalancing act, the United States and China, have already made progress, and Geithner gave an upbeat assessment of President Barack Obama's trip to China.

"Moving from a global economy based on U.S. demand to one based on global demand is critical to our domestic efforts to reduce unemployment and increase the wages of middle-class Americans," Geithner told the U.S. Senate Foreign Relations Committee.

In wide-ranging remarks, from the role of the Group of 20 nations in the global economy to financing climate change and poverty reduction, Geithner said the United States would be more effective in achieving its own economic goals by working in partnership with other countries.

He was not asked about the value of the U.S. dollar, which has slumped by a little more than 15 percent since mid-March, when global economic concerns sent investors searching for safe havens. On the economy, he said it still needed public support as recovery takes hold and private demand revives.

"We cannot make the mistake of putting on the brakes too early or withdrawing support prematurely," he said, echoing a common theme at recent G20 gatherings.

Geithner said Obama had made "a lot of progress" on economic issues in his recent trip to China.

"I think the best test of that is just to look at ... what China is actually doing in terms of policies to shift sources of future growth away from exports," he said.

He said Beijing had a good plan to move away from a growth strategy that relies on heavy industry and exports to one more reliant on domestic demand, but cautioned this would take time.

"We want to see more open markets in China, a more level playing field for U.S. companies that compete in China and compete with China around the world. And it's very important we see financial reforms, broader reforms to their exchange rate system over time that will help reinforce this process toward a more-balanced global recovery," Geithner said.

Beijing has kept the value of its yuan currency nearly frozen in place against the U.S. dollar over the past year, leading to cries of foul from U.S. producers and complaints from other Asian exporting nations that have seen their currencies rise in value.

After meeting with Chinese President Hu Jintao, Obama on Tuesday said movement by China on its exchange rate would "make an essential contribution to the global rebalancing effort."

IMF TO HELP LEAD WAY ON REBALANCING

Geithner told the committee the International Monetary Fund would need to be at the center in helping G20 countries adopt economic policies that foster more balanced global growth.

The IMF itself needs to be overhauled to give greater voice to dynamic emerging and developing countries, Geithner said. He has pushed hard for countries such as China to have more say within the IMF, arguing that their influence should be commensurate with their growing economic clout.

As for the G20, he said it would not completely supplant the smaller G7 or G8 clubs of rich nations, which would still meet from time to time. The larger G20, which includes some emerging economies, is "the best available alternatives today," Geithner said.

"It's not perfect," he added, although he said its core membership ought to remain stable to maintain its effectiveness.

Geithner also said more money was needed to help poorer countries transition to a greener world economy, with the World Bank playing a critical role, and called on Congress to make good on more than $1 billion in pledges owed to multilateral development banks to fight poverty.

Developing countries need financial support to cut greenhouse gas emissions, create new markets for clean energy technologies and adapt to the effects of climate change, he said.

"Climate finance therefore will need to be scaled up significantly, but we must do so in a way that is efficient and leverages U.S. investments in the area of climate," he said. (Editing by Leslie Adler)