World leaders show unity, vow to do no harm

By Alister Bull - Analysis

WASHINGTON (Reuters) - Bretton Woods II it was not, but world leaders achieved a crucial show of unity at their summit to confront recession, promising to revamp the global economic order and remain firmly wedded to free trade.

Old Cold War rivals from the West and former Communist East publicly tied their economic fates together on Saturday and gave themselves until April to hammer out concrete reforms.

"The real value of getting these countries together is to say that they won't do any harm, rather than they will do something for the collective good," said Raghuram Rajan, a former chief economist at the International Monetary Fund.

Leaders vowed to use fiscal policy, as well as interest rate cuts in countries that still had room to ease, to offset the steepest global economic slowdown in decades.

Their gathering, which brought the 20 leaders together for the first time, evoked the 1944 meeting in Bretton Woods, New Hampshire, that created the IMF, World Bank and a foreign exchange rate system closely tied to the dollar.

Host President George W. Bush told reporters he was not sure if the summit would earn a similar place in history, but stressed that it had more modest ambitions as a hastily convened first step toward achieving lasting change.

Among the few solid commitments was a ban on raising protectionist trade barriers for 12 months, and to agree to the long-running Doha round of trade talks by end-December.

There was also a timetable of tasks, focused heavily on tackling accounting and regulatory issues, which the leaders pledged to complete by the end of March.

They plan another summit in April, by which time President-elect Barack Obama will have been inaugurated, replacing Bush in the White House.

TOO VAGUE

Critics inevitably seized on the lack of concrete proposals for evidence that nothing of substance was achieved.

"There is no coordination in the fiscal arena, the promises made to emerging markets are vague, and even though there is a clear statement on protection and export subsidization, there is no monitoring or enforcement mechanism," wrote Dani Rodrik, a professor at the Kennedy School of Government at Harvard.

Others said they had only ever held low expectations for the event, but still voiced frustration that it had not measured up to the severity of task at hand.

"The G20 is such an unwieldy body that anything not agreed in advance is never going to happen," said Kenneth Rogoff, an economics professor at Harvard University.

"The global economy is tumbling ... this didn't really push the ball very far down the field," said Rogoff, who proceeded Rajan as IMF chief economist.