PARIS — Canada claimed credit at the G20 finance ministers gathering here Saturday for brokering a compromise deal on ways to measure whether economic "imbalances" are so drastic they could send the world spiralling into another recession.

"It wasn't easy, there were obviously diverging interests," French Finance Minister Christine Lagarde said after announcing the agreement.

The deal was struck after China agreed to accept Canada's proposed re-wording of a resolution intended to allow measurement of economic indicators, such as government and private debt and trade surpluses and deficits, said Finance Minister Jim Flaherty.

"Canadian leadership helped bridge the gap between China and the rest of the G20," he told Canadian journalists at the end of the two-day meeting.

"Canada proposed the arrangement that was ultimately accepted and my officials and I worked aggressively to secure the agreement," Flaherty said.

One G20 official, who spoke on condition of anonymity, said both Canada and the U.S. "worked very hard" to deliver a deal. But the official noted that Germany and France are also claiming credit for the breakthrough, and added that the BRIC countries — Brazil, Russia, India and China — also played important roles.

Flaherty acknowledged that there is no immediate indication that China will go beyond any concessions over words to actually deal with complaints about its policies, including its alleged artificially-low currency.

Bank of Canada governor Mark Carney, who attended the meeting with Flaherty, said Saturday's progress represented only one step in a series of meetings leading to the G20 leaders summit in November in Cannes, France.

"Ultimately, the test is policy, the test isn't process," Carney said.

U.S. Treasury Secretary Timothy Geithner underscored the ongoing concerns here when he complained that progress has been limited despite years of complaints that American companies are at a disadvantage competing with Chinese exporters.

"China's currency remains substantially undervalued, and its real effective exchange rate — the best measure to judge its currency against all of its trading partners — has not moved much in this latest period of exchange rate reform."

Canada and India were tasked at last November's G20 leaders' summit in Seoul to come up with a list of indicators that would make it easier to keep track of imbalances, such as excessive debt or trade deficits or surpluses, or accumulation of sky-high foreign reserves.

But China dug in its heels Friday, arguing against the inclusion of foreign reserves. Beijing is sensitive about criticism over its $2.8 trillion US in reserves, which critics say has been built up thanks in part to an artificially-low currency that boosts exports.

For similar reasons it also objected to the inclusion of the term "current account," which measures a country's net performance based on trade deficits or surpluses as well as the flow of income derived from interest and dividends.

A beaming Flaherty said Canada got around that problem by excluding both terms — current account and foreign reserves. But he said all the ingredients that make up the current account formula are included.

"We accomplished the goal without using the two words that China did not wish to use," he said.

Saturday's G20 communique reiterated concerns about the state of the global economy.

"The global recovery is strengthening but is still uneven and downside risks remain," the ministers declared.

"While most advanced economies are seeing modest growth and persisting high unemployment, emerging economies are experiencing more robust growth, some with signs of overheating."

The prime example of a global imbalance is the Chinese economy, which is expected to grow by almost 10 per cent this year, according to the International Monetary Fund, more than triple the IMF's projection for the U.S.

Among the concerns in China is an overpriced real estate market, the same problem that played a huge role in worsening the impact of the 2008 meltdown on the American, Spanish and Irish economies.

Canada, despite being in relatively strong financial shape and despite having a healthy banking sector, is one of the countries on the wrong side of the current account "imbalance."

Carney said last month that the "thing that keeps me up at night" is Canada's drastic swing over the past three years, going from a current account surplus of two per cent of gross domestic product to a deficit totaling four per cent of GDP.

poneil@postmedia.com

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