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The key policy issue facing the G7 finance ministers meeting in Boca Raton, Florida on February 6-7, 2004 was to address widespread international alarm that is being created as a result of the fact that American dollar valuer continues to decrease. The key statement that the G-7 made was "excess volatility and disorderly movements in exchange rates are undesirable for economic growth." These countries can gain by coordinating their microeconomic policies that the dollar rapid decline and euro's rise do not jeopardize exports of European nations even as US exports receive an increase in exports. The criticism was issued at China and Japan that they have worked at keeping their currency from rising in value. The meeting didn't provide confront zone for global currency markets since American officials didn't give any clue in how they will implement their desired action. The weaker dollar has provided a big boost to US exports since it makes them cheaper while stronger Europe has created big problems for European exports since it makes them more expressive. Since exports are virtually the only source of economic growth in countries such as Germany and France the European finance ministers and central bankers want to reach some sort of an agreement in stopping American dollar from further decrease. Another concern for the G7 countries is the fact that US has a huge budget deficit which in turn creates a need for foreign borrowing which already is at alarming levels. Although President Bush has previously stated that one of his goals is to decrease the budget deficit of the US the fact that his administration targets large tax cuts to be enforced as well as cost of maintaining overseas troops in places such as Iraq and Afghanistan make Bush's anti-deficit plan that much more unlikely to be accomplished. Another issue that the G7 countries is the fact that both Japan and China have made huge purchases of American treasury securities and dollars in attempt to discourage their own currencies from increasing in value versus value of US dollar. (info taken and summarized from NYT Article "G-7 statement Signals Worry About Dollar") When countries coordinate their micro-economical policies they can do several things among which are targeting inflation or unemployment, coordinating their inflation, exchanging forecasts of key microeconomic variables based on their economic plans. Also they can coordinate their policy making and implementation processes. By setting joint goals this could induce policy changes that could help make this these goals more attainable. The coordination of information regarding the current state of economy and forecasts of future changes could take place both informally and through formal meetings of key policymakers. Also coordinating of policy-making process has a capability of making all the countries involved better off. Possible obstacles to coordination of microeconomic policies would be countries not agreeing on common goals as a result of differing interests and also the fact that politicians who are involved in these international agreements tend to look after their own benefit as opposed to the benefit of the own countries and finally another rather major obstacle could be the fact that different countries adhere to different theories of microeconomics. These obstacles may make it impossible to coordinate international economic policy.
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