As the G-20 talks get underway, we're thrilled to have Clyde Prestowitz guest-blogging for us over the next few days. Clyde is the president of the Economic Strategy Institute here in D.C. He served as counselor to the secretary of Commerce during the Reagan administration and as vice chairman of the President's Committee on Trade and Investment in the Pacific.

Be sure to check out his most recent book, The Betrayal of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era as well as his piece, Lie of the Tiger, from the November print issue of FP. -JK

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First, Barack Obama was shellacked in last week's congressional elections. Then, the U.S. president was garlanded in India and Indonesia. Now he's in Korea, where he's about to be waterboarded by the G-20.

Oh sure, the G-20 will come up with some paper-over language that will allow everyone to sign on to some vague agreement that it might be a good idea to achieve global rebalancing at some undetermined time in the next century. But this is just what the Japanese would call tatemae -- the packaging or superficial appearance of things. The honne -- the truth or actuality -- is that whether he knows it or not, the U.S. president has arrived in Seoul to preside over the end of the Flat World.

In fact, the Obama administration is demonstrating a lot of schizophrenia about this. In India, Obama couldn't stop spouting the conventional wisdom about how international trade is always a win-win proposition and how those who express concern about the offshoring of U.S. services jobs to India are just bad old protectionists.

At the same time, however, Treasury Secretary Tim Geithner is calling for some kind of deal for the G-20 governments to take concrete actions to reduce their trade surpluses or deficits. To be sure, Geithner has quickly backpedaled from his original proposal that governments would set hard numerical targets for the allowable limits of surpluses and deficits at 4 percent of GDP. His first fallback position was that the numbers would be only voluntary targets or reference points. When that elicited a new round of incoming fire he retreated further to the current proposal for agreement that each country will take the measures it thinks necessary to reduce excessive surpluses and deficits. Hardly much of a deal at all.

Yet even this is a revolution. No matter how watered down, Geithner's proposal is a call for managed trade. It is an implicit admission that contrary to 50 years of the preaching of economists, trade deficits matter. Even bilateral trade deficits can matter if they are big enough because they distort capital flows and exacerbate unemployment in the deficit countries. Further, it is an admission that unfettered, laissez-faire free trade is not self-adjusting and therefore not really win-win.

This implicit admission by Geithner has been manifested even more strongly (but still implicitly) by some of our leading free-trade economists and pundits. Thus, Paul Krugman, a Nobel Prize winner and long a champion of conventional free trade has called for tariffs on imports from China. So has Washington Post columnist and eternal free trader Robert Samuelson, and even the Financial Times' economics columnist Martin Wolf has suggested that some offsetting response to China's currency manipulation might be necessary.

But Obama isn't going to get agreement to any of that in Seoul. None of the other countries want to face the fact that the United States cannot be Uncle Sugar and the buyer of last resort forever. In fact, Obama has asked both the Germans and the Chinese to help out a bit by consuming more and exporting less. The Germans told him bluntly to get lost and the Chinese told him somewhat more politely to get lost. So the honne is that the Germans, because they're Germans, and the rest of Europe, because it is in terrible financial shape and can't borrow any more, are bent on creating jobs by dint of export-led growth. Essentially, they are saying they are going to create jobs by taking U.S. jobs. The Asians are saying and doing the same thing. Neither Asia nor Europe is likely to take steps that will achieve significant rebalancing in any reasonable period of time. That, of course, means no new jobs for Americans.

The big question is whether or not Obama will respond to that refusal by taxing foreign capital inflows, imposing countervailing duties on subsidized imports, matching the tax holidays and other investment incentives used by China and others to induce off-shoring of U.S. production, and challenging the mercantilist practices of many Asian countries in the World Trade Organization (WTO). These are all measures that he could take himself in an effort unilaterally to reduce the U.S. trade and current account balances and thereby create jobs for Americans.

If he does, he is sure to be harshly criticized by the apostles of the conventional wisdom. But if he doesn't he is sure to be toast in two years.

Last weekend, the Dutch coalition government, headed by Prime Minister Jan Peter Balkenende, fell apart. The Labor Party wanted all of the Netherlands’ troops out of Afghanistan by the end of 2010; the Christian Democrats wanted to agree to a NATO request to extend their stay. Labor pulled out, and now Balkenende needs to scramble to create a new government. It’s all a bit less dramatic than it sounds; Balkenende’s last three coalitions governments disintegrated as well.

But it’s ginned up some very dramatic bellowing from across the pond. None less than Secretary of Defense Robert Gates lamented the Dutch pull-out (the Orwellian New York Times headline, sadly now changed, read "Gates Calls Europe Anti-War Mood Danger to Peace").

The real stick the U.S. and NATO seem ready to use to punish the Dutch? Ejecting them from the G-20. Granted, it sounds a bit wet noodle-ish. But the Dutch have tried to get into the G-20 for years, and won their observer status by being strong international partners during the financial crisis. It's going to smart.

European leaders are starting to follow suit; Britain's five largest banks have agreed to publish the pay of their key staff members, and will spread bonus payments over three years. French president Sarkozy has announced a set of even tougher and more broadly applied regulations.

Of course, not everyone thinks that bonus reforms are the way to go. Nobel prize-winning conomist Robert F. Engle III says

We shouldn't ban bonuses, but restructure the way they're paid so they're more commensurate with the risk the company is taking....What's important is we give the banking system the right incentives to figure this out. When companies get too big and too complex to fail, they would face a higher tax rate, which would go into a rescue fund. The banks are not excited about it, they would rather go back to business as usual."

The British press corps traveling with Gordon Brown -- or tabloid writers, as White House spokesman Robert Gibbs might have it -- had a bit of a laugh this morning when a Downing Street flack announced that the prime minister would be a bit late for his own press conference because "the PM is just having a quick chat with Obama." (The White House had put out a release saying that Brown and Obama would have a bilateral session at 4:05 p.m., but it now appears that this morning's quick impromptu meeting was it.)

Fleet Street hacks are always on the lookout for signs that Brown is being snubbed by the U.S. president, and it was readily apparent that the PM is deeply irritated by all the chatter and speculation about his relationship with Obama.

Asked for a readout of their meeting, Brown launched into a short lecture. "I've been meeting the president all week and I’m not going to get into this game," he said, clearly annoyed.

Saying the two leaders spoke about Iran, Afghanistan, and the global economic crisis, he continued: "You guys should start to understand how international meetings work," directing his comments at British journalists.

"This has been a week in which the big issues have been climate change, nuclear weapons, solidarity in dealing with the Iranian issue, the fight against terrorism and how we deal with it, the economy and what we do now," Brown added. "Newspapers are reporting these as the big issues that have got to be dealt with."

News today that the G-20 has officially replaced the G-8 as "the world's premier economic forum," in the words of South Korean President Lee Myung-bak, was quickly -- and dramatically -- overshadowed by the revelation that Iran has a second, covert uranium enrichment facility.

British Prime Minister Gordon Brown, speaking to reporters here in Pittsburgh, said that "we must have answers from Iran" about its nuclear program by the Oct. 1 meeting of the P5+1, the permanent five members of the U.N. Security Council plus Germany. Any decisions about what to do vis-a-vis Iran would not be made before that meeting, he said.

"It's the third time they've been caught red-handed," Brown said. "There has been serial deception over many years."

The prime minister wouldn't get into specifics about what sorts of penalities Iran might face should it fail to comply, but indicated that if sanctions are needed, they will "clearly be of a banking nature" and would "involve energy" and new restrictions on technologies that could be used for nuclear purposes.

"I think the IAEA will see that there is a breach of regulations," Brown said. According to the evidence he'd seen, "this could not have been for a civil nuclear facility," because the "level of production was not sufficient for a civil nuclear facility but could have been intended for a nuclear facility."

On the G-20, Brown made a more sweeping statement than either Korea's Lee or Canadian Prime Minister Stephen Harper, who earlier insisted that "we are not replacing the G-8 with the G-20."

"The old systems of economic cooperation are over," Brown said. Canada is due to host both the G-8 and the G-20 next year, in cooperation with South Korea, and Harper said that the G-8 would become more of a forum for discussing development issues, security issues, and, "for lack of a better word, geopolitics."

Brown said that the G-20 today would be issuing a "very strong view on remuneration," a somewhat peripheral issue that has nonetheless dominated discussions surrounding the summit, on the insistence of French President Nicolas Sarkozy.

"We cannot be soft on these issues," Brown said some passion. "We have got to be tough … we will not condone the old system of bonuses … there is no return to the bad old days."

Brown also announced that G-20 leaders had agreed that it would be "premature" to remove the fiscal and monetary stimulus measures put in place over the past year, saying that "millions of jobs" would be at stake if countries acted too quickly.

Nevertheless, he said, "The action that we took at the London Summit [in April] has worked."

If you want to influence what happens at a summit like the G-20, where the final communiqué is drafted in advance and most of the agenda items are probably already decided upon at this point, you need to start your advocacy campaign early.

But that isn't deterring groups here from weighing in on what the leaders of the world's most powerful countries ought to be doing this week. Even though it's a rather technocratic gathering driven by the priorities of finance ministries, the G-20 makes for a great bully pulpit, whether your cause is poverty or climate change, women's rights or financial-sector transparency.

Oxfam International and Save the Children, two of the world's largest and most influential NGOs working on global poverty, are separately urging the G-20 to do more to protect the world's most vulnerable populations from the continued fallout of the global economic crisis.

Their worry, group representatives here say, is that as developed countries begin to recover, the plight of the world's poor will fall by the wayside. That could be very bad news indeed, because according to Oxfam, 100 people around the world are currently being driven to poverty each minute. The group is projecting that the budgets of governments in sub-Saharan Africa will be $70 billion smaller this year, leaving them struggling to meet rising needs.

"In the time it takes G-20 leaders to tuck into dinner tonight," said Oxfam senior policy advisor Max Lawson in a statement, "thousands more people will be pushed into poverty and forced to survive on less than $1.25 a day."

Lawson also complained that G-20 countries have yet to deliver on the $50 billion in short-term emergency relief they promised at the London summit in April.

Michael Klosson of Save the Children, which operates in more than 50 countries, said that "from what we see on the ground ... it's still a real problem." Klosson, a former U.S. ambassador to Cyprus who now heads the organization's policy efforts, pointed to the drying up of remittances to and foreign direct investment in places like sub-Saharan Africa as global economic demand has shrunk.

Klosson said he is looking for the G-20 to follow through on commitments on food security made by G-8 leaders in L'Aquila, Italy, in July. At that summit, the G-8 pledged $20 billion for global food security and reassessed, at least on paper, how food assistance ought to be given.

He also warned that the world is falling dramatically short on the Millennium Development Goals, which are to be evaluated next September. Sixty-eight countries are responsible for 97 percent of deaths before the age of five, he said, and only 14 of those countries are on track to meet their child-mortality targets next year. The World Bank has found that as many as 400,000 additional babies could die every year until 2015 because of the recession.

"Why wait until next September?" Klosson asked. "There are things that can be done if we put our minds to it."