Asia Leaders to Work for Freer Trade

[Ray]

Asia Leaders to Work for Freer Trade

By THE ASSOCIATED PRESS
Published: November 13, 2010

Filed at 4:24 a.m. EST on November 14, 2010

YOKOHAMA, Japan (AP) — Leaders of the Pacific Rim economies that have spearheaded the still-fragile global recovery agreed Sunday to work toward building a regionwide free trade zone they say is the lynchpin for sustainable growth.

From tiny Brunei to rising powerhouse China, the 21-member Asia-Pacific Economic Cooperation forum unanimously pledged to avoid raising more trade barriers and to roll back those they may have erected in the midst of crisis.

"We reaffirm our unwavering commitment to achieving free and open trade and investment in the region," the leaders said in a declaration released after their two-day summit ended Sunday. "We must take steps to build a foundation for stronger, more sustainable and more balanced growth in the future."

The show of unity contrasted with the discord over currencies seen days before at a Group of 20 summit held in South Korea. But worries over the frailty of the recovery seemed to lend urgency to the push for freer trade.

"The recovery is not solid, and imbalances are causing great uncertainty," Chinese President Hu Jintao told the other leaders, according to a text of his speech. "The employment situation in developed countries is grim, and emerging markets face inflationary pressures and asset price bubbles."

The leaders agreed to "take concrete steps toward realizing a Free Trade Area of the Asia-Pacific," according to their declaration, with Japanese Prime Minister Naoto Kan saying the rough target year was 2020.

Such a sprawling free trade zone — which would slash tariffs on imports of everything from automobile parts to food — would encompass all 21 economies, covering more than half the world's economic production and two-fifths of its trade.

This goal should build on regional groupings such as the Trans-Pacific Partnership, a U.S.-backed free trade agreement that nine APEC members are negotiating, and ASEAN Plus 3, which groups the 10-nation Association of Southeast Asian Nations with Japan, China and South Korea, the statement said. It would not be forged through APEC, which has no negotiating power.

But achieving such a huge free trade zone is a highly complicated endeavor given the region's diversity, vested interests opposed to opening markets, and broader sources of friction.

The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join the TPP bloc, which currently brings together the small economies of Chile, New Zealand, Brunei and Singapore.

Cutting tariffs and reducing other trade barriers can boost economic growth by giving companies easier access to other markets, both to sell their products and to invest. Greater trade and investment can create jobs, but competitive pressures can also threaten livelihoods.

Japan has lagged behind its regional rivals in forging free trade deals and is seriously considering joining TPP despite strong opposition from farmers who worry that an influx of cheaper agriculture products would ruin them.

"Japan is determined to reopen itself," Kan told reporters, alluding to the historic role that Yokohama, which hosted the summit, played more than 150 years ago as one of the first Japanese ports to open up to the West.

Outside the convention center, anti-China protesters gathered by the hundreds for a second day Sunday, waving Japanese flags and holding placards insisting on Tokyo's claim to islands in the East China Sea at the heart of a long-simmering territorial dispute.

"We will protect Japan! "We will fight China! We will fight to the end!" the crowd chanted in unison. "Fight, fight, fight!"

Japan's foreign minister, meanwhile, urged China to reopen talks on developing natural gas deposits off the islands claimed by both countries. But his Chinese counterpart said tensions must cool before progress can be made, a Japanese Foreign Ministry official said on condition of anonymity, citing policy.

Kan likewise appeared to make no headway toward mending fences with China's president on that issue. He got even less traction with his complaints over a recent visit by Russian leader Dmitry Medvedev to an island in the northern Pacific that Soviet troops occupied in the closing days of World War II.

The dispute over that territory has prevented Tokyo and Moscow from ever signing a peace treaty, and Medvedev told Kan that he has the right to go there whenever he wants.

Like Japan, others in the region are wary of China's growing might and its increasingly aggressive stance on various issues. But despite such tensions, they all appear committed to knitting the region closer together for the sake of maintaining its robust and resilient growth.

The summit's declaration also noted a need to reduce trade imbalances and government debt. It also includes a pledge to move toward more "market-determined exchange rate systems" — alluding to the tensions that flared at the G-20 summit.

Washington contends that China's currency, the yuan, is significantly undervalued, giving Chinese exporters an artificial advantage in overseas markets and contributing to the huge U.S. trade deficit. China and some other countries have slammed the U.S. for printing money to help spend itself out of recession, a policy they say is driving the value of their own currencies higher, flooding their markets with excess cash and fueling inflation.

For the first time, the leaders approved a strategy calling for balanced, sustainable and innovative growth both in the region and within their own borders. Countries should provide better access to credit and social services for women, the poor and other vulnerable groups, it said.

They also intend to improve energy security and reduce carbon emissions that contribute to global warming.

APEC's next summit will be held in Honolulu, Hawaii, with the 2012 gathering due to move to Russia's Far East city of Vladivostok.

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Associated Press writers Jim Gomez, Eric Talmadge, Tomoko A. Hosaka, Malcolm Foster and Mari Yamaguchi contributed to this report.

Asia Leaders to Work for Freer Trade

While one can work towards free trade, so long as the currencies are unrealistic, there will be an imbalance and this could cause more problems. This is the view of the developed nations.

For China, if she does a genuine valuation of her currency, then she will not rule the roost. It will also affect the developing countries who are reaping benefits from the unrealistic value of the Chinese currency.

What should be the answer to have a freer trade and yet at the same time it does not hurt too seriously the developing economy thriving on Chinese cheap goods?