Apec vows to blunt effects of euro crisis
HONOLULU—Top Asia-Pacific finance officials on Thursday agreed to do whatever it takes to prevent Europe’s debt crisis from spreading in the region as a possible European recession threatens to engulf the global economy.
The spillover from the European crisis is adding to the urgency in the Asia-Pacific region—now the strongest driver of world growth—for more effective trade regimes to help spur job creation and for reforms to ensure financial resiliency.
“We are all directly affected by the crisis in Europe,” US Treasury Secretary Timothy Geithner said after hosting a meeting of finance ministers of the 21-member Asia-Pacific Economic Cooperation (Apec) forum.
“It’s not being dealt with forcefully,” Finance Secretary Cesar Pursima told reporters in Honolulu, echoing the views of many of his Asia-Pacific colleagues.
“But the economies gathered here are in a better position than most to take steps to strengthen growth in the face of these pressures,” Geithner added.
The Apec finance ministers have fretted about what they see as Europe’s failure to take more decisive measures to sort out euro zone’s debt problems. The epicenter of the crisis has shifted from Greece to Italy.
Act quickly
Geithner said the Asia-Pacific region—which accounts for more than half of global economic output—must act quickly on its own.
“Asian economies will need to do more to stimulate domestic demand growth—both so they are less vulnerable to slowdowns, such as the situation in Europe, and so they can continue to contribute to global growth,” he said.
There was no sign, however, that the Asia-Pacific economies would offer any direct measure to help Europe cope with its crisis. The focus of the 21 Apec economies was buffering themselves against the fallout.
The European Union has warned that the 17 countries that use the euro common currency could slip into “a deep and prolonged recession” next year as the debt crisis that has already engulfed Ireland, Portugal and Greece continued to show alarming signs of spinning out of control.
A European recession would be felt sharply in the United States, where growth is already anemic, and in Asia, which relies on Europe as a big market for its cars, clothing, consumer electronics and other exports.
“Growth and job creation has weakened in the region, particularly in advanced economies,” the Apec finance ministers said in a statement that cited “heightened downside risks for the global economy.”
“Such risks need to be addressed decisively to restore confidence, financial stability and sustainable growth,” they added.
The Apec finance ministers discussed ways to reenergize economic growth and create jobs through nuts-and-bolts measures such as investment in infrastructure and reforms aimed at providing more access to financing for the poor.
The top finance officials gathering in Hawaii for the annual Apec forum also hope to build support for a comprehensive regional free trade pact.
The United States and eight countries supporting a regional free trade pact, known as the Trans-Pacific Partnership (TPP), also met on the sidelines of the Apec gathering and agreed to work toward forging a broad outline for the plan.
The TPP trade pact now includes Chile, New Zealand, Brunei and Singapore—all relatively small economies. The United States, Australia, Malaysia, Vietnam and Peru are negotiating to join.
Word was awaited from Japan, the world’s third-biggest economy, on whether it will seek to become part of the group. Japanese Prime Minister Yoshihiko Noda was expected to make an announcement on Friday on the issue.
The United States recently clinched long-sought free trade pacts with South Korea, Colombia, and Panama—agreements that if ratified would bring to 20 the number of countries that have free trade agreements with Washington.
The US government views the Pacific trading bloc as a potentially “valuable tool toward anchoring us in the region and building the next generation trade model, from the ground up,” US Trade Representative Ron Kirk said in an interview.
Bringing onboard other big regional powers such as Japan and China, the world’s second-largest economy, would vastly expand the bloc’s scope and impact.
At the same time, however, Washington stepped up pressure on Beijing to commit to faster trade liberalization and to freeing its currency which, according to US officials, remains undervalued even though the Chinese yuan has gained substantially against the American dollar in recent years.
The statement of the Apec finance ministers included a call for exchange rate flexibility. US treasury officials said China’s willingness to back such a commitment—both at the Group of 20 meeting in Cannes last week and in Honolulu this week—could encourage similar moves by other economies in the Asia-Pacific region.
‘Overly ambitious’
But Beijing’s apparent openness to move faster on its currency policy was not matched by similar support for the TPP trade pact. Earlier this week, a senior official in Beijing described the trade pact as “overly ambitious.” With a report from Reuters
