Prime Minister Kevin Rudd heads to Singapore today for the Asia Pacific Economic Cooperation leaders’ summit, where the focus is expected to be on free-trade, climate change, and the financial crisis.
There are also pressing tensions over the US and Chinese currencies at annual talks, while Mr Rudd yesterday reiterated Australia’s support for India’s membership of APEC in a speech to the Indian Council of World Affairs in Delhi.
Ahead of a weekend summit to be joined by US President Barack Obama, the 21-member Asia-Pacific Economic Cooperation (APEC) forum said it would work towards a trade zone stretching from Chile to China via the United States.
The battle to compete with China
After talks among APEC finance ministers, Treasury Secretary Timothy Geithner said a strong dollar was “very important” to the United States and praised China for helping the world recover from its worst post-war slump.
But the dollar’s prolonged decline and China’s refusal to relax the rigid exchange rate governing its own currency, the yuan, prompted rare public criticism against both nations from other APEC members.
“There is concern in Asia about the falling dollar,” Philippine Finance Secretary Margarito Teves said.
“If more intervention is needed, Asian central banks will act accordingly,” he said, following repeated market interventions by governments battling to keep a lid on their currencies and stay competitive against China.
In a statement, the APEC finance ministers pledged to pursue “market-oriented exchange rates”, but there was no mention from China of any immediate action that would allow the strictly managed yuan to appreciate.
The dollar’s plunge is bad news for export-reliant Asian countries that are struggling to maintain competitiveness, particularly against Chinese rivals benefiting from the yuan’s government-enforced stability.
Asia’s stance on yuan
The meeting’s host, Singapore Finance Minister Tharman Shanmugaratnam, said a freely floating yuan would not be a “silver bullet” for the region.
“But we do see flexible exchange rates as being part of the overall milieu of options that all our economies must use, together with structural reforms, together with other economic reforms,” he said.
The currency issue has flared anew heading into the Singapore summit, where Obama will encounter Chinese President Hu Jintao. US officials say the yuan’s exchange rate will be up for discussion when Obama goes on to China next week.
Other Asian nations are now adding their voices to longstanding US complaints as they struggle to keep up with China, which was the target of broader criticism at a G20 meeting last weekend in Scotland.
Geithner skirted over the currency issue but lauded the “major role” being played by China in powering the world back to growth.
Global Financial Crisis still high on the agenda
And the Treasury boss echoed APEC as a whole in arguing that it was too early to shut off the lavish government spending that has done much to prop up growth.
He told a news conference that “most governments conclude it’s going to take a sustained period of further support before again we have conditions for private demand”.
Canadian Finance Minister Jim Flaherty said: “The downside risk of discontinuing the stimulus early has been very substantial, we know that from history.”
In a statement after their own annual discussions, APEC foreign and trade ministers said they “remained concerned over the threat of protectionism to our economic recovery”.
Pacific-wide free-trade a ‘long term’ vision
Vowing to work for the Pacific-wide free-trade zone, the ministers also called for easier commercial access for green technology to combat climate change, ahead of crunch talks on global warming in Denmark next month.
The proposed “Free Trade Area of the Asia Pacific” would cover over 40 percent of the world’s population of 6.7 billion people and more than half its economic output.
But APEC is already struggling to meet a goal of eliminating all trade barriers among its developed members by next year, and the broader trade zone is a long-term vision, officials said.
“First we have to recognise that this is a huge undertaking to be able to reach an FTA for the Asia-Pacific,” Singapore Trade Minister Lim Hng Kiang said.