APEC looks to safeguard growth amid US plan tension

by Hiroshi Hiyama

KYOTO, Japan, Nov 6, 2010 (AFP): - Asia Pacific finance ministers will call on countries to rein in large imbalances to safeguard growth at an APEC meeting Saturday, amid tension over US monetary policy and its economic proposals.

Finance chiefs from the 21-nation Asia Pacific Economic Cooperation group including the United States, China and Japan met in Kyoto, after an October G20 meeting in South Korea vowed to avoid “competitive devaluation of currencies”.

But fault lines have emerged over a US proposal that countries assign a specific limit for their current account surpluses or deficits of four percent of gross domestic product.

Beijing on Friday rejected the plan, setting up a potential showdown at next week’s G20 summit in Seoul.

Such a limit would force China, among others, to take steps to rein in its massive trade surplus, an issue at the centre of tensions with the US over the strength of the yuan.

Saturday’s meeting was to “focus on efforts to support economic growth and development in our region,” Australian Treasurer Wayne Swan said, adding that APEC would help deepen policy discussions initiated by the G20.

A draft of an APEC finance ministers’ communique to be released Saturday takes a similar line to a statement released by G20 nations in South Korea last month against “competitive” currency devaluation, Dow Jones Newswires said.

The statement also urges developed economies to rein in deficits and surplus nations to reduce their reliance on exports and undertake reforms to boost domestic demand, aiming to help rebalance the global economy, Dow Jones said.

Political tensions have been high as nations caught in the US-China crossfire look to protect their export-driven growth and jostle for a trade advantage.

The US, and some export-reliant Asian nations that have seen huge inflows of capital push up the value of their currencies, want China to loosen its tight grip on the yuan.

Beijing, in turn, accuses the Federal Reserve of warping currency markets by maintaining a weak dollar through its loose monetary policy.

Southeast Asian nations also plan to raise their concerns over the proposal to target current account imbalances at next week’s G20 summit in South Korea, arguing that it could encourage trade protectionism.

Finance ministers from the Association of South East Asian Nations (ASEAN) grouping met with US Treasury Secretary Timothy Geithner in Kyoto Saturday to discuss currencies, Philippines finance secretary Cesar Purisima told reporters.

“We talked about several things with the interest of seeing the world continue to grow out of the present situation,” he said.

Japan Finance Minister Yoshihiko Noda also met with Geithner in Kyoto Saturday.

“The need to correct external imbalances and to coordinate broad macroeconomic policies to achieve that end... is our shared goal,” Noda said.