APEC Leaders Back China's Trade Agenda, Avoid Currency Debate
Nov. 15 (Bloomberg) -- Asia-Pacific leaders agreed tofight protectionism while refraining from mentioning currencydistortions that contribute to such actions, backing China’sstance as critics increase calls for the yuan to strengthen.
The 21-member Asia-Pacific Economic Cooperation group said“structural reforms” were necessary to unwind globalimbalances, without detailing specific changes, according to astatement after leaders including U.S. President Barack Obamaand China’s Hu Jintao met in Singapore. They dropped languagefrom an earlier draft on specific cuts in carbon emissions, adecision that resonates with China’s refusal to give targets.
The meeting concluded hours before Obama travels to China,where he aims to defuse tensions over U.S. duties on Chineseimports. The lack of any APEC commitment to ending currencycontrols by China, the region’s biggest economy without afloating exchange rate, signals that most of the region won’tjoin the U.S. in pressing for a stronger yuan.
“China’s got big issues of its own and certainly doesn’twant to move on the currency, and it’s concerned about someprotectionist rumblings from the United States,” said StephenRoach, Morgan Stanley’s Asia Chairman. “The ultimate verdict isthat there’s no major breakthrough on any of these large globalissues.”
Central banks in Asia accelerated dollar purchases thisyear to stem gains in their currencies that made their exportsless competitive than those from China. Indonesia’s rupiahjumped 11 percent against the yuan in the past six months, theKorean won climbed 9.2 percent and the Indian rupee rose almost7 percent.
Ceding to China
The U.S. has ceded economic influence in much of Asia toChina in a region that contains sea lanes vital to worldcommerce, as well as coal, oil and other commodities.
China’s trade with the Association of Southeast AsianNations jumped almost 20-fold since 1993 to $179 billion, withits share of total Asean commerce rising to 10.5 percent from 2percent. The comparable U.S. portion during that period fell to12 percent from 17 percent, according to Asean statistics.
“Since it is China’s growth that has been contributing torecovery in other economies, it’s not in their interest to risklowering China’s growth,” said Simon Tay, chairman of theSingapore Institute of International Affairs. “Obama mustmanage the relationship with China and avoid tensions given theeconomic and other realities.”
Bush Comparison
Obama needs to show the same commitment to free trade ashis predecessor George W. Bush, Malaysian Prime Minister NajibRazak said during a Nov. 13 panel discussion in Singapore.
Other leaders were more critical. Mexican President FelipeCalderon suggested the U.S. has become more protectionist andless engaged internationally since the Sept. 11 attacks.
“The greatest threat to the recovery in 2009 isprotectionism,” Calderon said in Singapore yesterday.
Chinese officials at APEC this week also condemnedbarriers to trade. Hu said China didn’t “foresee” the amountof protectionist acts that would occur this year.
A U.S. trade commission on Nov. 6 ruled that Chineseglossy paper and phosphates are harming domestic producers. Aday earlier, the U.S. imposed preliminary duties of as much as99 percent on certain Chinese steel-pipe imports. Obama inSeptember imposed tariffs on Chinese tires imports, promptingChina to complain to the World Trade Organization.
WTO members are “on course to launch a record number ofinvestigations against Chinese imports this year,” accordingto an analysis by Mark Williams, an international economist atresearch group Capital Economics Ltd. in London. Thatunderscores China’s interest in obtaining a region-wide pledgeto fight protectionism.
Rebalancing Growth
APEC finance ministers this week called for market-orientedcurrencies to rebalance growth. China has kept its currency atabout 6.83 per dollar since July 2008, while several other APECmembers also oversee some form of control on their currencies.
“We think this policy contributed to the economicstability and the quick recovery in the Chinese economy,”Assistant Finance Minister Zhu Guangyao said in Singapore Nov.12. China has no plans to alter its policy of step-by-stepchanges in the value of its currency, he said.
Singapore’s Prime Minister Lee Hsien Loong said currencieswere “mentioned” at today’s meeting, though there was no“in-depth discussion.”
“Some of the leaders expressed their concern over thepossibility of currency movements which would become unstableand also the potential problems which could arise ifgovernments have to intervene continually in order to managetheir currencies,” he said.
Climate Goals
An earlier draft of the leaders’ statement said globalemissions will need to peak over the next few years and bereduced to 50 percent below 1990 levels by 2050, with a latertimeframe for peaking in developing countries. The finalstatement excluded that reference.
China’s Hu called climate change “a grave challenge tomankind” and pledged to work for “positive outcomes” inCopenhagen during a speech today to APEC leaders. China haspledged to cut emissions in proportion to economic growth,without giving specific goals.
The world’s most populous nation is key to proposals forreducing global emissions. Without new international limits ongreenhouse gases, annual discharges will surge 40 percent inthe 2007-2030 period to 40.2 billion tons, with three-quartersof the increase coming from China, the Paris-basedInternational Energy Agency has estimated.
U.S. Engagement
Obama began his Asian trip this week in Tokyo, where hepromised broader engagement with a region that is leading theworld out of recession.
China’s growing economic and military influence in Asiadoesn’t necessarily come at the expense of the U.S., Obama saidNov. 14. The U.S. will continue to approach its relationshipwith China based on American interests, he said.
That statement illustrates a wrong approach by the U.S. inengaging China, said Morgan Stanley’s Roach.
“Is that really the way to look at China?” Roach said.“When you engage a powerful nation, if you want something fromthem, you need to give something back.”
To contact the reporters on this story:Shamim Adam in Singapore at sadam2@bloomberg.net
Last Updated: November 15, 2009 05:48 ESTSource: Bloomberg
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