The two-day gathering of finance ministers from the
21-member Asia-Pacific Economic Cooperation, or APEC, kicked off Friday and
follows a Group of 20 meeting last month in South Korea, where finance heads
and central bankers vowed to avoid using their currencies as trade weapons.
They also promised to establish a way to measure the
reduction of destabilizing trade gaps, seen through figures such as surpluses
and deficits in the current account — a broad indicator of a country’s trade
and investment.
At the heart of the problem is the huge gap between the
United States, which buys far more than it sells to the rest of the world, and
developing countries, such as China, which are running big trade surpluses.
The Obama administration says that China’s undervalued
currency, the yuan, contributes to strains in the global economy because it
gives Beijing an unfair trade boost by making Chinese goods cheaper in the US
and elsewhere.
Meanwhile, emerging economies like Brazil blame both the US
and China for keeping their currencies weak.
APEC is comprised of countries that border the Pacific
Ocean, including advanced economies such as the US, Japan and Australia and
emerging economies such as China, Vietnam and Mexico. Because this weekend’s
APEC meeting is sandwiched between two G20 gatherings, it will offer officials
another opportunity to figure out how to spark the global economy.
Geithner had pushed in a letter to last month’s G20 meeting
for a commitment to polices that would reduce current account and trade gaps
“below a specified share” of gross domestic product “over the next few years.”
Ultimately, however, the G20 could only agree that progress would be “assessed
against indicative guidelines to be agreed,” reflecting the opposition of some
export-reliant countries such as Japan.
Exactly what those guidelines will be remains a point of
contention, and an agreement is unlikely in time for the G20 leaders summit on
Nov. 11-12 in Seoul, South Korea.
A senior Treasury official said last week in Washington that
Geithner would use APEC to reach out to the eight G20 members in the group, as
well as “a broader group of economies beyond the G20, many of which have been
pursuing export-led growth strategies that have resulted in very large and
persistent current account surpluses and significant accumulation of foreign
currency reserves.” But Southeast Asia, made up of export-reliant nations,
headed into the meeting skeptical of Geithner’s original proposal. Thailand’s
Finance Minister Korn Chatikavanij is expected to submit a statement on behalf
of the Association of Southeast Asian Nations, whose members account for a
third of APEC.
The group “welcomes the constructive suggestions by the
United States” and supports policy coordination but focusing purely on the
current account would hurt trade, according to a draft of Chatikavanij’s
statement obtained by The Associated Press.
Southeast Asia “has concerns that specific targeting of the
current account could lead to measures being employed that may be detrimental
to the principal of free trade,” it said.
China, Asia biggest economy, also expressed opposition.
“An artificial setting of a numerical target cannot but
remind us of the days of the planning economy,” said Chinese Vice Foreign
Minister Cui Tiankai. “We believe the target for current account misses the
point.” Geithner may also face questions about the Federal Reserve’s latest move
to stimulate the US economy known as quantative easing. The Fed announced
Wednesday that it will sink $600 into government bonds, hoping to drive
interest rates even lower and invigorate a sluggish economy.
