U.S. Treasury Secretary Tim Geithner speaks to the press [auth] at the Asia-Pacific Economic Cooperation summit Thursday, Nov. 10, 2011, in Honolulu. (AP Photo/Andres Leighton)
HONOLULU (AP) — Pacific rim finance ministers pledged Thursday to take decisive action if necessary to prevent the spillover from Europe’s financial woes from further undermining growth and financial stability across the region.
The government debt crisis in Europe remains the central challenge to global growth, U.S. Treasury Secretary Timothy Geithner said ahead of a Pacific summit this weekend that encompasses economic giants such as the U.S. and China and small nations including New Zealand and Papua New Guinea.
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 has shown alarming signs of spinning out of control. A European recession would be felt sharply in the U.S., 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.
“It is crucial that Europe move quickly to put in place a strong plan to restore financial stability,” Geithner said. “They’re moving ahead, but we just need them to move ahead more quickly and with more force behind it.”
The finance ministers from the 21 economies that make up the Asia-Pacific Economic Cooperation forum discussed ways to re-energize economic growth and create jobs through practical measures such as investment in infrastructure and reforms aimed at providing more access to financing for the poor.
“Growth and job creation has weakened in the region, particularly in advanced economies,” the group said in a statement that outlined a consensus on the need for quick, short-term measures and longer term reforms.
Officials gathering in Hawaii for the annual APEC meeting also hope to build support for a comprehensive regional free trade pact to help boost commerce. Trade ministers from nine countries meeting on the sidelines of the forum agreed Thursday to work toward a “broad outline” this week of what is called the Trans-Pacific Partnership.
“Countries are seeking a high-standard, ambitious, 21st-century trade pact in the Trans-Pacific Partnership,” said a statement on the website of the U.S. Trade Representative.
Word is awaited from Japan, the world’s third biggest economy, on whether it will join efforts to forge the Pacific-wide free trade zone, encompassing more than half the world’s economic output.
Regionwide, there is growing interest in the plan, which Washington believes “could become a valuable tool toward anchoring us in the region and building the next generation trade model, from the ground up,” U.S. Trade Representative Ron Kirk said in an interview.
American officials hosting the APEC meeting voiced their determination to deepen U.S. engagement in the region. Asia-Pacific nations are increasingly wary of China’s growing economic and political clout, and hope U.S. influence will continue to provide a counterbalance.
“Today, there is a need for a more dynamic and durable trans-Pacific system — a more mature security and economic architecture that will promote security, prosperity, and universal values,” Secretary of State Hillary Clinton said in a speech Thursday at the East-West Center, a government supported think-tank in Honolulu. “We need to seize new opportunities for trade and investment to create jobs and fuel our economic recovery at home.”
APEC’s scope encompasses a wide range of issues, including climate change, energy and food security, and politics. But its main focus remains growth through trade and closer economic ties among Pacific Rim nations from Chile to China.
That mission dovetails with President Barack Obama’s efforts to spotlight U.S. progress on boosting exports.
APEC is more than just talk, said Kirk.
“It’s been a really good laboratory for trade liberalization,” he said. The emphasis now, is real economic integration and “putting meat on the bones behind that.”
Japanese Prime Minister Yoshihiko Noda was expected to make an announcement Friday on whether his government would join negotiations for the Pacific free trade area. The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join the grouping, which already brings together the smaller economies of Chile, New Zealand, Brunei and Singapore.
Japan’s debate on joining the pact was sidetracked by the March 11 earthquake and tsunami disaster. The ruling party is split, with supporters pushing membership as a way to revive the sagging economy, while opponents complain it would hurt farmers.
Bringing onboard other big regional powers such as China, the world’s second-largest economy, and Japan would vastly expand the bloc’s scope and impact.
The U.S. recently clinched long-sought free trade pacts with South Korea, Colombia, and Panama — agreements that if ratified will bring to 20 the number of countries that have free trade agreements with the U.S.
Such arrangements are potentially worth billions to American exporters, and thousands of new jobs. Despite a recent surge in exports, the U.S. share in Asian international trade has fallen 9 percent since 1990 as other nations have set trading agreements among themselves.
In Honolulu, Washington was keeping up pressure on China to commit to faster trade liberalization and to freeing its currency, which U.S. officials say remains undervalued even though it has gained substantially against the U.S. dollar in recent years.
A senior U.S. Treasury official said Wednesday that officials were largely agreed on the need to push ahead with reducing trade gaps, especially through flexible management of exchange rates. China’s willingness to make that commitment both in Cannes and in Honolulu could encourage similar moves by other Asia-Pacific economies, he said.
But Beijing’s apparent openness to move faster on its currency policy was not matched by similar support for the Trans-Pacific Partnership, which earlier this week a senior official in Beijing described as “overly ambitious.”
Kirk shrugged off suggestions by some analysts that China might use competing arrangements with Asian trading partners to challenge the U.S.-backed free trade bloc.
“Well then, China can stay on the sidelines and watch us build the most dynamic trade partnership in the Asia-Pacific,” Kirk said. “If China believes this is too ambitious, that’s a decision for China to make.”
Associated Press writer Jaymes Song contributed.