APEC leaders warn of nascent protectionism

Economy

Published: 07 Oct. 2013, 21:33

APEC leaders warn of nascent protectionism

Lee Hsien Loong, Singapore’s prime minister, speaks Sunday during a panel discussion at the Asia-Pacific Economic Cooperation CEO Summit in Nusa Dua, Bali, Indonesia. Global growth will probably be slower and less balanced than desired, ministers from APEC nations said as they agreed to refrain from new barriers to trade and investment. [BLOOMBERG]

Asia-Pacific leaders are calling for vigilance against protectionism as economic growth slows in parts of the region and completion of a 12-nation trade pact looks set to be delayed further.

Asia-Pacific Economic Cooperation nations also must improve infrastructure to spur trade and investment, Indonesian President Susilo Bambang Yudhoyono said in Bali yesterday in a speech to about 1,000 executives before the start of the APEC leaders summit today. In Malaysia, Prime Minister Najib Razak said the year-end deadline for the Trans-Pacific Partnership may not be met.

Policy makers are seeking to boost their economies via new markets for goods and services as an uneven global recovery and volatility in financial markets constrain growth. China’s increased economic presence may support trade for the region, even as its territorial spats with some Southeast Asian countries and its greater military assertiveness cause concern.

Countries should be on guard against requests from companies to protect certain industries, said Singapore Prime Minister Lee Hsien Loong.

“Every business lobbies their government in order to look after their interests,” Lee said in Bali yesterday. “It is important to maintain that publicsupport for openness and integration because unless you have that - if we all close ourselves up, or even hinder the process of trading and doing business with one another - I think we are just going to make things worse for all the countries.”

“I think some are witnessing protectionism in some economies,” Indonesia Trade Minister Gita Wirjawan told Bloomberg TV today. “But I think the spirit of fighting against protectionism is highly up there in the past couple of days. That’s basically one of the biggest variables of success for the spirit of multilateral trading system going forward.”

Global growth will probably be slower and less balanced than desired, as the world economy is too weak and “risks remain tilted to the downside,” trade and foreign ministers from the 21-member grouping said in a statement Oct. 5.

A slowdown in China and India is reverberating across the region with the Asian Development Bank forecasting expansion at a four-year low in 2013, putting pressure on policy makers to bolster their economies. The Group of 20 countries repeated their concern last month that stimulus pullback in developed nations may prove damaging to global markets.

Since the start of the global financial crisis, governments have been pressured to support exporters, said Vishnu Varathan, an economist at Mizuho Bank in Singapore. The number of trade actions seen at the World Trade Organization is evidence of tensions, he said.

“It’s a function of the difficult external environment and competition is on the rise,” Varathan said. “But at the same time, we are seeing more trade agreements being negotiated. Policy makers realize that more trade agreements result in a bigger pie to share.”

TPP governments are seeking momentum during the Bali meetings on the pact as concessions sought by countries hinder progress in completing negotiations. The accord, which involves countries such as the U.S., Australia, Japan, Malaysia and Vietnam, would link an area with about $28 trillion in annual economic output.

Japan took too long to join the TPP negotiations, Hiromasa Yonekura, chairman of Japan’s Keidanren business lobby group, told the APEC CEO summit yesterday. Since joining, Japan’s negotiators have done “rather a good job,” he said.

Malaysia’s Najib said yesterday the end of 2013 deadline is a “very tight time line” and leaders will discuss if it is feasible. U.S. Trade Representative Michael Froman said Oct. 5 the “finish line is in sight,” and TPP officials are trying to complete the deal this year.

“With markets struggling to emerge from a devastating global recession, we need the jobs, growth and economic opportunity a free trade agreement could provide,” Jay Timmons, president of the Washington-based National Association of Manufacturers, and Phil O’Reilly, chief executive of Business New Zealand, said in a joint commentary on TPP. “With every month that passes without a deal, we miss vital chances to boost trade and investment.”

While finishing the accord this year may be “ambitious,” it is important to set deadlines and trade agreements should have high standards, said U.S. Commerce Secretary Penny Pritzker in Bali yesterday.

All TPP countries are members of APEC, set up in 1989 to advance free trade and investment in an area that accounts for half the world’s total gross domestic product and 45 percent of commerce. China, the second-biggest economy among APEC members, isn’t a member of the TPP talks.

Bloomberg