Leaders from 21 Pacific Rim economies converged on Japan on Saturday for an annual summit to push for free trade, hoping for a show of unity after rancour over currencies soured the Group of 20 meeting a day before.
President Barack Obama, Chinese President Hu Jintao and other leaders of the Asian—Pacific Economic Cooperation forum were expected to agree to take steps toward a Pacific—wide free trade zone.
Mr. Obama’s failure to conclude a free trade agreement this week with South Korea, and the G—20’s refusal to go along with the U.S. stance of formally criticizing China’s controls on its currency highlighted reduced U.S. influence in the region, at least on economic issues.
But in broader issues of diplomacy, Japan and others in the region are looking to the U.S. for a counterweight to China’s increasingly aggressive stance on many issues.
Most notably, relations between Japan and China are strained by conflicting territorial claims over islands in the East China Sea. That dispute flared up as the two sides squabbled over an incident in which a Chinese trawler collided with two Japanese coast guard vessels near disputed islands east of Taiwan.
With the mood still frosty, it remained unclear if Mr. Hu would meet with host Prime Minister Naoto Kan during his visit.
“If you talk to people in this region, they would tell you they are making very, very strong requests from this part of the world asking the U.S. to be more deeply involved,” said Ding Xueliang, a China expert at Hong Kong’s University of Science and Technology.
Tokyo’s ties with Moscow also are strained after Russian President Dmitry Medvedev visited an island off the northern coast of Japan that both nations claim. Mr. Kan was expected to meet with Mr. Medvedev later on Saturday.
Mr. Obama, on the last stop of a four—nation Asian tour, vowed to deepen U.S. engagement in the region.
“America is leading again in Asia,” he said at a business conference on APEC’s sidelines, reaffirming his government’s desire to double U.S. exports in the next five years. “In this region, the United States sees a huge opportunity to increase our exports in some of the fastest—growing markets in the world.”
Mr. Kan, meanwhile, vowed to open Japan’s sluggish economy further for the sake of future growth, despite protests from farmers who fear the loss of subsidies and protective tariffs.
“We have to grow with the fast developing economies of the Asia—Pacific,” Mr. Kan told the business conference.
As a precaution against protests from farmers and other disruptions, some 21,000 police were standing guard near the summit venue in Yokohama, which 150 years ago was one of the first Japanese ports opened to foreign trade, under pressure from American warships.
The fractious G—20 summit in Seoul, South Korea, ended with an agreement to refrain from “competitive devaluations” but no consensus on a U.S. push to get China to let its currency rise.
The ill—will from that meeting threatened to carry over to the APEC talks, though currencies are not on the official agenda. About half the leaders from the G—20 meeting are attending APEC, which represents more than half the world’s GDP.
Still, the weekend summit in Yokohama is likely to be less contentious thanks to APEC’s informal nature and the widespread consensus among all attending about the need for freer trade.
“There is no pressure to be aggressive because it’s nonbinding,” said Philippine Foreign Undersecretary Antonio Rodriguez. “That’s the beauty of APEC.”
Washington accuses Beijing of deliberately keeping its currency, the yuan, weak to gain a trade advantage. That stance has been undermined, however, by the U.S. policy of printing money to boost the sluggish American economy, which is weakening the dollar and provoking complaints from Brazil, Germany and China.
Hong Kong’s chief executive, Donald Tsang, said on Friday he fears the U.S. Federal Reserve’s decision last week to buy up $600 billion in U.S. debt last week, keeping interest rates low and the dollar weak, could flood emerging markets with cash seeking higher returns.
“International investors should tighten their seat belts and get prepared for unprecedented turbulence in currency markets, bond markets, stock markets and the property market,” Mr. Tsang told a business conference on APEC’s sidelines.
APEC, founded in 1989 to promote regional integration, aims to move toward creating a Free Trade Area of the Asia—Pacific, or FTAAP, including all its 21 economies and more than half of all world business.
Such a trading bloc might help harmonize various smaller trade, but it would not be forged by APEC itself, which is not a negotiating body.
Such a goal would likely be built from existing free trade agreements, such as the U.S.—backed Trans—Pacific Partnership, or TPP. It now includes only four small economies, Brunei, Chile, New Zealand and Singapore, but the U.S., Australia, Malaysia, Vietnam and Peru are in talks to join them.