Tuesday, September 12, 2006
APEC calls for greater currency flexibility
Pacific Rim finance ministers address exchange rates and global imbalances; work towards reviving world trade talks.
"We resolved to work with our own trade authorities to make tangible contributions to restart the Doha round," the Asia-Pacific Economic Cooperation (APEC) forum said in a statement at the end of a two-day meeting in Vietnam.
APEC, which says it accounts for about 47 percent of all world trade, believes its 21 economies can influence the Doha round of World Trade Organization talks that collapsed in July over disagreements on subsidies.
"It is so important that we reinvigorate the Doha round," Australian Treasurer Peter Costello said at a news conference. "We cannot afford to fail."
The ministers statement said they discussed the need for greater exchange rate flexibility among "some economies as appropriate in emerging Asia."
They pledged joint action toward "orderly readjustment of global imbalances," noting that every economy around the world had a part to play.
The United States has been pressing fellow APEC member China to allow greater flexibility in its yuan exchange rate because of its record-high trade deficit with the Asian country.
A stronger yuan would help address China's trade surplus with the United States and reduce its bulging balance-of-payments surplus, critics of Beijing policy say.
A stronger yuan will also give China's Asian neighbors the confidence to let their currencies rise more swiftly, so cutting back on regional surpluses, they argue.
At the news conference, China Finance Minister Jin Renqing said China was not to blame for the global imbalances. "We all know that the exchange rate issue of China is not the major reason that causes an imbalance of the global economy," Jin said.
He said China's economy accounted for less than five percent of total global gross domestic product. "So by no means can China's exchange rate have such a great effect on changing the imbalance issue of the global economy."
Reiterating China policy, he said: "China will continue to make the exchange rate reform in a progressive and controllable way. This is a gradual process and could not be achieved with one push."
Financial systemsBoth the United States and China agree currency flexibility is "very important," U.S. Treasury Secretary Henry Paulson said at the same news conference. "Currency flexibility is one part of dealing with the global imbalances," he said.
A key element in dealing with the imbalances would be structural changes in economies "particularly in this region but also in Europe," he said. He said a greater savings rate in the United States also played a part.
Participants said the delegates discussed efforts to secure systems from such abuses as money-laundering and to bolster banks against the use of their accounts for holding money for the development of weapons of mass destruction (WMD).
But the final statement did not include a paragraph mentioning WMD. The group re-committed itself "to combat terrorist financing, money laundering and other abuses of our financial systems."
Washington officials had visited Asia in July to ask countries to check bank accounts opened by North Korea, which it suspects is trying to develop a nuclear weapon.
In a region still haunted by memories of the 1997 fiscal crisis, the ministers urged reforms aimed at strengthening financial sectors. However, the statement said those reforms should be accompanied by "a sound macroeconomic framework" and a strong legal system.
Category: Economics and Policies.