The leaders of the world’s three largest economies agreed on Saturday to continue to push for free trade. In Yokohama at the Asia Pacific Economic Cooperation forum, China, Japan and the United States apparently put aside their differences to warn against the dangers of protectionism.
President Hu Jintao vowed to keep China’s markets open and reiterated Friday’s G20 pledge to try to balance world trade. In Seoul, South Korea this week, the leaders of the world’s twenty largest economies agreed that major trade imbalances pose a threat to their recovery but they failed to reach an agreement on how to address the issue. Surplus economies as China and Germany were particularly hesitant to submit to an accord that might have forced them to change policy.
In the wake of the crisis, several industrialized countries, including France and the United States have promoted domestic industries considerably, bailing out automakers and, in the case of France, conditioning such a bailout on a promise not to outsource jobs. China stimulated its economy with a package nearly ten times the size of President Obama’s in terms of national income. Of the nearly $600 billion worth of investment, only a third was provided by the government however. More than $400 billion had to be raised by the private sector.
Along with stimulus measures which have failed to avert high unemployment and low investment rates, calls to “buy American” and criticism of allegedly “unfair” competition from China are heard ever louder in the United States despite President Barack Obama’s assurance that free trade will “create American jobs.” His administration’s failure to conclude the Korea-United States Free Trade Agreement in Seoul this week is not an encouraging sign however.
Obama also failed to persuade the Chinese to appreciate their currency to make American exports more competitive. The United States complain that China’s currency manipulation is largely response for its $227 billion trade surplus with the United States. Despite promises to gradually let the renminbi gain in value, China is unlikely to move on currency significantly, afraid that a sudden increase in the yuan‘s value would damage Chinese industries.
For the time being, the Chinese have reason to point at the United States’ own expansionary monetary policy instead as an attempt to drive down the exchange rate of the dollar and help American exporters. President Hu didn’t, publicly, but urged the international community to “oppose protectionism in all manifestations.”
On the sidelines of the APEC summit, the Chinese president held a brief bilateral meeting with his Japanese host, Prime Minister Naoto Kan who also met with President Dmitri Medvedev of Russia in private. Tokyo has been at odds with both Beijing and Moscow in recent months after a Chinese trawler collided with two Japanese coast guard vessels near disputed islands east of Taiwan and because of the Russian president’s visit to another disputed island chain north of Hokkaidō.
With Japan’s economy lingering in recession, Kan’s promise to further liberalize trade, over heavy protests from farmers who fear the loss of subsidies and protective tariffs, was notable. “We have to grow with the fast developing economies of the Asia Pacific,” he stressed. The prime minister previously announced tax relief for Japanese business in order to help his country recover.