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Last Updated: Friday, 17 October, 2003, 17:43 GMT 18:43 UK
Apec summit heads for trade clash

By Steve Schifferes
BBC News Online economics reporter

As leaders of the major Pacific nations begin gathering in Bangkok for the Apec summit, trade and terrorism will top the agenda.

President George W Bush will bracket his attendance at the Apec summit of world leaders on Monday with a whirlwind tour of major Asian countries, including Japan, Singapore, and Australia.

A soldier looks at a disguised weapon
Thailand is mounting a big security operation to combat terrorism
The US President is eager to garner support for the war on terrorism and help with the rebuilding of Iraq.

But unresolved economic issues will hang over the talks, making the task of cooperation more difficult.

Apec, the Asia-Pacific Economic Cooperation forum, was set up to boost free trade in the fastest-growing region of the world.

But disagreements among its members have slowed progress towards its target of reducing tariffs to zero by developed Asia-Pacific countries by 2010, and by 2020 for developing countries in Apec.

US-Japan clash

Ahead of the summit, US and Japanese trade negotiators clashed over US trade sanctions and the value of the yen.

The weak yuan is costing American jobs, Washington says
On Friday, US Trade Representative Robert Zoellick exchanged threats with Japan's Economy, Trade and Industry Minister Shoichi Nakagawa on the sidelines of the meeting.

Mr Nakagawa said that Japan was considering introducing retaliatory tariffs in response to the US decision to raise steel tariffs to protect its domestic manufacturers.

The World Trade Organisation has ruled against the US action, and the final appeal will be decided in December.

Mr Zoellick countered that the US might launch a trade dispute over Japanese restrictions on US frozen beef exports.

Mr Nakagawa also complained about Japan's high yen, which he said was hurting Japanese manufacturers by making their exports more expensive.

Currency debate

The United States has been pressing Japan and China to allow their currencies to float upwards on world markets to relieve pressure on its own home market, reversing Japan's long-term policy of intervening to weaken the value of its currency.

On his visit to Japan on Friday, President Bush urged Japanese Prime Minister Koizumi to let market forces decide the yen's value, while saying he still favoured a strong dollar.

Mr Koizumi "did not make any firm commitments" to change policy and warned that rapid currency fluctuations "could be dangerous and upsetting to markets," according to press reports.

China - which fixes its currency, the yuan, against the dollar - is also reluctant to yield to American pressure, fearing that a stronger currency could hurt exports and deter future foreign investors.

And a new report from the Apec secretariat warns that a major revaluation of Asian currencies could hurt growth prospects in the region.

Trade blocs and trade talks

Meanwhile, other Apec members want to encourage a resumption of progress towards free trade.

In particular, they are hoping to restart the stalled world trade talks, which ended in disagreement last month in Cancun, Mexico.

In a draft communiqué, the Apec trade ministers say that there is a need for a "clear and strong message" from the group to put negotiations back on track.

It says they regret "the missed opportunity to advance" the trade round which "offers the potential for large economic gains for both developing and developed countries."

However, according to development charity ActionAid's Rick Rowden, "many developing countries fear that the industrialised nations are still not willing to further open their markets or lower their subsidies."

With world trade talks faltering, there has been an increasing emphasis on regional trade deals, with China, India and Japan all pursuing bilateral free trade agreements with the countries of South-east Asia.

The United States, meanwhile, has reached a free trade arrangement with Singapore and Chile, and is pressing for a Free Trade Area of the Americas.

Some of the smaller countries, notably Thailand and South Korea, would like to strengthen Apec's role in liberalising trade.

Thailand intends to propose that the deadline for full trade liberalisation within Apec for developing countries be moved forward to 2015.

But this summit is likely to see little concrete evidence of Apec's original role as the engine of trade liberalisation in the Pacific region.

Apec groups 21 Pacific Rim nations with a population of 2.8 billion: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.

The BBC's Michael Voss
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