TOKYO, Japan — As a demonstration of a commitment to free trade, it falls some way short of the dramatic arrival of Commodore Perry’s black ships in Yokohama 150 years ago, which forced Japan to open up to a world it had shunned for two centuries.
It is fitting, though, that world leaders will attend the Asia-Pacific Economic Cooperation forum (APEC) in the same city this weekend — perhaps a little bruised by a testy G20 meeting in South Korea that culminated Friday in little more than putting off the heavy lifting of decision-making — to finalize an agreement that shuns protectionism and identifies free trade as a solution to the region’s economic imbalances.
The groundwork has already been done by finance and foreign ministers from APEC, a 21-nation body that includes the world’s three biggest economies: the United States, China and Japan.
Earlier this week they agreed to extend a freeze on any new protectionist measures for another three years, and called for a conclusion to the bedevilled Doha round of free trade talks by the end of next year. "While the world economy is on its way to recovery … there remains a possibility of increasing protectionist pressures in the future," their statement said.
Encompassing 40 percent of the globe’s population and 44 percent of its trade, the Free Trade Area of the Asia-Pacific (FTAAP) up for discussion in Yokohama would be the world’s biggest.
It also may never see the light of day, at least in the form envisioned by APEC’s upbeat ministerial communique this week.
The body does not have the legal authority to implement the agreement, and some have labeled the zone as unworkable, given the diverse size and nature of the economies it is expected to bring together.
In Japan, where angst is rising over the progress its neighbor, South Korea, is making in inking free trade deals, the government must contend with opposition from farmers, concerned about the potential for cheap imports to put them out of business.
While Japan has decided to spare its guests the embarrassment of donning traditional attire — they will line up for the obligatory photo shoot in “smart casual” mode — this weekend’s talks could present more serious problems than sartorial discomfort.
Given APEC’s lack of policymaking powers, observers will be looking for more nuanced signs that the U.S. president, Barack Obama, and other major leaders, have the appetite for the kind of concerted action needed to sustain the region’s slow economic recovery.
The G20 talks set an uncomfortable precedent: the United States faced a backlash over its second dalliance with quantitative easing to boost demand at home. China, under pressure to devalue its currency, spoke for many in the region when it warned that the U.S. Federal Reserve’s new spending program could create asset bubbles in emerging economies such as Thailand and Indonesia.
But officials have played down the potential for a prolonged spat over exchange rates. "I don't believe there is going to be a currency war," Robert Zoellick, president of the World Bank, said. "There are tensions in the exchange [market] and these tensions risk an increase in protectionism.”
Yet as the G20 neared its conclusion on Friday, reports from Seoul indicated significant differences of opinion had delayed agreement on the leaders’ joint statement. The sticking point: China and the United States’ failure to address accusations that the other is devaluing its currency, in moves that some have warned could be opening salvoes in a global trade war, with protectionism the weapon of choice.
There was cause for muted celebration, then, that in their “Seoul Action Plan,” the G20 leaders eventually agreed to avoid “competitive devaluation" and instead “strengthen multilateral cooperation to promote external sustainability and pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account imbalances at sustainable levels."
In other words, no escalation in the currency wars … for now.
Yet U.S. unease about China’s refusal to let the yuan rise is certain to continue. As Gary Locke, the U.S. secretary of commerce, said in a speech in Tokyo this week: "U.S. businesses still have concerns about policies that inhibit their ability to compete in Asia-Pacific. They want to ensure that their access to raw materials and exposure to currency risk is dictated by market, and not political forces."
If expectations are low for APEC, the summit will at least offer leaders another chance to address pressing bilateral disputes. A quick resolution to the U.S.-China currency row looks unlikely, but there is the potential for Japan’s leader, Naoto Kan, to begin repairing the damage that territorial disputes have inflicted on his country’s relations with China and Russia.
No firm plans have been made for Kan to meet his Chinese counterpart, Hu Jintao — weeks after the east Asian rivals fell out over a collision near disputed islands — but he is expected to meet the Russian president, Dmitry Medvedev, who raised Japanese hackles with a recent visit to another group of contested islands in Japan’s far north.
It isn’t often that an APEC summit gets the political juices flowing in the United States, but pressure is mounting on Obama, fresh from a battering in the midterm elections, to take a stand on behalf of anxious U.S. exporters. He could do worse than evoke the spirit of Commodore Perry … minus the firepower.