* Indonesia, Turkey also co-sponsor trade experts' group
* UK says Merkel, Cameron agree need for EU to curb spending
(Adds details, background)
By Adrian Croft
LONDON, Oct 31 (Reuters) - Britain, Germany, Indonesia and Turkey are setting up an experts' group to suggest ways to boost global trade, Britain and Germany said on Sunday.
The group's creation, announced after talks between British Prime Minister David Cameron and German Chancellor Angela Merkel, comes at a time when some economists fear that currency strains could escalate into trade wars.
The experts have been asked to make recommendations in early 2011 on boosting global trade in the short and medium term by tackling tariff, regulatory, administrative and physical barriers to trade.
"Trade is the engine of global growth. That is why we have put boosting trade and tackling trade barriers high on our governments' agendas and want to see a strong political commitment to liberalising trade at the Seoul G20 summit," Cameron and Merkel said in a statement.
Leaders of the Group of 20 major economies meet in Seoul on Nov 11-12.
The experts' group will be led by Peter Sutherland, a former head of the World Trade Organisation, and Jagdish Bhagwati, a trade expert and professor at New York's Columbia University.
It will include experts from advanced, emerging and developing economies, including G20 members Germany, Britain, Indonesia and Turkey, which are co-sponsoring the group.
The EU has set a goal of completing the Doha round of global trade talks in 2011, according to a draft document obtained by Reuters this month.
SUPPORT FOR OPEN MARKETS
Cameron and Merkel underlined that open markets and free trade should be at the heart of the global economic recovery, according to Cameron's spokesman.
G20 finance ministers agreed this month to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances that cloud global growth prospects.
In talks at the British prime minister's residence at Chequers outside London, Cameron updated Merkel on the probe into package bombs from Yemen intercepted in Dubai and Britain.
Germany's federal crime office said it had tipped British authorities about the parcel bomb found in Britain. Merkel and Cameron agreed to maintain close counter-terrorism cooperation.
The two leaders also agreed on the need for restraint in European Union spending, Cameron's spokesman said.
"The 2011 EU budget should increase by no more than 2.9 percent and the EU budget in future years should reflect the spending cuts that national governments were having to make," the spokesman said, summarising the leaders' discussion.
Cameron claimed a victory last week when he won support from France, Germany and others at a European Union summit to limit the rise in next year's EU budget to 2.9 percent, lower than the 5.9 percent increase backed by the European Parliament.
But more important from the British government's point of view is to build alliances with other EU states to fight an increase in the EU's long-term budget.
Britain, slashing spending at home to rein in a record peacetime budget deficit, wants a cut in the EU's long-term spending for 2014-2020, on which talks are just beginning.
Merkel and Cameron also called on Iran to return to negotiations on its nuclear programme, Cameron's spokesman said. (Reporting by Adrian Croft; Editing by Michael Shields)