WRAPUP 5-Amid economic strains, APEC trumpets free trade

Published 11/14/2010, 03:17 AM

* China's Hu says protectionism rising

* Discord resurfaces over global imbalances

* APEC agrees to move toward giant free trade area

* Leaders freeze protectionist measures for three years

(Updates and recasts)

By Linda Sieg and Jonathan Thatcher

YOKOHAMA, Japan, Nov 14 (Reuters) - Leaders of the world's most powerful economies went home on Sunday after four days of summitry that left them little closer to agreeing how best to rebalance the global economy and stave off fresh crises.

Two successive summits -- first the Group of 20 meeting of advanced and emerging economies in Seoul, followed by this weekend's Asia-Pacific leaders' gathering in Yokohama -- were marked by splits on economic policy between the United States and the world's new number two economy, China.

U.S. President Barack Obama made little headway in his efforts to persuade counterpart Hu Jintao to do more to change the structure of the Chinese economy so the United States could ramp up exports there.

Beijing is concerned that too radical adjustments will undermine its economic growth.

"Advanced economies have to cope with serious unemployment problems, while emerging market economies are confronted with asset price bubbles and inflationary pressure," Hu told other leaders of the 21-member Asia-Pacific Economic Cooperation (APEC) in the Japanese port city.

The two-day meeting did agree on plans for a free trade area linking the world's fastest-growing region and to continue an agreement not to erect new trade barriers.

They also agreed, as did the G20 summit, to try to breathe life into the flagging Doha round of global trade talks and to avoid using competitive devaluations to export their way to economic recovery.

But Hu sounded a sombre note amid the public display of amity by leaders, saying there had been a notable rise in protectionism, a threat to the lifeblood of a region that depends so heavily on trade.

FREE TRADE AREA

One of the centrepieces of the APEC meeting was to take real steps towards a Free Trade Area of the Asia-Pacific (FTAAP) linking the world's three biggest economies -- the United States, China and Japan -- with some of the fastest-growing emerging economies in other parts of Asia and Latin America.

The gathering followed hot on the heels of the G20 summit, where a vague agreement showed scant unity on how to deal with current account imbalances, in particular the one between China and the United States, which risk destabilising the global economy.

The risk posed by economic fragility, and the price that financial markets will extract if it is not addressed, was underscored at the end of last week as it emerged that deeply indebted Ireland was in talks about a funding rescue.

The goal of balanced growth is proving elusive, given deep divides among indebted advanced and export-driven emerging economies that were papered over at a G20 summit in Seoul.

For U.S. President Barack Obama, who may have started his 10-day tour of Asia hoping to put his party's mid-term election defeats behind him, there were disappointments on the economic issues that were the primary focus of the trip.

Washington argues that the global economy can only recover if its own economy is on the mend, which requires a surge in exports. It has singled out China and its strong yuan as being a major barrier to that goal.

While Washington contends that China's currency is undervalued, so giving it an export advantage, Beijing argues the U.S. Federal Reserve's easy-money policy is weakening the dollar to boost exports and could destabilise other economies.

Hu said Beijing was committed to exchange rate reform and to boosting domestic demand but that it would be gradual. (Additional reporting by Yoko Kuboto, Yoko Nishikawa, James Topham, Edwina Gibbs, Chris Buckley, Chisa Fujioka, Chang-Ran Kim, Kyoshi Takenaka, Patricia Zengerle, Alister Bull; editing by Bill Tarrant)

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