Obama calls for new strategy to rebalance world economy

Obama calls for new strategy to rebalance world economy
The Hindu Business Line, November 15, 2009, Page 4

The US President Barack Obama called on Saturday for a new strategy to rebalance global growth, but leaders around the Pacific rim, gathering for a weekend summit, took aim at signs of US trade protectionism.

Obama, who was due to arrive in Singapore late on Saturday for the Asia Pacific Economic Cooperation (APEC) summit, reiterated his call to redress the economic imbalances blamed by many for the global financial crisis.

The strategy calls for America to save more, spend less, reform its financial system and cut its deficits and borrowing.

“It will also mean a greater emphasis on exports that we can produce, and sell all over the world,” Obama said in a speech in Tokyo, his first stop on a nine-day Asian tour before leaving for Singapore. “We simply cannot return to the same cycles of boom and bust that led us into a global recession.”

Fresh government figures on the US trade deficit, which ballooned by more than 18% to $36.5 billion in September, could add urgency to Obama’s efforts to seek greater export opportunities in China and other Asian countries.

But leaders of APEC, a 21-member grouping accounting for more than half of all global output and 40% of world trade, called on the United States to show leadership on free trade, especially in jump-starting the Doha round of global talks.

A row between two APEC members, Peru and Chile, soured the mood just as the summit was getting under way on Saturday.

Peru said it would leave Singapore early after recalling its envoy from Chile over charges a Peruvian military officer had spied for the Chilean government. The spying charges emerged as tensions between the South American neighbours ran high over a maritime border dispute.

The APEC meeting is the last major gathering of global decision-makers before a UN climate summit in Copenhagen in three weeks meant to ramp up efforts to fight climate change.

However, the latest draft of a final statement showed that they had watered down their text on emissions cuts, dropping a reference to reductions of 50% by 2050, pledging instead to “substantially” cut carbon pollution by 2050.

Sniping at Washington

Although Obama proclaimed his faith in open markets, the sniping of regional leaders ahead of his arrival underlined the challenge he faces to convince them it’s more than lip service.

After taking office in January, the US president focused first on a huge stimulus to the economy and then on a domestic agenda that so far has included little attention to trade.
No end is in sight for the Doha trade round, now eight years old, despite pledges by Obama and others to get a deal by 2010.

Mexican President Felipe Calderon, singling out Washington for trends “going in the opposite sense of free trade”, said protectionism was a major threat to the global economic recovery.

Russian President Dmitry Medvedev, who followed Calderon to the podium, made the same point.
In Mexico’s neighbour the United States, “the old wrong idea of protectionism” was emerging in Congress and among other policymakers, Calderon said, citing as an example increasing “buy American” clauses in US legislation.

US inaction on trade is giving China and Asia an opening to forge trade agreements amongst themselves, said C Fred Bergsten, president of the Peterson Institute for International Economics.

“There is a lot of activity in the region and this is all in the absence of US engagement. What the Asians are hoping is that with this trip, Obama will begin the process of re-engaging with Asian in economic terms.”

Calling himself “America’s first Pacific President”, the Hawaii-born Obama signalled a commitment to the region, but with no new specifics on how to re-invigorate his trade agenda.

He in fact missed the summit’s first day of business, after delaying his departure for Asia to attend a memorial service for soldiers killed in a mass shooting at a US military base.
Other leaders have taken advantage of the spotlight to take veiled or even direct pot shots at the world’s biggest economy.

Chinese President Hu Jintao helped set the tone, saying Beijing had done its part to lead the world out of recession but had been hit by trade probes and protectionist barriers.

Stick with Stimulus

However, China’s policy of pegging the yuan currency to a weakening dollar -- which make Chinese exports comparatively cheaper -- has also come under fire at the meeting. Obama has said he will raise the issue on a visit next week to China.

Aside from endorsing further moves toward free trade, the 21 leaders of APEC will agree to stick with economic stimulus policies until “a durable economic recovery has clearly taken hold”, according to the draft declaration.