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Pacific Rim leaders vow to fight protectionism

Pacific Rim leaders pledged on Friday to resist a new wave of protectionism as US President-elect Donald Trump loomed large over the opening of the 21-country Asia-Pacific Economic Co-operation summit. 

Mr Trump’s surprise victory in this month’s US presidential election has upended the Obama administration’s plans for a Trans-Pacific Partnership with Japan and 10 other countries and opened the door to Chinese rivals. It has also raised fears that the US could embark on a trade war with China or erect new barriers that could undermine fragile growth in the region.

Opening a business summit on the sidelines of this weekend’s APEC event, Peru’s president pointed to Mr Trump’s protectionist rhetoric and June’s vote in the UK to leave the EU as frightening developments for the global economy.

“In the US and Britain, protectionism is taking over,” Pedro Pablo Kuczynski said. “It is fundamental that world trade grow again and that protectionism be defeated,” he added, urging “anyone who wants to promote protectionism [to] read an economic history of the 1930s”.

“We have to deliver an unequivocal message to the world that trade continues to be beneficial,” he said.

That warning was echoed by Malcolm Turnbull, Australia’s prime minister, who cautioned that any new surge in protectionism would only hinder efforts to get the global economy out of its current low-growth rut.

“As we all know, if you are in a deep hole the worst thing to do is to keep digging. That is what protectionism does,” he said.

Those calls came as APEC ministers on Friday instructed officials to develop a work plan to pursue a Free Trade Area of the Asia Pacific, which Beijing has been pushing as an alternative to the TPP. A growing number of countries have also said in recent days that they are examining joining another Chinese-led TPP rival, the Regional Comprehensive Economic Partnership, or RCEP.

APEC officials said that Mr Trump’s election and what was being read as a signal that the US would pull back from its current leadership role in the region had created a new atmosphere ahead of this weekend’s leaders summit.

“There is a different dynamic around the table. People are hedging their bets,” said one senior official from an APEC country.

Mike Froman, the US trade representative, said at a meeting of TPP ministers on Friday that other countries had discussed moving ahead without the US — Republican leaders in Congress have said since Mr Trump’s victory that they would not allow its ratification to go forward. Mr Trump put his opposition to the TPP at the heart of his campaign, which used an antitrade message to cater to disgruntled blue-collar voters in rust belt swing states such as Ohio and Michigan.

But other APEC countries were also making clear to the US that they were looking to China for leadership now, he said.

“This is playing out in real time,” Mr Froman told reporters. “We see people around the table here that are now saying that if the TPP doesn’t move forward they are going to have to put their eggs in an RCEP basket.”

Eduardo Ferreyros, Peru’s trade minister, said APEC ministers meeting on Friday had agreed that “we are not going back to protectionism”. 

“We understand that the challenges ahead are great, but we strongly believe that if we continue working on trade liberalisation and facilitation, we will contribute to greater efficiency and competitiveness,” he said.

But other leaders warned that governments needed to do a better job of helping to address the gripes of those who felt left behind by globalisation.

“It is not just a matter of education. It is also a matter of making sure the [economic] reality matches the rhetoric [about free trade and globalisation],” said Lee Hsien Loong, Singapore’s prime minister. “People have to feel that they have a brighter future and that this is the way forward.”

Via FT