APEC favors currency liberalization

APEC favors currency liberalization

Frederic Garlan, Agence France-Presse, Santiago

Asia-Pacific finance ministers will call for currency deregulation in a statement to be released Friday, the head of the U.S. delegation said, in a move that particularly targets China's monetary peg to the U.S. dollar.

The statement is to be released at the end of a two day meeting of top finance officials from the Asia-Pacific Economic Cooperation forum in the Chilean capital.

"In the communique, I was particularly pleased that support for the move to more flexible currency regimes was expressed," said U.S. Treasury Under Secretary John Taylor.

China's renminbi currency has been fixed at 8.28 to the dollar for the past 10 years. With the Chinese economy so strong, this has given Chinese exporters a major advantage on world markets.

Critics, especially in the United States, say this has led to unfair trade imbalances in China's favor.

At their meeting last year in Thailand, APEC finance ministers were unable to come up with an agreed formula to criticize fixed currency regimes used by China and other countries in the region.

The latest communique only talks of the need to put in place the conditions for countries to move toward a more flexible exchange system.

"China has already indicated that its choice is to move towards more flexible exchange rate," Taylor told reporters, even though it has not fixed a date to end its currency peg.

He added that Washington was "working actively" with the Beijing government "to move towards a more flexible exchange rates."

Taylor highlighted that floating a currency was not the only solution and highlighted what attempts to dollarize economies in Latin America and Greece's entry into the euro zone.

"But for large economies, flexibility is important to preserve a stable economy," he declared.

Giving the example of rising oil prices, he said that "greater flexibility allows adjustment to be made" when commodity prices climb, which is a boost to the international economy.

"The international economic system works best in an environment characterized by free trade, the free flow of capital and currencies in open, competitive markets. I believe we are moving closer to achieving this goal," the U.S. official said.

At the same meeting, Mexican Economy Secretary Francisco Gil Diaz highlighted how "all the crises of the past 15 or 16 years had been caused by the arrival of excessive short term capital into economies with fixed parities."

The finance ministers' meeting is one of many to prepare for a full APEC summit in Santiago in November which will be attended by leaders including U.S. President George W. Bush, President Vladimir Putin of Russia and President Hu Jintao of China and Japan's Prime Minister Junichiro Koizumi.

APEC comprises Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.