Asia is leading the world back to recovery but a strong dollar remains important to global stability, Timothy Geithner, the United States Treasury Secretary, told an audience Singapore today.
His comments, which come amid rising concerns over the stability of the greenback and the currencies pegged to it, followed a summit meeting of finance ministers from across the Asia-Pacific region. Delegates discussed the need for more flexible currency exchange rates, as well as strategies for weaning themselves from post-crisis stimulus measures that have left many governments buckling under rising public debt.
Stimulus exit strategies, said Mr Geithner, would be timed according to each country, but the underlying task was to restore the confidence of business and the financial system.
“The challenge is growth. First growth, but make sure we have business confidence restored, investments expanding again, unemployment coming down, financial sector definitively repaired — that’s our basic challenge,” he said.
In an unexpectedly forthright policy shift, the finance ministers also agreed to discuss the abolition of all trade restrictions on food — a potentially transformational move for the structure of food supply in Asia. The impact of such a liberalisation would be particularly dramatic for the trade in rice, the carbohydrate that feeds most of the region.
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Many Asian leaders remain badly rattled by last year’s food crisis — a destabilising phase during which rice prices rocketed over the space of a few days, leading several rice exporting nations to ban exports, and rioting broke out some places.
Thailand would suddenly be able to export its plentiful rice across the region. Japan and Korea are among Asian countries that deliberately restrict the flows of foreign rice to ensure their farmers do not face competition from cheaper imports. Asia-Pacific Economic Co-operation delegates vowed to “actively resist” protectionism.
Robert Prior-Wandesforde, an economist at HSBC, said that the idea was a very worthy objective, but unlikely to be settled as long as it was seen to benefit some nations more than others. The food crisis, he added, clearly demonstrated how quickly governments are prepared to turn protectionist when threatened with something as socially destabilising as food shortages.
The APEC forum in Singapore, which is building towards weekend visits from President Barack Obama and China’s President Hu Jintao, declared itself set in the shadow of the biggest financial crisis since the Second World War. Reducing public sector debt will take more than “the mere phasing out of stimulus measures. It will need lower budget deficits and reforms that support economic growth,” read a statement by the ministers.