Free trade gets boost at APEC from Japan

The Obama administration is seeking to reset relations with Pacific nations and offer a counterweight to China's growing power at the Asia-Pacific Economic Cooperation leaders' summit this weekend in Honolulu.

"We obviously believe that the world's strategic and economic center of gravity will be the Asia-Pacific for the 21st century and it will be up to American statecraft over the next decade to lock in a substantially increased investment -- diplomatic, economic, strategic and otherwise," Secretary of State Hillary Clinton said after meeting APEC ministers.

Obama -- who also sees increased trade opportunities as an engine for U.S. job creation that could help him through a troubled 2012 reelection bid -- arrives later on Friday to host the annual gathering of APEC's 21 members, which account for more than half of the world's output.

With Europe's debt crisis sending shock waves around the globe, this year's APEC meeting is also shaping up as a forum to press the euro zone to sort out its problems and for APEC countries to bolster defenses against the fallout.

"The stakes are high for all of us," Clinton said earlier.

Fostering free trade is one of the few steps that leaders can take to spur global growth when fiscal and monetary measures are virtually exhausted in many developed countries. Pushing ahead with regional trade pacts has gained importance now the Doha round of global talks have ground to a halt.

Japanese Prime Minister Yoshihiko Noda announced earlier in Tokyo that the world's third-largest economy wants to join U.S.-led talks to forge a Transpacific Partnership among nine nations.

Its addition holds out the prospect of creating a huge regional market, around 40 percent bigger than the 27-nation European Union. Mexico and Canada quickly signaled their interest in exploring joining the talks, though they made no commitment to do so.

Tokyo's move marked a breakthrough in Washington's efforts to seize the initiative from Beijing, which has made deep economic inroads in the region.

"As a trading country that has built its prosperity of today, we must take advantage of growth in the Asia-Pacific region," Noda said in Tokyo before leaving for the summit.

But China, frequently at odds with the United States on trade and currency issues, gave a cool reception to the initiative. A commentary in China's state-owned news agency Xinhua said Washington was using the proposed pact as a way to enhance its influence in Asia on its terms.

In a tense exchange at an APEC trade ministers news conference that pointed up the depth of U.S.-China rivalry, Assistant Commerce Minister Yu Jianhua said Beijing had not been asked to join the TPP talks but would seriously consider if it were invited.

But U.S. Trade Representative Ron Kirk insisted the pact was "not designed to be a closed clubhouse ... it is also not one where you should wait for an invitation."

He said national leaders would announce the "broad outlines" of a deal at the summit and voiced U.S. hopes it could be the basis for the long-term goal of an APEC-wide free trade zone.

Japan's interest still faces significant hurdles.

Kirk welcomed Tokyo's move but insisted it must be prepared to meet the "high standards" of liberalized trade by reducing barriers to agriculture, services and manufacturing. Japan's farmers have proved a formidable domestic opponents to removing its large subsidies.

Japan also must overcome skepticism in the U.S. Congress and among American business and labor leaders. At least one major U.S. company, Ford Motor Co, said it opposed letting Japan into the negotiations because it believes Tokyo is not prepared to address barriers to importing American cars.

Australia hailed Japan's interest in a comprehensive agreement, with Trade Minister Craig Emerson calling it "an extremely positive development."

Other countries in the TPP trade talks are New Zealand, Malaysia, Singapore, Vietnam, Brunei, Chile and Peru.

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Asia-Pacific chief executives pressed world leaders to step up free trade initiatives in a "volatile" economic climate that they fear could spawn protectionist sentiment.

With Europe in danger of slipping into recession and U.S. growth sluggish, Asia represents the best bet for keeping the world economy on track.

Senior officials drafting an APEC communique agreed on Thursday on the need for Europe to act more forcefully to sort out its debt woes and for Asia-Pacific countries to bolster themselves against the potential spillover from the euro zone.

But there was no sign the summit would offer any concrete measures to help the euro zone cope with its crisis.

APEC leaders, who begin meetings on Saturday, are expected to keep the heat on China over what many see as an artificially undervalued yuan that hurts competitors. The currency issue has been a major irritant between Washington and Beijing.

Finance ministers pledged to take steps to strengthen growth and move faster toward market-based pricing of their currencies. Even so, China's deputy finance minister Wang Jun dampened prospects for a faster appreciation of the yuan.

"Facing current economic conditions, the Chinese government will continue to adopt proactive financial policy and stable currency policy," Jun said, according to the state news agency Xinhua. But he did commit to quicken the pace of China's move over the longer term toward a domestic consumer market, in balance with its export-driven economy.

(Writing by Stella Dawson and Matt Spetalnick; Additional reporting by Kiyoshi Takenaka and Michael Martina; Editing by John O'Callaghan)