Friday, November 11, 2011
SECRETARY GEITHNER: The finance ministers of the APEC countries met in the face of continuing global economic challenges. The crisis in Europe remains the central challenge to global growth and it's crucial to all of us that Europe move quickly to put in place a strong plan to restore financial stability.
We're all directly affected by the crisis in Europe, but the economies of the Asia-Pacific region, the economies you saw gathered here today, are in a better position than most countries are to take steps to strengthen growth in the face of the pressures from Europe.
Now in this context, the principle focus of our discussions as finance ministers was about how to help strengthen growth around the world, make it more balanced and sustainable in the future. The finance ministers here voice their support for last week's pledge by the G20 leaders to support the global recovery. In order to achieve this project, this objective of stronger, more balanced growth, the APEC finance ministers focused on making progress in a number of areas.
First, as the U.S. continues to work through the problems that caused our crisis and Europe confronts a period of slower growth, Asian economies will need to do more to stimulate domestic demand growth. Also that they're less vulnerable to slow downs in the future, such as the situation in Europe, and also so that they can continue to contribute to stronger global demand.
Second, this process of rebalancing will be aided by exchange rate policies in China and other Asian economies to allow their currencies to adjust in response to market forces. China, in particular, should continue to allow its currency to strengthen, and China has acknowledged the importance of faster exchange rate adjustment.
The finance ministers agreed to continue our to work to advance global financial reform, to put in place a stronger framework of global safeguards around the financial system, and to make sure that those standards are applied on an even basis to create a level playing field to reduce the risk, financial risk, in the future just shifts to jurisdictions with lower standards.
The APEC finance ministers also discuss practical direct measure for boosting future growth of all of our economies, focusing on the vital role of infrastructure investment in catalyzing growth and job creations.
And finally, to help both protect the poor and promote financial development and growth, the APEC finance ministers have taken steps to expand the reach of safe and reliable financial services to their citizens.
Now while APEC countries are the most vulnerable to a global slowdown, they can also play the greatest role in contributing to global recovery and establishing the foundations for a stronger more sustainable, more balanced growth in the future. The APEC economies account for more than half of global GDP, and the bulk of these economies are likely to grow significantly faster in coming years than the rest of the world. They also account for more than half of the global current account surpluses and their rebalancing efforts are critical to the foundations for stronger, more balanced growth in the future.
That capacity for growth is very important to the United States and that's why we're committed to continued engagement with the economies of the Pacific Rim including, of course, more open and productive trade relationships.
APEC economies account for 60 percent of U.S. exports, a figure that's likely to continue increasing. U.S. exports overall rose almost 16 percent over the past year. Our exports are growing at a rate nearly four times faster than the rated growth of the overall economy, further underscoring the importance to the United States of the Pacific Rim. As APEC economies grow and as they move to increase domestic demand, the importance of these trade relationships will only grow further.
In the United States we recently ratified trade agreements with Korea, with Panama and Colombia, and we're making substantial progress towards the Trans-Pacific partnership, which will also help increase trade with the most dynamic economies of the Pacific Rim. But in order for the United States to take full advantage of the substantial opportunities created by, offered by this region, we need to continue to invest in the United States in reforms to make us more competitive, and this means making smart, targeted investments in education, in innovation, and infrastructure, and doing what's necessary to put our fiscal house in order.
The President's strategy is to combine immediate investments and tax incentives as proposed in the American Jobs Act with long-term reforms to reduce our future fiscal deficits. We need to take immediate steps to help strengthen growth now as well as make long-term reforms that will help sustain growth in the future. These meetings reinforce the importance of the relationship shared among APEC economies. You're going to see the President come to Hawai'i tomorrow to build on the progress we've achieved here today.
I'd be happy to take some questions. Thank you. Yes?
QUESTION: Thank you Mr. Secretary. (Inaudible) Japanese paper. You mentioned that the obvious situation remains the central challenge to global growth. Could you talk a little bit more on that? I mean, the (inaudible) Italian (inaudible) went beyond 7 percent, and also G20 ministers and leaders being committed to help global growth in (inaudible) a week ago, the situation has deteriorated farther. What does this mean to the European situation right now and what needs to be done by Europe and also internationally?
SECRETARY GEITHNER: Well, you know, very tough challenges facing Europe and I think I would say it this way: I'd say they're making progress. They're working to put in place this broad comprehensive framework they announced several weeks ago to help strengthen the financial system, put in place a stronger firewall to help protect Europe, move towards the type of fiscal reforms, fiscal union changes, that will help engender greater disciplines on fiscal policy to member states in the future. That basic framework is a good framework, but it needs to be put in place with the speed that markets require and with the force necessary to restore confidence and they're moving ahead, we just need to see them move a little more quickly and with more force behind it.
QUESTION: Hi, Dave Lauder with Reuters from Washington. Just a follow-up on that. You discussed with the APEC ministers the need to boost growth in the face of this to help protect our economies. Did you discuss what can be done to protect their financial systems from the potential fallout to protect their banks, and specifically what are you doing contingency-wide in the United States?
SECRETARY GEITHNER: You know Europe matters -- Europe's a very large part of the world economy, so when growth is weaker in Europe it affects growth prospects everywhere, but it also affects growth around the world because through the financial channels, as European institutions come under more pressure, they respond to that pressure by selling assets and by deleveraging and that's added to the pressure you've seen on emerging economies around the world; and for that reason among many, the economies here are very much focused on Europe.
In fact, you could say that the discussions last night over dinner and certainly in the hallways were still overwhelmingly dominated by what you're seeing unfold in Europe. I think it's important to recognize, though as I said in my remarks, that these economies, including the United States, have the capacity to do things now to make growth stronger, both to offset some of the pressures we're facing from Europe, but also because the world, as a whole, even when Europe stabilizes you're going to see growth damaged by the magnitude of the crisis so far.
So there's a very strong rationale in those economies that have the capacity to do it to act now to strengthen growth makes a lot of sense. In some ways that's the best thing the Asian countries can do both for the global economy now and to limit their vulnerability to what's happening in Europe.
QUESTION: Hi my name's Andre (inaudible). So you will be changing over chairmanship in the APEC to Russia next year. I was wondering if this might mean that we will finally have institutionalized financial dialogue which I think will (inaudible) in our relationship, and generally how is this process going; and secondly, what is the substitute difference between G20 and like G21?
SECRETARIY GEITHNER: Well, our Russian colleague today laid out some of their proposals for APEC next year as they take over the chairmanship and they seemed like reasonable suggestions and I'm sure he'd be happy to walk you through those; and I think you see in this group a strong commitment to try to build in this tradition of cooperation.
You know, we spend a lot of time talking about infrastructure financing, how to make sure our financial systems work better for small businesses and for individuals. Those are challenges we all face and there's a lot of benefit, even as we're thinking about the broader crisis and the deeper questions you see preoccupy Europe and the world today. It's a great value for us in this forum using this to share experience and find better solutions, and I think our Russian guys will build on that.
Your question was what was the difference between the G20 and APEC. Well, not all members of APEC are at the G20, and one of the values of a group like this is we can sit around the table together and talk through some of the broad conclusions reached at the G20, and the rest of countries didn't have a chance to be exposed to that to ask questions, debate it, offer different views and there's a lot of value in that.
So the system we have today, we've tried to concentrate our efforts on cooperation in the G20, but there are regional arrangements in Latin America, in Asia, in Eastern Europe and Africa that all play a very helpful role in the system as a whole, and they're good compliments to the G20 itself.
QUESTION: Thank you Mr. Secretary. I'm (inaudible) with Hong Kong. I would like to know has any progress been made on the (inaudible) during the meeting, and also a few weeks ago (inaudible) mentioned that (inaudible) appreciate 40 percent within five years and also Chinese official mentioned that during the G20 meeting that (inaudible) is actually coming close to having a reasonable exchange rate. How do you respond to that? Thank you.
SECRETARY GEITHNER: Let me read you what I think is the most important sentence in this statement by finance ministers. It echoes the statement made by the G20 and of course China was party to this language and supports this language.
It says, "We affirm our commitment to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying economic fundamentals, avoid persistent exchange rate misalignments and refrain from competitive devaluation of currencies."
That's a good strong commitment and it reflects the shared interest, not just of China in letting their exchange rate appreciate more rapidly, but that's pretty important to all of China's trading partners. China has allowed its exchange rate to appreciate roughly 7 1/2 percent against the dollar in nominal terms since they started moving in June of 2010. If you adjust for the fact that inflation in China is rising at a more rapid rate, significantly more rapid rate than the United States, the actual real appreciation against the dollar, which is what matters for competitiveness, has moved by somewhat more than 10 percent.
But I think the judgment of most independent analysts and economists who look at the Chinese exchange rate would say it's still significantly undervalued and that's one reason why, although I don't want to put words in their mouth, that's one reason why the Chinese believe it's in their interest to let the exchange rate continue to move in response to market forces, and our judgment is it's better for China, better for the world, better for the United States if China allows (inaudible) to move more rapidly.
QUESTION: Yesterday the trade minister of Australia spoke about that a lot of people don't have the skill sets in vocation, or even for entrepreneurs, to create business and you just spoke a little bit about the poor. I was wondering what is the strategy and the type of dialogue, in America usually you have to have a really good credit score to get some kind of financing, so what are the steps or the dialogues?
SECRETARY GEITHNER: Well, again, these are challenges that all countries are dealing with and you're seeing a huge amount of innovation across developing countries, in particular trying to make sure that all their citizens have access to the formal payment banking system so that they can get financial services at much lower costs with much less risk of perdition and abuse.
In the United States you know even though we're a remarkably rich country in many ways we still have tens of millions of Americans that don't have bank accounts that operate outside the formal financial sector, and as you saw in our financial crisis we went through a period where credit was, let's say, very generously provided across the American system as a whole to a point where credit is now quite difficult to get for some individuals and some small businesses.
It's a natural part of cycles is that credit, after being a little too easy to get, becomes to tough to get even for viable businesses and individuals, and so we're all trying to figure out how to get a better balance in those systems.
In the United States our focus has been on, as we try to repair the damage from the crisis, we're tying to make sure that small banks and small businesses can get access to credit and we've put in place a whole range of relatively creative programs to help make that more likely, and in the consumer protection area we're trying to make the broad protections we offer consumers work much better, and part of that is much better disclosure, much more simple disclosures, so individuals have a better chance to understand the risk they take when they borrow, a better chance to shop for the best value that service across banks, and we think there's a lot of promise in that approach of using disclosure as a way to get better performance out of the financial consumer protection area
But, you know, we have a lot to learn as a country in this area, and one of the things that we found useful as a model, and I think that's true of all countries, is to look at -- just to share experience and look at the remarkable innovations we're seeing in India, in South Africa, many parts of Latin America and I think those will provide some positive examples for all of us.
QUESTION: I'm (inaudible) from (inaudible) from Indonesia. You said (inaudible) Asian countries can (inaudible) economy grow, but the financial crisis has happened in Europe and USA. Is that (inaudible) become more (inaudible) Asia Pacific region? Thank you.
SECRETARY GEITHNER: I'm sorry; can you repeat the last part of your question?
QUESTION: (Inaudible) in Asian Pacific-Rim growth (inaudible).
SECRETARY GEITHNER: You're question, if I may restate it, is does the importance we attach to the economies in the region, including Asiong (phonetic), taking measures of strength and growth, does that increase their strategic importance in the world.
Did I say your question correctly? I hope so.
And I would say yes. Again, we've seen a very substantial shift in the broad balance of economic activity and certainly future growth prospects around the world. We try to get that reflected in changes in the government structure of the IMF and the World Bank and the other institutions so that greater economic potential is reflected in a greater voting weight in the institutions, more influence in the institutions. That's perfectly appropriate and we fully support that.
Now you see in the crisis in '08/'09 and you see in the crisis in Europe today that the countries in Asia and emerging economies that are very export dependent are very vulnerable to these crisis, and they have a strong interest in reducing that vulnerability over time and part of that involves trying to shift the basic power of growth more to domestic demand, and you've seen a lot of progress in that area in some parts of the region, not much progress in others, but the important thing to emphasize is even though we can't directly affect the choices the European governments make, we can affect the choices we make in our own economies to strengthen growth and the countries in Asia, because of the progress they made following the Asian financial crisis are in a stronger position to do that than would have been the case before and that's an encouraging thing. We want to see that translate into more growth in the region.
QUESTION: Hi, Don Bracken from the Bureau of National Affairs in Washington, D.C. Could you talk a little bit more about your expectations for the rebalancing effort? You touched on it just then, but I guess there's a little bit of a contradiction in asking for cooperation in something that's inherently competitive in trade, so a lot of the measures you're asking for cooperation on are relevant to trade, which is inherently competitive.
SECRETARY GEITHNER: I don't think that's true in this economy, in the growth imperative. Just think of it this way: The U.S., after a decade where -- a decade bracketed by a recession and then a deep financial crisis was a decade where we had sort of a lost decade for growth because the growth we had was financed by an unsustainable increase in borrowing. It was used to finance too much consumption relative to income and too much investment in housing, and if you look at the future of the U.S. economy, the future economic growth in the United States, it's going to have to come from more from investment and exports, and in the face of that transition we're going to go through in the United States, and in the face of what's likely to be a long period of relatively weak growth in Europe because of their challenges, the countries of Asia and other emerging economies have a very strong incentive to change the basic strategy of how they grow so that their future growth relies more on domestic demand and investments and improving the basic -- how they meet the needs of their people.
So then those interests, our interests, are completely aligned and if you see a broader shift in growth strategies to compliment what we're going through in the United States with more exchange rate adjustment and more shift in domestic demand, then growth for the entire global economy will be stronger as a result. If that doesn't happen, then growth will be weaker everywhere.
So in this context, it's not true in all contexts as you're right, but in that context our interests are very much aligned and that's' when you get cooperation that produces results, is that understanding of the shared interest in more complimentary policies.
QUESTION: Hello Mr. Secretary. I'm (inaudible). I have the question, considering the situation (inaudible) many countries is the monetary policy (inaudible) but the crisis is going on for three years. We have QE1, QE2, QE3 and --
SECRETARY GEITHNER: No QE3.
QUESTION: -- okay, not yet. Do you think what kind of new measures we can have to tackle this financial crisis in the future? Thank you so much.
SECRETARY GEITHNER: Well, let me just speak to the United States. The United States, what you've seen the President propose, is a very strong package of measures to try to strengthen growth in the near term. Tax incentives for individuals and for businesses combined with investments and infrastructure tied to long-term reforms to reduce our long-term fiscal deficits, it's that combination of long-term reforms to make sure we're living within our means as a country to provide room for the types of investments we need to make the economy strong in the short terms and over time. That's the basic strategy for growth we're adopting in the United States.
We obviously have a lot of challenges ahead of us. We're still trying to repair the damage of a devastating financial crisis, devastating not just to us, but to many countries around the world. We have a lot of challenges ahead of us in that context, but for us to be able to address those challenges we need to be growing more rapidly. We need to see growth that's stronger in the United States and that requires action by the Congress to provide the type of tax incentives and investments that can make us stronger as a country right now.
Our job is to make sure we're doing everything we can to make sure the U.S. is growing in a sustainable base in the future and we have a more stable financial system, that we're more likely to be a source of stability and growth for the world, not a source of crises like we were in this recent past, and we're very much focused on that basic obligation and responsibility.
Nice to see you all. Thank you.