APEC Leaders Scramble To Stave Off Global Recession

LIMA --Frantic efforts to stabilize the world's economies and financial systems continued on Sunday as leaders from Pacific Rim nations - including the United States and China - ended a two-day summit, urging aggressive trade liberalization to boost economic growth.

Meeting in the coastal Peruvian capital, leaders of the Asia-Pacific Economic Cooperation forum nations - whose economies comprise more than half of the globe's economies - said they would act swiftly to address the "deteriorating global economic situation."

The economic downturn and financial crisis dominated the meetings that were also attended by high-level government officials and corporate executives, as participants debated solutions to the world's churning economic storm.

The leaders made impassioned pleas to avoid protectionism, calling the opposite a surefire path to worsening the crisis.

In what is expected to be the final international address of his presidency, George W. Bush called protectionism a formula for "economic ruin."

At a press conference Sunday, Canadian Prime Minister Stephen Harper said that the world was "entering into a period of severe slowing of economic growth with deflationary pressures."

The APEC summit came at the heels of a month of world leaders' urgent meetings on how to stave off a global recession and repair battered global financial markets. A recent meeting of the Group of 20 nations in Washington, D.C. earlier this month, also examined the global woes, and participants in the Pacific Rim summit seconded many of its conclusions.

The APEC nations, which account for around 40% of world trade, echoed calls on Sunday from the Washington G20 meeting, calling for a speedy and "balanced" conclusion to the Doha round trade talks.

Leaders lauded free trade deals as an economic motor. Summit host Peru concluded FTA talks with China last week, and announced it would start free trade negotiations with South Korea and Japan.

With less than two months left in office, Bush railed against the U.S. Congress for not yet approving free trade deals with Colombia, Panama and South Korea, calling lawmakers' failure to do so "extremely disappointing."

   Calls For Calm, Reflection 

But trade liberalization alone is not sufficient to guide the world out of turmoil, some leaders said. Restoring calm and confidence in financial markets is essential for economic recovery.

"We have to break the cycle of uncertainty," said Mexican President Felipe Calderon. He said the psychological effects of the crisis are crippling world economies and sinking financial markets.

Deep structural reform is also crucial, leaders said, emphasizing a need to correct what brought the crisis on with greater financial market regulation and supervision.

While some financial market soul-searching appeared to be a given, some nations did not hesitate to point fingers at the United States for starting the crisis.

"What is now apparent, as pressure to boost profits grew, Wall Street assumed more and more risk," New Zealand Prime Minister John Key said Friday at the Asia-Pacific Economic Cooperation summit in Peru.

"For well over a decade, a glut of global credit created an illusion of almost limitless liquidity, which in turn fueled an unsustainable credit boom," Key said. "The capital was sourced mainly from offshore."

Australian Prime Minister Kevin Rudd blasted "unregulated" markets.

"The origins of the current crisis lie in the largely unregulated sectors of our financial markets that brought out the absolutely worst in the most extreme forms of capitalism," Rudd said.

Inter-American Development Bank President Luis Alberto Moreno said the crisis will cut Latin America's growth next year to 2.5% from a projected 4.5% for 2008.

"We are suffering the consequences of something that happened in the U.S. and Europe," Moreno said at a meeting of chief executives at APEC.

Even Bush echoed some of their concerns.

"It's true that the free-market system is not perfect," Bush said. "It can be subject to excesses and abuse. As we've seen in recent months, there are times when government intervention is essential to restart frozen markets and protect overall economic health. Yet it is also essential that nations resist the temptation to overcorrect, by imposing regulations that would stifle innovation and choke off growth."

-By Leslie Josephs; Dow Jones Newswires; 511-98853-8610; peru@dowjones.com

(Robert Kozak contributed to this article.)