Pacific Rim leaders sign $1.5trn trade deal

Ministers from Pacific Rim countries yesterday agreed a $1.5 trillion trade liberalisation deal and the creation of an Asian emergency fund in a bid to restore investor confidence in the ailing region. Mary Dejevsky reports from Vancouver on the fear hang

Welcoming the agreement to lower tariff barriers across key sectors of trade, President Bill Clinton described the deal as "very important".

In an attempt to sustain international faith in Asia's battered economies, Mr Clinton described the current difficulties as "glitches" and said: "This is a time for confidence in the economies of Asia and in our relations with them."

But he stopped short of pledging additional US assistance, whether for South Korea or any of the South-east Asian countries that are in difficulty: "Our commitment is limitedbut sufficient to send a signal."

Mr Clinton stressed that for South Korea, which has applied to the IMF for a $20bn aid package, the task should be to "restore the natural growth potential". The IMF should be the "first line of defence", followed by attempts by national governments to pursue "responsible policies that inspire confidence in others".

There might, then, he said, be a need for "a sort of back-up, stabilising support", but this would be nowhere near as large as what was required to bail out Mexico and it was "premature" to consider whether the US might contribute.

Mr Clinton is expected to hold bilateral discussions today with the Prime Minister of Japan, Ryutaro Hashimoto, as the annual Apec meeting gets under way with 18 leaders of Pacific Rim countries in attendance. A meeting that the United States had hoped would advance its global free trade agenda has turned into an exercise in crisis containment.

The accords signed over the weekend include a nine-point agreement on tariff reductions, covering a range of sectors from telecoms, toys and chemicals to environmental goods, fish and forest products. Ministers also endorsed the idea, mooted in Manila last week, of an Asian emergency fund. The fund would supplement financial rescue packages such as those the International Monetary Fund is providing for Korea.

The two accords, contained in a declaration by Apec trade and foreign ministers, seemed designed to show that the grouping was intent on sticking to its original agenda - the pursuit of freer trade and closer co-operation - and resisting a retreat into protectionism. Given the general uncertainty prevailing at Vancouver, however, the declaration looked like a hastily arranged insurance policy, just in case nothing else could be achieved.

The United States is unhappy, however, about the idea of an Asian emergency fund and this may cause some friction with other Apec members. The US believes that such a fund could allow ailing economies to muddle on without the reforms and fiscal discipline that the IMF would require.