Asia-Pacific finance chiefs agreed Thursday to do whatever it takes to prevent the malaise from Europe's debt crisis spreading to the region as a possible European recession threatens the global economy.
The spillover from the European crisis is adding to the urgency in the Asia-Pacific — now the strongest driver of world growth — for more effective trade regimes to help spur job creation and for reforms to ensure financial resiliency.
"We are all directly affected by the crisis in Europe," U.S. Treasury Secretary Timothy Geithner said after a meeting of finance ministers of the 21-member Asia-Pacific Economic Cooperation forum. "But the economies gathered here are in a better position than most to take steps to strengthen growth in the face of these pressures."
The officials gathering in Hawaii for the annual summit of Pacific rim economies also hope to build support for a comprehensive regional free trade pact to help boost their economies.
The European Union has warned that the 17 countries that use the euro common currency could slip into "a deep and prolonged recession" next year as the debt crisis that has already engulfed Ireland, Portugal and Greece has shown alarming signs of spinning out of control. A European recession would be felt sharply in the U.S., where growth is already anemic, and in Asia, which relies on Europe as a big market for its cars, clothing, consumer electronics and other exports.
"Growth and job creation has weakened in the region, particularly in advanced economies," the APEC ministers said in a statement that cited "heightened downside risks for the global economy."
"Such risks need to be addressed decisively to restore confidence, financial stability and sustainable growth," it said.
The APEC finance ministers discussed ways to re-energize economic growth and create jobs through nuts-and-bolts measures such as investment in infrastructure and reforms aimed at providing more access to financing for the poor.
The U.S. and eight countries supporting a regional free trade pact, the Trans-Pacific Partnership, meanwhile met on the sidelines of the APEC gathering and agreed to work toward forging a broad outline for the plan.
The Pacific trade pact known as the TPP now includes Chile, New Zealand, Brunei and Singapore — all relatively small economies. The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join.
Word was awaited from Japan, the world's third biggest economy, on whether it will seek to become part of the group, which if it were regionwide would encompass more than half the world's economic output. Japanese Prime Minister Yoshihiko Noda was expected to make an announcement Friday on the issue.
The U.S. recently clinched long-sought free trade pacts with South Korea, Colombia, and Panama — agreements that if ratified will bring to 20 the number of countries that have free trade agreements with the U.S. Washington views the Pacific trading bloc as a potentially "valuable tool toward anchoring us in the region and building the next generation trade model, from the ground up," U.S. Trade Representative Ron Kirk said in an interview.
Bringing onboard other big regional powers such as Japan and China, the world's second-largest economy, would vastly expand the bloc's scope and impact.
In Honolulu, Washington was keeping up pressure on China to commit to faster trade liberalization and to freeing its currency, which U.S. officials say remains undervalued even though it has gained substantially against the U.S. dollar in recent years.
The finance ministers' statement included a call for exchange rate flexibility. Treasury Department officials said China's willingness to back such a commitment - both at the Group of 20 meeting in Cannes last week and in Honolulu this week - could encourage similar moves by other Asia-Pacific economies.
But Beijing's apparent openness to move faster on its currency policy was not matched by similar support for the Trans-Pacific Partnership, which earlier this week a senior official in Beijing described as "overly ambitious."
Kirk shrugged off suggestions by some analysts that China might use competing arrangements with Asian trading partners to challenge the U.S.-backed free trade bloc.
"Well then, China can stay on the sidelines and watch us build the most dynamic trade partnership in the Asia-Pacific," Kirk said. "If China believes this is too ambitious, that's a decision for China to make."