Asia-Pacific nations pledged Thursday to embrace more flexible exchange rates and stable growth strategies as economies start to scale back their stimulus spending after the global downturn.
Finance ministers from the Asia-Pacific Economic Cooperation forum's 21 member economies spent the entire day discussing the challenge of sustaining growth and encouraging free trade in the wake of the world's biggest financial crisis since the 1930s.
Officials said short-term sacrifices were needed for lasting improvements.
"Fixing the economic situation today is like going to the dentist," Chile's vice finance minister, Maria Olivia Recart, said. "It hurts a lot, but you know you are investing in the future."
The weeklong forum culminates in a leaders' summit Saturday and Sunday that includes President Barack Obama, Chinese President Hu Jintao and Japanese Prime Minister Yukio Hatoyama, among others from Pacific Rim nations.
"We're seeing Asia lead the world back to recovery; we're seeing growth resume in the U.S. and countries around the world after the worst recession we've seen in decades," U.S. Treasury Secretary Tim Geithner told reporters.
But ensuring growth and stability as nations begin withdrawing stimulus packages are key challenges that face the world economy after the crisis subsides, he and fellow finance ministers said in a joint statement Thursday.
Reducing public sector debt will need more than "the mere phasing out of stimulus measures" and will require lower budget deficits and reforms that support economic growth, they said.
Geithner said there was strong consensus at APEC on the importance of ensuring that "we lay the foundations for a strong, more balanced recovery." Global imbalances between countries in trade, currencies, spending and saving habits have been blamed for much of the severity of this year's world economic crisis.
The ministers agreed to "undertake monetary policies" based on flexible exchange rates _ a statement that reflects concerns over China's restrictions on its currency, the yuan, despite repeated pledges by Beijing to move toward market-based exchange rates.
European and other Asian exporters have been pressured by the yuan's effective peg against a weakening U.S. dollar, which makes Chinese exports relatively cheaper, and thus more competitive overseas.
"It is very important for the U.S. that we have a strong dollar, that we sustain confidence in our financial system," Geithner said.
The ministers' statement also called for freer trade and warned against resorting to protectionism.
"We are committed to supporting open trade and investment to advance Asia-Pacific and global prosperity and growth ... and (we) will actively resist projectionist measures," the statement said.
Officials also discussed the creation of an Asia-Pacific free trade area, which would account for about half the world's exports and imports if it becomes reality. There are high hopes Obama, who arrives Saturday, will support the proposal, given the deadlock in World Trade Organization talks.
But the plan is still years away because of reluctance among some members, especially in Southeast Asia, to sign on to an agreement that would be dominated by the U.S.
Finance ministers also committed to strengthening financial supervision and regulations to prevent excess credit growth. And on the sidelines, ministers stressed the importance of stronger social support systems in emerging economies _ healthcare, education and retirement benefits _ as nations cut back on emergency spending.
The timing of exit strategies is "critical," the Pacific Economic Cooperation Council said. The APEC-affiliated think tank said analysis shows the longer stimulus measures remain in place, the lower the trajectory of growth coming out of the crisis.
"The challenge is not just when and how to exit interventions adopted in the crisis _ which dominates the policy debate _ but to replace these with structural policies that promote growth through the recovery and beyond," the think tank said in a statement.
New Zealand is gradually withdrawing stimulus and new spending in 2010, Finance Minister Bill English said.
"The concern is that the U.S. needs to keep stimulating their economy because it's in a pretty bad shape," he said. "We are in a better shape, we can afford to pull back and get a more balanced recovery so that the private sector can get up and running, providing new jobs."
English said the impact of the weak U.S. economy has been cushioned by robust Asian economies, especially China.
Associated Press writers Jim Gomez, Elaine Kurtenbach, Eileen Ng and Vijay Joshi contributed to this report.