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U.S. hopeful of Asia trade deal by year-end, eyes December meeting

Penny Pritzker testifies before a Senate Commerce, Science and Transportation Committee confirmation hearing on her nomination to be Commerc
Penny Pritzker testifies before a Senate Commerce, Science and Transportation Committee confirmation hearing on her nomination to be Commerc

By Randy Fabi and Lesley Wroughton

NUSA DUA, Indonesia (Reuters) - The United States expressed hope on Tuesday it could seal an ambitious trade pact by year-end despite resistance from some countries and the absence of President Barack Obama from a regional summit that was to iron out differences on it.

Members of the U.S.-proposed Trans-Pacific Partnership (TPP) said after a meeting that "negotiators should now proceed to resolve all outstanding issues with the objective of completing this year a comprehensive and balanced, regional agreement."

Three-year-old TPP talks, now involving 12 nations, are aimed at establishing a free-trade bloc that would stretch from Vietnam to Chile to Japan, encompassing 800 million people, about a third of world trade and nearly 40 percent of the global economy.

The TPP meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Bali, Indonesia, included leaders from Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States.

New Zealand Prime Minister John Key chaired the TPP meeting after Obama cancelled his trip to the summit to deal with a budget crisis that has shut down the U.S. government. U.S. Secretary of State John Kerry stood in for Obama.

U.S. Trade Representative Michael Froman said on Tuesday that world trade ministers may discuss the TPP on the sidelines of a World Trade Organization meeting that starts on December 3, with a goal of reaching a deal by year-end.

But several outstanding issues remain, he told reporters at the APEC summit, citing issues ranging from intellectual property to state-owned enterprises, labor and the environment. The World Trade meeting will also be held on Bali.

"I think there is a consensus that there has been substantial progress on outstanding issues and there are still remaining issues that must be addressed," Froman told reporters.

Later, a senior U.S. administration official acknowledged that the end-year target for completing the trade talks may slide into next year.

"As always the substance drives the timetable," the official told reporters, speaking on condition of anonymity. "None of us are here to agree to a bad agreement simply to meet a deadlines. The collective view is that it is ambitious but doable."

A major goal of the Obama administration, the TPP would tear down trade barriers in areas such as government procurement and set standards for workers' rights, environmental protection and intellectual property rights.

Obama had hoped to settle outstanding issues in discussions with other leaders at the APEC meeting but was forced to cancel his visit because of the fiscal standoff and partial government shutdown in Washington.

"We didn't expect any real breakthrough on TPP in the meeting, especially with Obama not here. There is some progress though," said a delegate from an East Asian country, who declined to be identified.

The TPP, by seeking unprecedented access to domestic markets, is proving highly sensitive in developing countries such as Malaysia and Vietnam, whose political systems could be shaken by intrusions in areas such as government procurement and state-owned enterprises.

'NOT SUBSTANTIALLY FINISHED'

Proponents call the TPP, the most ambitious trade pact since the demise of the Doha round of global talks, a "high-standard" agreement to eliminate tariffs and tackle an unprecedented range of non-tariff barriers that restrict growth.

Obama has touted the deal by saying that 5,000 U.S. jobs are created for each extra $1 billion in exports created under the pact.

For the United States, the TPP would complement its shift of diplomatic and military resources to Asia to tap the region's fast growth and balance the growing influence of China, which has not joined the pact.

To its opponents, including a range of advocacy groups globally, the TPP represents an encroachment of U.S. economic might that gives big corporations unprecedented powers to challenge national policies in the name of free trade.

U.S. multinationals like Wal-Mart and Fedex have warned Washington not to compromise and weaken the trade pact in order to complete the deal by the end of the year.

"For Wal-Mart, we would like to see a high-quality agreement, which is that no sectors and no products are excluded. That there are no compromises that leak into the process for the purpose of speed," Scott Price, chief executive of the U.S. retailer in Asia, told Reuters.

More intrusive than other trade pacts, the TPP seeks to regulate sensitive areas such as government procurement, intellectual property and the role of state-owned enterprises as well as giving corporations more rights to sue governments.

In TPP nations such as Malaysia, Japan, and Vietnam, reform-minded leaders are seen as using the pact as external leverage to break down vested interests and force liberalization of protected, inefficient sectors.

Negotiators hope to revive global trade, which has weakened due to an economic slowdown in China and emerging markets like India and Indonesia.

The 21 countries of APEC closed out the summit by agreeing to implement responsible macroeconomic policies that will help offset the slowdown.

"Global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired," the group said in a prepared statement.

"We will implement prudent and responsible macroeconomic policies to ensure mutually reinforcing effect of growth and to maintain economic and financial stability in the region, and prevent negative spillover effect."

(Additional reporting by Alexei Anishchuk; Editing by Raju Gopalakrishnan and Robert Birsel)

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