2ND LD: APEC pushes for free trade area but sees challenges: draft statement.

SINGAPORE, Nov. 14 Kyodo

(EDS: UPDATING & RECASTING WITH NEW INFO)

Leaders of Pacific Rim economies will seek to establish a free trade area in the future while recognizing the ''challenges'' to achieving such a goal, a draft of their joint declaration showed Saturday.

The 21-member Asia-Pacific Economic Cooperation forum ''will continue to develop building blocks towards a possible Free Trade Area of the Asia Pacific in the future,'' says the modified version of the draft obtained by Kyodo News. But it also says that an analytical study has shown the ''challenges of establishing such an agreement.''

The leaders of APEC, which accounts for more than 40 percent of the value of global trade, kicked off their two-day summit in Singapore.

One of their main topics is how to develop measures to help accelerate regional economic integration, including the creation of a free trade area. However, the draft indicates that differences remain between member economies over how much to open their domestic markets to imports and which countries should or should not join such a multilateral framework.

Some members, including China, are skeptical about discussing integration based on the Asia-Pacific grouping that includes the United States, conference sources said. Beijing has pressed for another grouping involving China, Japan, South Korea and the 10-member Association of Southeast Asian Nations.

Japanese Prime Minister Yukio Hatoyama, who is attending the summit, delivered a speech to business leaders, saying it is important to promote ''open regionalism'' in Asia in which ''the United States will have an important role to play.''

The Japan-U.S. alliance benefits economic and political stability in the region, Hatoyama added. Referring to multilateral frameworks for cooperation, including his proposal for the creation of an ''East Asian community,'' the Japanese prime minister said, ''I don't think we should be questioning which countries would be in and out of it.''

Drafting work is still under way. The leaders will release the declaration on Sunday after the end of their meeting.

The annual APEC summit is also focusing on the battle against climate change, rising protectionism in international trade and how to reenergize the stalled Doha Round negotiations under the World Trade Organization.

On climate change, the leaders are expected to send some signals before a key U.N. climate change conference next month in Copenhagen. But the draft only says that the leaders ''believe that global (greenhouse gas) emissions will need to...be substantially reduced by 2050.''

An earlier version of the draft had said that emissions must be cut ''to 50 percent below 1990 levels by 2050.'' The sources said the retreat was due partly to reluctance on the part of some large emitting economies to include specific figures in the declaration.

APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.

U.S. President Barack Obama, Chinese President Hu Jintao and Russian President Dmitry Medvedev are also attending the summit.

Host Singapore has said economic growth after the global recession must be more sustainable and ''inclusive'' with both developed and developing members and all segments of societies benefiting from the integration. The leaders will seek to raise growth potential through innovation.

The draft says the leaders ''recognize the necessity to develop a new growth paradigm for the changed post-crisis landscape,'' and that APEC ''will put in place next year a comprehensive long-term growth strategy that supports more balanced growth within and across economies.''

Japan, next year's APEC chair, will effectively play a leading role in crafting the growth strategy.

On international trade, the draft says the leaders ''firmly reject all form of protectionism and reaffirm our commitment to refrain from raising new barriers to investment or to trade in goods and services.''

The leaders will stick to the WTO's most recent goal of successfully concluding the Doha Round free-trade talks within next year. ''We are ready to exercise pragmatism and all possible flexibility in order to accelerate the pace of negotiations,'' it says.

The Doha negotiations were launched in 2001 in the Qatari capital and were originally scheduled to be concluded in 2005.