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'Protectionism' the bogey at APEC

STORY HIGHLIGHTS
  • Singapore's 2Q GDP down 3.5 percent, best performance since crisis hit
  • Performance follows 1Q GDP drop of 9.5 percent
  • Trade disputes between China, United States have many concerned
  • APEC meeting may help reduce protectionist rhetoric, observer says

Singapore (CNN) -- While economists fret whether the sharp "V"-shaped drop of the financial crisis will turn into a double-dipped "W" recovery, Tan Pheng Hock is most worried about the "P" word: Protectionism.

His Singapore-based ST Engineering builds aerospace and transport systems and control centers. Most of the group's $3 billion in revenues come from exports.

"When you have protectionism it breeds like a disease whereby people become so dependent on it," Tan said. "The moment you remove it you get lots of resistance."

As the business and government leaders gather for the Asia-Pacific Economic Cooperation summit, Tan has good reason to be concerned.

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Few economies have borne the brunt of the financial crisis -- or the "financial tsunami," as many Asian nations call it -- as has export-driven Singapore. The city-state's economic output took a record fall, with its GDP dropping 9.5 percent in the first quarter of this year, according to government statistics.

Singapore lives and dies by the global economy. With no natural resources and a small domestic market, in a generation the city-state transformed itself from the third world British colony into a first world economic power by building its economy on exports and business services.

While Singapore's economic health is quickly rebounding -- second quarter GDP was down only 3.5 percent, the best performance since the financial crisis exploded in September last year -- protectionist winds threaten to shatter any nascent recovery.

"With the crisis we've been through there have obviously been some protectionist tendencies beginning to rise, particularly in the Western world," Tan said. "I hope we will see those quashed during the course of this week (at APEC)."

Although APEC was built as an avenue to promulgate freer trade among Pacific Rim economies, the first salvos of trade disputes between China and the U.S. have many concerned. In September, the U.S. placed tariffs on Chinese made automobile tires; China responded by cutting off imports of poultry parts (including chicken feet, a delicacy in China) and auto parts.

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  • Singapore
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More recently, China has begun an investigation whether Washington bailouts of U.S. carmakers constitutes unfair government supports of U.S. cars sold in China.

The fact that the leaders of the two nations will be gathering here on Saturday ahead of U.S. President Barack Obama's first visit to China puts implicit pressure to reduce the protectionist rhetoric, said Tan Khee Giap, chairman of the Singapore National Committee for Pacific Economic Cooperation Council.

"At least they have to say that they will resist any form of protectionism at meetings like this," Tan said.

Whether words will match deeds remains an open question. A survey of 400 business leaders released Wednesday by the Pacific Economic Cooperation Council found a majority of those polled believe protectionism is likely to increase if the global recovery stalls.

CNN's Andrew Stevens and Kevin Voigt contributed to this story.