Australia, Indonesia say G20 must fight protectionism

CANBERRA (Reuters) - The world's major economies must not use global financial turmoil as an excuse to retreat into protectionist trade, Australia and Indonesia said on Wednesday in a coordinated message ahead of a crisis summit in Washington.

Both countries are members of the group of 20 countries, that includes the world's biggest economies, and their leaders will attend a meeting this weekend called by U.S. President George W. Bush to combat financial turmoil and recession fears.

"This is not the time to retreat to protectionism or to retreat to closed economies," said Australia's Foreign Minister Stephen Smith after talks with his Indonesian counterpart Hassan Wirajuda and senior ministers from both countries.

Smith and Wirajuda said in a joint press conference that the world must not abandon hope for a free trade pact after the collapse earlier this year of talks for a global deal in Geneva.

The G20, which covers 90 percent of the world economy, must be central in helping shape reform of the battered world financial system and coming up with a coordinated strategic plan to deal with the current crisis, they said.

"We appreciate that if we are to deal with the global problems of the financial crisis, both the developed and emerging economies within the Group of 20, we can work together," Wirajuda said.

Financial ministers and central bankers from G20 nations met in Brazil at the weekend and agreed ahead of the Washington leaders' meeting that they were ready to "urgently take forward" proposals to underpin world growth and shore-up global markets.

Brazil's government said it would call for stricter regulation of world trade, and suggest the G20 meet twice a year rather than once to bring key emerging economies like China and India together with rich nations.

Indonesia's Trade Minister Mari Pangestu and her Australian counterpart Simon Crean led closed door talks in Canberra on the financial crisis and security issues for both neighbors.

Australia's Prime Minister Kevin Rudd said that at the G20 meeting in Washington, governments would need to act together to improve financial regulation and stimulate economic growth.

"This financial crisis is moving into an economic crisis, affecting jobs in the real economy, and therefore the need for coordinated or at least cooperative fiscal and monetary policy action across the principal economies of the world has now become necessary," Rudd told Australia's parliament.

(Additional reporting in Canberra by James Grubel, editing by Dhara Ranasinghe)