* Draft says leaders to press for balanced growth
* Ministers agree to avoid protectionist measures
* ASEAN pacts will be building blocks for new FTA
* Angry Japanese farmers protest trade pact
* Canada questions China rare earths policy
first day of meeting)
By Yoko Kubota and Yoko Nishikawa
YOKOHAMA, Japan Asia-Pacific leaders will call for policies that promote balanced growth and start work on creating a vast free trade area in the world's most dynamic economic region.
In a draft statement to be issued at this weekend's summit of the 21 members of the Asia-Pacific Economic Cooperation (APEC), the leaders will adopt what they called their first real effort to provide a framework for long-term growth in the region.
The group includes the world's three biggest economy -- China, Japan and the United States.
On Wednesday, APEC trade and foreign ministers agreed to avoid taking any new protectionist measures for the next three years, and urged a conclusion of the Doha round of trade liberalization talks in 2011, Japanese officials said.
The ministers said they would build on the 43 bilateral and mini-free trade pacts with each other.
Businesses have long urged a single pact for the Pacific rim to simplify and harmonize the plethora of standards and rules that has been a by-product of the many mini-pacts.
The 10-member Association of Southeast Asian Nations (ASEAN) -- most of whom are APEC members -- has its own free trade area and is building an EU-style economic community. ASEAN also has various pacts with APEC members China, Korea, Japan, Australia and New Zealand.
Those agreements, and a U.S.-led one called the Transpacific Partnership (TPP) that is being negotiated among eight nations, will be the main building blocks of the Free Trade Area of the Asia-Pacific (FTAAP), Japan's Foreign Minister Seiji Maehara told reporters.
An Asia-Pacific free trade area would be a formidable force in world trade. APEC economies account for 53 percent of global economic output and 44 percent of world trade.
The ministers met ahead of a G20 summit of rich and emerging economies in Seoul on Thursday and Friday, where leaders will try to soothe tensions over global economic imbalances and currencies. APEC leaders meet on November 13-14.
"U.S. businesses still have concerns about policies that inhibit their ability to compete in Asia-Pacific," U.S. Secretary of Commerce Gary Locke said in a speech in Tokyo. "They want to ensure that their access to raw materials and exposure to currency risk is dictated by market, and not political forces."
AGRICULTURE KEY CHALLENGE
Agriculture poses a potential obstacle to APEC's vision of free trade in the region, Australian Trade Minister Craig Emerson said on Wednesday.
"The opening up of agricultural sectors of APEC economies remains a key challenge," Emerson said in a statement. "Some APEC economies maintain very high levels of protection in agriculture."
Underscoring the political difficulties in opening up agriculture to free trade, thousands of Japanese farmers rallied on Wednesday in Tokyo to demand their government steer clear of a separate and smaller U.S. free trade initiative.
Japan's politically influential, but inefficient, rice farmers have long been protected from cheap imports, including from fellow APEC members the United States, Thailand and Vietnam.
Japan's government has in the past cited food security and preserving an agrarian culture as reasons, but is now leaning toward opening up so that its companies can compete globally.
The touchy subject of China's clamp on exports of rare earths also came up on the sidelines of the APEC meetings, something that has added to tension among a number of major economies which rely on supplies from China for their lucrative high-tech industries.
China controls about 97 percent of the world's supply of rare earth which are the source of 17 metals used high-technology goods from LCD televisions to clean energy.
Japan and the United States had agreed on the need to address the problem of relying too much on a single country for production and supply of rare earths, a Japanese government official said on Wednesday.
"Everybody is concerned about supply of rare earths," Canada's Trade Minister Peter Van Loan told Reuters.
"The approach of the Chinese is troubling because it is not a market approach that they've adopted."
(Additional reporting by Edwina Gibbs and Stanley White in Tokyo, Chisa Fujioka and Chang-Ran Kim in Yokohama; Writing by Bill Tarrant and Jonathan Thatcher; Editing by Ed Davies) Ѐ