Asia-Pacific leaders sought a united front on Sunday to prop up economic growth despite divisions over trade and currency policies as they face a common threat from Europe's debt crisis.

Fresh from a rare success over agreement on the outlines of a regional trade deal, the 21 nations at the Asia-Pacific Economic Cooperation summit looked to the immediate challenge of safeguarding themselves against the fallout from Europe.

President Barack Obama, seeking to reassert U.S. leadership to counter China's expanding influence around the Pacific Rim, opened talks with APEC leaders declaring the region was absolutely critical to America's prosperity.

But he insisted Asia-Pacific economies must address imbalances and promote balanced and sustainable growth, a clear reference to U.S. concerns about a huge trade deficit with China's export-driven economy.

It's time to get down to work, Obama told leaders gathered in his native city of Honolulu. Nearly 3 billion citizens (are) looking to us to bring our economies closer, to increase exports, to expand trade and opportunities that creates jobs and economic growth.

By harnessing the potential for expanded trade with Asia-Pacific countries -- the world's fastest-growing region -- Obama hopes he can create U.S. jobs to help him through a tough reelection fight in 2012.

We are not going to be able to put our folks back to work and grow our economy and expand opportunity unless the Asia-Pacific region is also successful, he said.

Obama's drive for a pan-Pacific free trade zone got a boost when Prime Minister Stephen Harper said Canada wants to join the talks. Japan has also expressed interest and Mexico is weighing the idea.

Obama is seeking to assure allies of U.S. reengagement as China flexes economic and military muscle in the region. But leaders may doubt whether Washington can avoid being distracted by economic woes at home and foreign policy priorities like Afghanistan, Pakistan and Iran.

The outlook for the Asia-Pacific region, which accounts for more than half of the world's economic output, also remains clouded by the threat of Europe's fiscal contagion.

After talks on Sunday, leaders were expected to release a statement expressing concern that Europe's unresolved debt troubles will spill over into the Asia-Pacific region and committing themselves to bolster their defenses.

International Monetary Fund chief Christine Lagarde, who has warned that strains from the euro zone could hurt Asia, attended the Honolulu summit to consult with the leaders.

ASIAN ENGINE SLOWING

Unlike the United States, where the Federal Reserve has already cut interest rates to near zero, many Asian economies have room to reduce benchmark borrowing costs to try to spur faster growth. Most of them also boast healthy public finances, giving them more leeway to boost government spending.

Obama has predicted that Asia-Pacific countries could be an extraordinary engine for growth if the European crisis can at least be contained.

But that engine is slowing down and inflation-wary Asian leaders do not necessarily want to rev it back up. China is reluctant to unleash another huge stimulus package like the one in 2009 because of concern over wasteful spending.

China's economic growth will likely dip below 9 percent next year for the first time in a decade. That would still be four times faster than the U.S. economy is likely to grow.

Although leaders will put on a show of unity, the APEC summit revealed some growing rifts, particularly between the two biggest players -- the United States and China.

An aide said Obama cautioned Chinese President Hu Jintao that Americans are growing increasingly impatient and frustrated with the pace of change in China's economic policy.

The two met on Saturday and the White House said Obama was very direct with Hu about currency and trade issues.

The United States has long complained China keeps its currency, the yuan, artificially weak to give its exporters an advantage. China counters the yuan should rise only gradually to avoid harming the economy and driving up unemployment, which would hurt global growth.

Hu was quoted by Chinanews.com in Beijing on Sunday as saying a big appreciation in the yuan against the dollar would not help solve U.S. woes.

The trade deficit and unemployment problems are not caused by the yuan exchange rate. Even a major appreciation of the yuan would not resolve the problems facing the United States, Hu said in comments echoed by China's foreign ministry.

(Reporting by Reuters APEC team; Additional reporting by Chris Buckley and Judy Hua in BEIJING; Writing by Matt Spetalnick and Emily Kaiser; Editing by John O'Callaghan)

Japan Pakistan Afghanistan Canada