The APEC summit: A turning point? – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise22nd November 2018
Events are barreling forward on the trade front, but before tackling the upcoming G20 meeting between President Trump and Chinese President Xi Jinping, here are a few reflections on last week’s Asia-Pacific Economic Cooperation (APEC) forum. As always, a caveat regarding the US: Given our mercurial (read: flaky) leader, matters could change on a dime, or more accurately, a tweet.
First, symbolically, it was a mistake for the US president to skip the APEC forum, one of the most important Asia regional gatherings each year — particularly with the US locked in a struggle with China for soft (and hard) power and influence throughout East Asia. But having said that, Vice President Mike Pence proved a much better conveyor of US policy than our “Dear Leader.” One can disagree with the administration’s China/Asia policies, but it was refreshing to have those policies stated clearly and forcefully, without the president’s distracting narcissistic or irrelevant asides.
In his presentation, Pence built on a “scorching” speech he delivered several weeks ago on China’s dangerous ambitions and predatory behavior. He warned APEC members to avoid the traps in China’s largesse, and he mocked China’s Belt and Road Initiative, contrasting it with aid from the US and its allies: “We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence . . . do not accept foreign debt that could compromise your sovereignty.” The Vice President also doubled down on US tariffs on Chinese goods, vowing: “The United States, though, will not change course until China changes its ways.”
In turn, President Xi defended China’s development aid program (“not for geopolitical purposes”), and called out the US for “unilateralism” and “bullying.” At this point, prospects for compromise at the G20 seem bleak, so the trade war is likely to continue.
Second, as events unfolded during the forum, Chinese diplomats seemed uncharacteristically “rattled.” In an extraordinary action, chronicled by a number of news organizations, a group of Chinese diplomats forced their way into the office of the New Guinea summit chairman, demanding last minute changes to the final text of the summit statement. Security officials were summoned, and the Chinese left voluntarily. Interestingly, the paragraphs that so upset Beijing were those calling for APEC nations to fight protectionism and unfair trade practices, and to support World Trade Organization reform (see below).
Ironically, though the Trump administration has done more than enough to alienate US trade allies, the PRC found itself isolated on these issues. (There is also speculation that the US-Australian announcement that they would jointly develop a deep water port on Manus Island capable of handling US and Australian naval vessels also contributed to the surprised irritation of the Chinese.) In any case, China experts — no fans of the Trump administration — nevertheless expressed astonishment at Beijing’s ineptness. As Eswar Prasad of Cornell University stated: “China’s strident reaction to such innocuous language signals its leaders’ concern about being isolated by the US and other countries who may still create a united front to take on unfair Chinese trading and economic practices.”
Third, the breakdown of diplomacy may also portend an ominous turn for Asia regional conferences such as the APEC forum. Because of the open conflict between the two giants, the US and China, for the first time in twenty-five years the APEC ministers were not able to publish a closing communique. While it is too early to make any conclusive judgments, certainly Asian nations will face a stronger pull-and-tug from both protagonists — and to their dismay may well face pressure to “choose sides,” something they already dread and will in most cases fiercely resist.
Fourth, though it went largely unreported, there were also ominous signs that China will dig in its heels and oppose key proposals for WTO reform. Specifically, two proposals pushed by the US and other leading WTO nations — more transparency in notifying the WTO of domestic subsidies and tightening requirements for “developing country” WTO status — have provoked opposition from Beijing. In his APEC forum speech, President Xi lauded “special and differential” treatment for developing countries, including China (this designation relieves countries so named from certain WTO obligations). Xi stated emphatically: “The principle of ‘special and differential treatment,’ which is a cornerstone of the WTO, is not to be challenged. Otherwise the very foundation of the multilateral trading system will be shaken.” Earlier, China’s ambassador to the WTO had criticized the transparency proposals as “punitive,” and argued that the proposals would “lead to far more negative effects than positive ones.”
In sum, as a window to the future, the APEC forum may be more consequential than whatever takes place next week at the G20.