US-China divisions dominate APEC summit
The Asia-Pacific Economic Cooperation (APEC) summit in Port Moresby, Papua New Guinea, went largely unnoticed at the weekend amidst the Brexit drama and the tragedy of the California fires. It was nonetheless a very important event, as it once more laid bare the degree to which the current US administration’s foreign policy has created schisms in the world and left it isolated.
Right after his inauguration, President Donald Trump’s first action was to tear up the Trans-Pacific Partnership (TPP), which bound together 12 Pacific Rim countries at the exclusion of China. The outgoing Obama administration had worked hard to get the deal done, because it saw the TPP as a vital piece in the jigsaw guaranteeing US influence in the world’s most populous and increasingly prosperous region.
US allies like Japan, Canada and Australia felt hard done by and proceeded to forge ahead with a smaller agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes all of the initial TPP members minus the US.
The US president’s increasingly isolationist stance has created a vacuum in the region, as has his bellicose rhetoric on trade. Wherever there is a vacuum, someone will fill it. Enter China. If anything, Trump’s actions have helped Chinese President Xi Jinping. He has always been a man with a plan and an extremely long planning horizon.
Over the past three decades, China has delivered unparalleled economic growth and lifted hundreds of millions of its citizens out of poverty. That success was built on having access to export markets. It also went hand-in-hand with a higher profile on the diplomatic and military stage. Association of Southeast Asian Nations (ASEAN) members are concerned with China’s overtures in the South China Sea, while Japan’s long-standing feud over the Senkaku or Diaoyu Islands has by now become legendary.
The US president’s increasingly isolationist stance has created a vacuum in the region, as has his bellicose rhetoric on trade. Wherever there is a vacuum, someone will fill it. Enter China.
Cornelia Meyer
The country’s global economic and geopolitical ambitions are also evident in the inclusion of the renminbi among the International Monetary Fund’s (IMF) reserve currencies, its leadership role in the Shanghai Cooperation Organisation, and in Xi’s flagship One Belt One Road (OBOR) project, which tries to emulate the old Silk Road between Asia and Europe.
Barack Obama, very aware of the importance of Asia Pacific, tended to attend the APEC summits personally. Not so Trump this time, as he sent his deputy, Vice President Mike Pence.
Trump may not have attended, but his agenda was omnipresent. From day one, trade wars dominated the conversation in the meeting rooms and the corridors. Xi made an impassioned plea for keeping the trading lanes open, while Pence asserted that tariffs on Chinese goods were there to stay until Beijing mended its ways. He also demanded that China respect the sovereignty of its neighbors, proceeding to announce the opening of a US naval base on Papua New Guinea’s Manus Island.
Xi had incurred Pence’s ire because he said at the CEO Summit, which preceded the official APEC meetings, that trade wars have no winners and called for nations to uphold a multilateral trading system led by the World Trade Organization. The US vice president was also unhappy that Xi held side meetings promoting his OBOR initiative, which is a thorn in the side of the US.
Other Asia Pacific nations and the IMF’s Christine Lagarde share the concern that the initiative may benefit China disproportionately more than the other participants in the scheme and that it may also trigger a debt trap for some countries like Pakistan. Sri Lanka has already had to cede control of its port of Hambantota to a Chinese operator in lieu of debt payments it could no longer afford. Djibouti may be the next country following down that road.
Other leaders, including Australian Prime Minister Scott Morrison, joined Xi in advocating free trade. Even Russian Prime Minister Dmitry Medvedev defended trade and transparent rules.
Malaysian Prime Minister Dr. Mahathir bin Mohammed, a veteran politician and the world’s oldest head of government, acknowledged in principle the importance of trade and embracing disruptive technologies, while still pointing out that there were nations and people left by the wayside when things moved too fast.
The governments who attended were so divided that they could not even agree on a closing communique, which is unprecedented.
The gathering of the 21 APEC nations was a precursor to the G-20 summit, which will take place in Argentina this month. We can expect the trade agenda to dominate there too. The mood music in Buenos Aires will, to a large extent, depend on how the US and China engage over the next week-and-a-half.
- Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources
