China-U.S. Discord Leads to APEC Stalemate – ‘The Entire World is Worried’

The two-day APEC summit in Papua New Guinea ended in an impasse as bitter trade rivals China and the U.S. failed to reach a consensus over the language of a final communique – a first in APEC’s history

China-U.S. Discord Leads to APEC Stalemate - ‘The Entire World is Worried’

Worsening trade relations between China and the U.S. is fast becoming a cause for major concern among world leaders.

The two economic powerhouses failed to reach common ground on the language for a joint communique at the Asia-Pacific Economic Cooperation summit in Papua New Guinea that ended Sunday (Nov 18) in a stalemate.

Claiming to have seen draft versions of the APEC communique, Associated Press (AP) reports that the U.S. demanded a strongly-worded statement that highlighted China’s contentious trade policies.

China, on the other hand, insisted on the need to oppose, if not condemn, the practice of protectionism and unilateralism that it accuses the United States of indulging in.

According to officials, the attending leaders were unable to come to a consensus on the role of the World Trade Organization (WTO) – the intergovernmental body that regulates international trade.

Papua New Guinea Prime Minister Peter O’Neill said his office would soon release a “chairman’s statement” on behalf of the attending leaders.

He did, however, acknowledge before reporters that “the entire world is worried” about the escalating differences between the two countries.

“The entire world is worried about the debate about trade relations between China and, of course, the United States,” O’Neill said.

“This is a situation that both countries need to sit down and resolve. And I believe that the G20 meeting that is going to be held very shortly will be an opportune time,” he added.

President Trump was conspicuous in his absence as his second-in-command, Vice President Mike Pence, presented the U.S. point of view in his weekend address at the summit – as did the Chinese president.

“The world today is going through major development, transformation and change,” Xi told the gathering of political and trade leaders representing 21 Pacific Rim nations that account for 60 percent of the global economy.

“While economic globalization surges forward, global growth is shadowed by protectionism and unilateralism,” said the Chinese premier.

Criticizing China for its “authoritarianism and aggression,” Pence said that the United States was in favor of “collaboration and not control.”

He accused China of wooing poorer nations in the region with cheap loans and road-building initiatives, in an attempt to burden them with bad debts so that it could demand concessions and advantages in exchange for debt-relief when these countries are unable to keep up with their repayments.

“We don’t drown our partners in a sea of debt, we don’t coerce or compromise your independence,” Pence said.

“The United States deals openly and fairly. We do not offer a constricting belt or a one-way road,” he said.

China’s foreign ministry has, meanwhile, categorically refuted the allegations of debt entrapment.

“The assistance provided by China has been warmly welcomed by our partners in this region and beyond,” said Wang Xiaolong, a foreign ministry official.

In a post-summit tweet Pence said:

“Every nation gathered here at APEC has a place in @POTUS’ vision for a free and open Indo-Pacific. Our vision excludes no one. We only ask that nations respect their neighbors’ sovereignty, embrace free, fair, and reciprocal trade, and uphold individual rights.”

The APEC deadlock could well set the tone for the upcoming meeting between President Xi Jinping and his U.S. counterpart, Donald Trump, at the G20 summit in Buenos Aires, Argentina, later this month.

The already bitter relations between the two economic giants became even more acrimonious when the U.S. slapped tariffs on $250 billion worth of Chinese goods earlier this year and has threatened tariffs on $257 billion more.

Now that the APEC summit has failed to bridge the differences between the two countries, and if the G20 summit ends on a similar note, we could well see Trump go through with his threat of additional tariffs, perhaps as early as December.

China, meanwhile, retaliated by levying tariffs on U.S. products worth $110 billion and has even threatened “quantitative and qualitative” measures if the U.S. doesn’t mend its ways.

Zhu Haibin, the chief China economist at JPMorgan in Hong Kong, said in June that China might have to consider other alternatives to counter the US tariff threat on Chinese goods.

“Any further action might include punitive measures against American companies operating in China, such as removing privileges and excluding them from any future deals,” he said.

However, China does realize that any such move on its part would be detrimental to the business-friendly image it has been trying to build for itself.

Louis Kuijs, Asia Economics head at Oxford Economics, is of the opinion that, sooner or later, Beijing will be forced to explore alternative measures, saying that it is unlikely it would be able to sustain the tariff war with the U.S. for long.

“China will run out of ammunition sooner than the US,” he wrote in a note published in June.

He went on to say that “history shows that there are various other measures [China] could take to inflict pain on US companies, especially those present in China, including scaled up health, safety and tax checks, delaying the imports of goods, and boycotts of US goods.”

Coming back to the APEC summit, Australian prime minister Scott Morrison was appreciative of O’Neill’s candor about the outcome of the summit.

“If the major powers here are not going to agree, we shouldn’t be pretending they do and we shouldn’t be trying to smooth that over for the sake of a communique,” he said. “We should call it out.”

While it is normal for two dominant powers to debate on issues, blowing their differences out of proportion could set a dangerous precedence, hinted the Australian prime minister.

“The other economies around the table here, it’s been made very clear to both the US and China that we want to see these issues resolved,” he said.

“That’s what is in our interests, and we’ve presented those positions to both the United States and China with the opportunities we’ve had here.”

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