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Trade war

China-US war of words escalates beyond trade

Xi Jinping and Mike Pence APEC speeches reveal deep ideological divide

Chinese President Xi Jinping warned that the U.S. is leading the world into a trade fracas from which no one can emerge the winner, while U.S. Vice President Mike Pence told leaders of APEC countries to be wary of infrastructure projects coming from an authoritarian regime.   © Reuters

PORT MORESBY -- Chinese President Xi Jinping and U.S. Vice President Mike Pence on Saturday traded barbs in speeches at a summit of world leaders, with Xi criticizing U.S. protectionism and Pence saying the U.S. will not back down on tariffs while Beijing engages in "forced technology transfers" and "intellectual property theft."

"Global growth is shadowed by protectionism and unilateralism," Xi said at the Asia-Pacific Economic Cooperation CEO Summit, aboard a cruise ship in the harbor of Papua New Guinea's capital. "History has shown that confrontation, whether in the form of a cold war, hot war, or trade war will produce no winners."

He added that "there are no issues that countries cannot resolve through consultation" as long as they understand each other.

His words appeared to be a possible olive branch ahead of his talks later this month with U.S. President Donald Trump on the sidelines of another summit, in Argentina.

Then Pence took to the podium.

"As we know, [China] has engaged in quotas, forced technology transfers, intellectual property theft and industrial subsidies on an unprecedented scale," the vice president said. "The United States will not change its course until China changes its ways."

The issue is expected to take center stage on Sunday, when the leaders of the 21 APEC nations meet. The participants are expected to announce a joint statement promoting free trade.

According to a working draft of the statement from Thursday, the U.S. is pushing to include the need to reform the World Trade Organization, and the "removal of all trade distorting practices," such as forced technology transfers and government subsidies for industry.

On Friday, Trump told reporters he received a "large" list of 142 items from Beijing in response to American demands for reform. He said the list is "not acceptable to me yet" but also noted that the U.S. "may not have to" impose further tariffs on Chinese imports. Trump has previously threatened to raise the tariff rate on $200 billion worth of Chinese imports from 10% to 25% in January 2019, and impose additional tariffs on a further $267 billion worth of Chinese imports.

In this context, Pence's speech could be a bargaining chip thrown on the table ahead of the Argentina meeting. His remarks come amid reports that Beijing and Washington are negotiating a truce before the presidents sit down together.

Trump's administration has accused Beijing of unfair trade and intellectual property practices. Trump has also accused the World Trade Organization of being unable to police countries that violate its rules.

"The cornerstone of the WTO is not to be challenged," Xi hit back on Saturday, warning that doing so would shake the "very foundation of a multilateral trading system."

Despite his strong words, Pence did not rule out those direct talks between Xi and Trump on the sidelines of the Group of 20 summit.

"The United States of America seeks a better relationship with China, based on fairness, reciprocity and respect for sovereignty," the vice president said. "As the president prepares to meet with President Xi at the G-20 summit ... we believe progress could be made."

The verbal jousting went far beyond trade issues. In his speech, Xi dismissed concerns over the political intentions of China's Belt and Road initiative, a sprawling infrastructure development program that would touch many parts of the globe.

"It is not designed to serve any hidden geopolitical agenda," Xi said. "It is not a trap, as some people have labeled it."

But in his speech, Pence warned about "strings attached" to the initiative. The U.S. "offers a better option," he said, referring to a $60 billion infrastructure investment scheme centered on the Indo-Pacific region.

"We don't drown our partners in a sea of debt," he said. "We don't coerce or compromise your independence. We do not offer a constricting belt or a one-way road."

Chinese President Xi Jinping told those gathered for APEC CEO Summit 2018 in Papua New Guinea to "reject arrogance and prejudice."   © Reuters

Xi and Pence also clashed over ideologies.

"The truth is," Pence said, "governments that deny rights to their own people too often violate the rights of their neighbors. Authoritarianism and aggression have no place in the Indo-Pacific."

He went on to hit China's closed internet, known as the Great Firewall. A "free and open Indo-Pacific deserves a free and open internet," Pence said.

The Great Firewall has acted as an incubator to many of the country's information technology giants, allowing them to grow piles of cash that they would later use to sweep through other Asian markets.

Xi said there is no single model for development and called on countries to embrace diversity

"We should reject arrogance and prejudice," he said. "When it comes to choosing a development path for a country, no one is in a better position to make the decision than the members of that country.

"Copying the development of others ...would be counterproductive. So will be any attempt to impose their own development model on others."

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