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Trade war

US-China trade clash blocks APEC declaration

Forum ends without statement for first time in its history

PORT MORESBY -- Tensions between the U.S. and China escalated on the final day of the 2018 Asia-Pacific Economic Cooperation summit, forcing the 21 members to wrap up without a joint declaration for the first time since meetings began in 1993.

Papua New Guinean Prime Minister Peter O'Neill, who hosted and chaired this year's summit, said he would issue a chairman's statement later as a substitute.

"There is a statement of consensus that has been agreed to by the leaders that I am authorized to release," O'Neill said. "Out of that, there are only one or two issues they disagreed on."

U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, are expected to meet for a summit in Argentina in two weeks. Increased friction ahead of this is seen as a major reason for the unprecedented failure to issue an APEC communique.

Trump's administration favors bilateral trade agreements in the Indo-Pacific region, which includes India, over multilateral trading arrangements.

This policy has clashed with those of other APEC members, especially China, which strongly insists on the need for a regional free trade deal. Such a multilateral framework could help Asia's largest economy expand its influence through the multibillion-dollar Belt and Road Initiative.

"Global development faces acute, deep-seated problems," Xi said in his summit speech on Sunday. "Protectionism and unilateralism are resurfacing."

In an apparent jab at Trump and his "America First" approach, Xi said: "The multilateral trading system is under assault. The global economic environment is fraught with risks and uncertainties."

For his part, U.S. Vice President Mike Pence reiterated American criticism of China's trade practices. "There are differences today: They begin with trade practices, with tariffs and quotas, forced technology transfers, the theft of intellectual property," he said.

The boxing between the two countries started earlier this year with tit-for-tat tariffs. Their quarrel intensified on the ASEAN Summit stage, when Pence strongly criticized China over territorial disputes and expansion of military presence.

In continuing the war of words in Papua New Guinea, Pence not only blasted China over its trade behavior but also security and human rights issues. In addition, the vice president touched on China's investment spree in the Asia-Pacific region and concerns that the Belt and Road Initiative is pulling countries into a debt trap. 

O'Neill said other countries also weighed in with opinions on trade, "not only the U.S. and China."

Japanese Prime Minister Shinzo Abe was quoted by an official from Japan as saying: "As the flag-bearer of free trade, Japan will take necessary steps to develop free and fair rules in multilateral, regional, and bilateral relations." This can be seen as a balancing act to maintain positive relations with both the U.S. and China.

O'Neill said reforming the World Trade Organization and other trade issues were the major points of contention. The U.S. pushed for an entry in the abandoned joint declaration stating that the WTO "is currently not functioning as envisioned by its members." It also sought to strike out the entry on a "multilateral trading system," a bedrock principle of APEC, but was met with strong opposition from most members.

China, meanwhile, pushed to include “recommit to stand against protectionism and unilateralism,” in an apparent protest against Trump’s “America first” policy.

Xi and Pence did have chances to talk directly in Papua New Guinea. The U.S. Vice President told reporters he spoke twice with Xi. Pence told  the Chinese leader Washington is interested in a better relationship “but there has to be change.”  Meanwhile, Xi replied by saying that “dialogue is important,” according to Pence.

The U.S. and China will head toward the Trump-Xi summit in Argentina with some disagreements. Pence said issues ranging from trade practices, the theft of intellectual property, freedom of navigation in the seas and concerns about human rights would be topics of discussions for Xi and Trump at the summit.

This year's APEC summit, hosted by the New Guinean government for the first time, exposed deep global divisions.

"The APEC leaders also recognized the rising tensions between the trading countries around the world, particularly on goods and services that are traded between each other," O'Neill said.

Tensions had built up in the run-up to the summit. Pence and Xi engaged in a verbal tussle at the APEC CEO summit on Saturday. And, at the drafting of the ministerial meeting statement on Thursday, a source said there was a "heated exchange" between Washington and Beijing over protectionism.

China, a key aid provider to Papua New Guinea, attempted to influence the drafting of the communique. Four Chinese officials barged into the office of Papua New Guinea's Foreign Minister Rimbink Pato on Saturday afternoon, demanding a discussion on the wording of the communique after being denied a meeting, according to Australian Broadcasting Corp.

Security was called to the office and the officials had to be escorted out, something China senior Foreign Ministry official Wang Xiaolong has denied.

"The entire world is concerned about the debate that is going on about trade relations between China and the U.S.," O'Neill said.

But he is holding out hope. "This is a situation that both countries need to sit down and resolve," he said. "And I believe that the G-20 meeting that will be [held] very shortly will be an opportune time" to do so.

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