China and US talks hit a snag at APEC
It started nearly 30 years ago at Australia’s initiative as a forum to align minds on integrating the rising economies of Asia into the global order. Last weekend, it barely remained civil, with leaders of the two biggest players, the United States and China, departing after harsh words.
For the first time since it started in 1989, the yearly Asia-Pacific Economic Cooperation summit could not agree on a joint communiqué, even one couched in generalities about free trade. It was left for the host, Papua New Guinea’s prime minister, Peter O’Neill, to issue a chairman’s statement.
Earlier, four Chinese officials pushed into the office of PNG’s foreign minister, Rimbink Pato, to argue about the terms of the draft communiqué. Police were called to usher them out. It seems the Chinese saw a paragraph about unfair trade practices and stepping up World Trade Organization complaints mechanisms as being aimed at them.
Chinese leader Xi Jinping had arrived two days before everyone else to a Port Moresby tarted up for the summit with Chinese money, and he defended his $US1 trillion Belt and Road Initiative. “It does not exclude anyone,” he said. “It is not an exclusive club closed to non-members, nor is it a trap as some people have labelled it.”
Donald Trump was not there but sent Vice-President Mike Pence, who has emerged as the administration’s chief attack dog against China. He followed up his key October 4 speech, which pledged the US would stand up to Chinese power in Asia, by weighing in at Port Moresby, saying Xi’s pet scheme was a “constricting belt” and a “one-way road”.
Pence also announced the US would join Australia in expanding a naval base on Manus Island, and join Australia and Japan in a multibillion-dollar aid program to bring electricity and the internet to 70 per cent of PNG’s population by 2030. He even threw the Bible at it. The King James original translation given to the PNG parliament by US evangelicals was support for a “free and open Indo-Pacific,” Pence said. “… as it says in that old book, ‘Where the spirit of the Lord is, there is liberty.’ ”
It remains to be seen who will win the South Pacific. The new Manus “base”, it turns out, is just a bigger wharf for the new patrol boats Canberra is giving PNG, along with other Pacific states, mostly to deal with fishing pirates. On Tuesday, PNG’s O’Neill faced rioting by soldiers, police and prison guards who said they had not been paid their $145 overtime for weekend summit duty. The fate of the 40 Maseratis and three Bentleys acquired for APEC will also be scrutinised. In the run-up to APEC, O’Neill slipped out his budget for 2019, showing rising debt service and cuts in health, despite a recent polio outbreak.
The Pence performance in Port Moresby was just a warm-up act for the main show next Friday in Buenos Aires, when Trump meets Xi at the Group of 20 summit, a yearly forum for large and medium economic powers.
Prime Minister Scott Morrison, who will be there, expressed the hope it would bring an end to the “tit-for-tat” tariff battle between the US and China. “I think every day brings us closer to a resolution,” he said in Port Moresby. “There’s a lot of movement under the water.”
Analysts speculated the US administration was playing a good cop/bad cop routine with Beijing, to get Xi to bring major concessions to Argentina in the areas of bipartisan concern in Washington, notably forced transfer of intellectual property as the price of selling into China. Announcing punitive tariffs on imports from China in September, Trump declared that “hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection”.
It is not yet known whether this brinkmanship model, transferred from the New York property scene, allows for retreat while saving face. If Xi stands firm, Trump’s tariffs on $US250 billion of Chinese goods – half of China’s exports to the US – jump from 10 per cent to 25 per cent on January 1. To keep economic growth at the level seen as ensuring regime stability, Xi might have to reopen the domestic lending taps. China itself would then get deeper into a debt trap.
Saudi Arabia’s King Salman or his representative will also be in Buenos Aires, but Trump made it clear he would not be going after Crown Prince Mohammed bin Salman for involvement in the gruesome murder of critical journalist Jamal Khashoggi inside the Saudi consulate in Istanbul.
Numerous reports said the US Central Intelligence Agency and Turkish intelligence concluded the prince authorised the assassination. But in a statement on Tuesday, Trump did not deliver on his earlier promise to reveal what officials knew, and said he would not listen to the audio recording the Turks had shared of the actual murder, obtained from a covert listening device.
“It could very well be that the crown prince had knowledge of this tragic event – maybe he did and maybe he didn’t!” the Trump statement said, adding, “In any case, our relationship is with the Kingdom of Saudi Arabia.” And that was more important. For Trump, the Saudis are vital to US arms sales, low oil prices, confronting Iran, and helping son-in-law Jared Kushner with his long-mooted solution to the Israeli-Palestinian deadlock.
“It’s a mean, nasty world out there – the Middle East in particular,” added Secretary of State Mike Pompeo. “There are important American interests to keep the American people safe, to protect Americans – not only Americans who are here, but Americans who are travelling and working, doing business in the Middle East. It is the president’s obligation, indeed the State Department’s duty as well, to ensure that we adopt policies that further America’s national security.”
At the G20, Trump will find plenty of European and Turkish opposition to that. It will not go down well in Washington, where both Democrats and some Republicans want action against the prince. The sop that Trump is offering is pressure on the Saudis and Emiratis to end their destructive war in Yemen, also an initiative of the crown prince.
It seems Britain’s Theresa May will also make it to Buenos Aires. The disgruntled Brexiteer Jacob Rees-Mogg was struggling this week to get much more than half the 48 signatures required from Tory MPs for a leadership contest.
Despite multiple resignations from her cabinet, May was sticking to the draft agreement thrashed out with the European Union for a transitional arrangement after Britain leaves the EU on March 29 next year. This would mean Britain staying in the European trade zone until the end of 2020 as permanent arrangements are worked out, while control over immigration, fisheries and agriculture would revert to London.
Rees-Mogg, Boris Johnson and other hardline Brexiteers see it creating and perpetuating a state of “vassalage” in which the British observe EU trade rules without any say in making them, their hopes of buccaneering trade deals outside Europe deferred. As the price of an open Irish land border, the Unionists in Northern Ireland fear the permanent deal will create a customs barrier between them and the British mainland.
The draft agreement goes to European leaders on Sunday. It will be put to the British parliament before Christmas, with Labour and a large section of the Conservatives saying they will oppose it. The clamour for a second referendum is growing, with polls indicating Remain would win this time, and May for the first time on November 15 raised the scenario of no Brexit at all. Maybe that’s her plan: to make it all too hard.
This article was first published in the print edition of The Saturday Paper on Nov 24, 2018 as "China and US talks hit a snag at APEC". Subscribe here.