The Asia-Pacific Economic Co-operation is not known for producing controversy. Former Australia Senator Gareth Evans neatly captured many people’s view of the multilateral forum in 1993 when he described APEC as ‘four adjectives in search of a noun.’ But as the sun set on this year’s meeting in Port Moresby earlier this month, regional leaders and diplomats were left deflated when, for the first time in APEC’s history, the summit failed to produce a final communiqué. Why?
For many months the stage had been set for APEC 2018 as an opportunity for the U.S. and China to solidify their positions as the dominant power in the Asia-Pacific. It’s no secret that China has been seeking to deepen its engagement in the region through a slew of investment in the Pacific. For instance, President Xi arrived in Port Moresby prior to APEC for a bilateral meeting with Prime Minister O’Neill that concluded with the announcement of a memorandum of understanding, signalling a new 10-year loan for PNG. This was coupled with China’s offer to build Port Moresby’s glistening new International Convention Centre for APEC, complete with a six-lane highway connecting it to their parliament house and the airport. Delegates and observers to APEC were curiously welcomed with billboards praising President Xi’s hand in the tangible prosperity.
It was further revealed throughout the summit that Tonga would be the newest member of President Xi’s flagship Belt and Road Initiative (BRI). This came as Tonga was nearing its first repayment date for a Chinese concessional loan which was promptly deferred for five more years. The loan, which amounts to a third of Tonga’s GDP, is expected to put strain on the island nation and was labelled by U.S Vice President Pence as an example of China’s growing ‘debt trap diplomacy.’ In short, the West has accused China of loaning large amounts to nations that are unlikely to make full repayment aiming, in the event of default, to gain economic or strategic footholds in those countries. Such an arrangement led to Sri Lanka granting China Merchant Port Holdings a 99-year lease to its Hambantota Port, an important harbour located on a crucial trade route. It was hardly surprising then that the Vice President urged his fellow regional leaders to “not accept debt that could compromise your sovereignty,” calling on them to “protect [their] interests.”
The West is clearly concerned with China’s rising influence in the region and responded with a range of announcements. In early November, Australia promoted the establishment of its new $2 billion infrastructure bank for the Pacific, part of which will be used to honour its commitment to roll out a large-scale electricity infrastructure network in PNG. Alongside the US, New Zealand and Japan, it hopes the network will provide power to 70% of PNG’s population in the next decade. Additionally, the US and Australia will partner with PNG to upgrade its naval base on Manus Island – although details on the project, at this stage, are light.
These tit-for-tat actions crystallised as leaders made their respective speeches to representatives. In a clear rebuke of the BRI, Vice President Pence affirmed:
“We don’t coerce or compromise your independence… We do not offer a constricting belt or a one-way road.”
President Xi, on the other hand, proposed a moral choice for delegates:
“Mankind has once again reached a crossroad. Which direction should we choose? Cooperation or confrontation, openness or closing one’s door?”
China’s rivals are evidently faced with a rising power that appears to have its house in order. Beijing has methodically improved ties with nations placed near the land and maritime components of the BRI such as Pakistan, New Zealand and Indonesia, and the Pacific is no different. While moves by the U.S. and its allies to redefine previously stagnant relationships are at least some form of response, these reactions can hardly be seen as nimble. Australia, for its part, has been sluggish in the Pacific, despite the aforementioned announcements. Potential allies such as PNG could be forgiven for thinking that Australia’s Pacific infrastructure fund is too little, too late, and recent (alleged) comments by Environment Minister Melissa Price that “it’s always about the cash” for our island neighbours were clearly not helpful.
APEC 2018 was of course played against the backdrop of the tense trade war in which the U.S. and China have been engaged since March. Both nations have slapped a range of tariffs on respectively important export sectors such as steel, aluminium and technology. Indeed, it is this that led to the roadblock to the summit’s final communiqué: the U.S. delegation had pushed for paragraphs to be included which called for an overhaul of the WTO and warned against unfair trade tactics – a clear call to arms against China. Naturally, Beijing rejected these measures, and Chinese officials reportedly stormed the PNG Foreign Ministry’s office demanding the paragraphs removed. Ultimately, regional leaders were forced to allow PNG’s chairman to issue a statement on behalf of the meeting.
APEC 2018 has set the stage for a crucial G-20 summit in a week’s time. Investors will be watching closely as President Trump makes the trip to Buenos Aires where a bilateral sideline meeting with President Xi has been scheduled, hoping for progression in talks between the great powers to relax tariffs. While hopes of a ‘grand bargain’ are slim, the world will be watching for any indication as to the next phase of this now strained relationship.
