This year's Asia-Pacific Economic Cooperation (APEC) summit held in Port Moresby, the capital city of Papua New Guinea on November 17-18, ended up in deep division between the USA and China failing to agree on a final communique. This has happened for the first time in APEC's 30-year history. The summit clearly magnified the fight for dominance in the region between the US and its close allies Australia and Japan on one side and China, on the other.
APEC was established in 1989 to promote and strengthen multilateral trading system and sustainable economic growth in the Asia-Pacific region through open trade and investment flows. Its membership has grown from 12 to 21 member countries spanning over four continents who account for almost half of the world's population and global trade and 60 per cent of global gross domestic product (GDP). But in the years following the Asian Financial Crisis of 1997, APEC leaders' meetings have become more symbolic than of any substance. The Global Financial Crisis of 2007-08 further added to economic woes of all Asia-Pacific countries affecting not only financial markets, trade and investment flows but also growth of real economy.
The APEC leaders now appear to parade wearing local clothing as happened in Port Moresby (the world's 5th least liveable city according to the Economist's Global Liveability Index, 2018, but three notches above Dhaka). The leaders gathered in matching red and yellow satin shirts for the obligatory photograph, but underneath tensions were brewing up between the US and China over trade and security issues culminating in no joint communique from leaders. Peter O'Neil, prime minister of Papua New Guinea (PNG), blamed 'the two big giants in the room' for the breakdown in talks.
But APEC has been drifting for quite a while and increasingly moving toward irrelevance. APEC faces challenges from many fronts. Washington saw it as a tool for 'trade liberalisation' under the Clinton administration but the next administration turned its focus on 'war on terror' and now the present administration has moved on to add one more war on its list of wars - 'trade war'. The USA in its rather short history as a country, can not just stay away from wars in one form or another. Since 1776 it has been at war all the time except 20 years; and since the end of the Second World War it has fought five major wars but could not win a single one.
The expansion of APEC membership spread over a very vast region and with a very high degree of diversity came at the expense of deepening cooperation. Every year the host government comes up with an eye-catching slogan for the summit, but nothing happens with its core objective of trade liberalisation. In fact the very agenda of free and open trade is under threat from the Trump administration and his Vice President Mike Pence carried that message to the Summit. The USA insisted on inserting a reform agenda for the World Trade Organisation (WTO) - mostly directed at China - with a strong message on trade given that APEC has no charter over the WTO. And that was the sticking point culminating in the failure to agree on a joint communique at the end of the Summit. That may hardly matters, yet the absence a communique signals an acceleration of the simmering tensions between Beijing and Washington on a number of fronts, not limited to trade alone.
The US also used the APEC platform to initiate yet another anti-China military alliance with Australia and PNG to establish the Lombrum Naval B base on Manus Island off the northern coast of PNG - undermining a Chinese proposal to build a port there. The Australian military is closely integrated with US forces in the region. Australia is now the key strategic partner of the USA in carrying out hostilities against China. Steve Bannon highlighted the importance of Australia to the US strategic drive against China by describing Australia as the 'tip of the spear in the Pacific'.
Pence even provocatively flew from Japan to Singapore, only 80 Km from the Spratly Islands, and claimed his flight was a 'freedom of navigation' mission. Using this misleading slogan of 'freedom of navigation' the US has since the Obama administration stepped up naval and air incursions into territorial zones claimed and controlled by China. The growing US military presence in the South China Sea in close proximity to Chinese territories that began with Obama's 'pivot to Asia' has now further accelerated under Trump.
The naval base at Manus Island will enable both the US and Australia to straighten their offensive capabilities against China. During the World War II, Manus Island was indeed a huge US base directed against Japan. This will further add to the USA's drive to encircle China in the Asia-Pacific region. Such military confrontational strategy against China is rendering APEC as an useless institution. At the same time the USA with its allies, Australia and Japan, have launched a coordinated hostile response to China's Belt and Road Initiative (BRI). To undermine BRI, the USA tagged along Australia, Japan and New Zealand to sign an agreement with PNG to connect power and internet services to 70 per cent of its population by 2030.
But President Xi Jinping warned the USA against trade war and risking an economic conflagration. He said that humankind has once again reached a crossroads and posited 'History has shown that confrontation - whether in the form of a cold war, hot war or trade war - will produce no winners'. He pointed out that China went to APEC with proposals to deepen cooperation in the region but the US took a very hostile attitude.
In effect Vice President Mike Pence sabotaged the APEC Summit. For quite some time, he has been at the forefront in launching a whole range of frontal aggressive attacks on China on issues which include trade, the South China Sea, BRI, intellectual property rights (IPRs). He even alleged Chinese interference in the US mid-term elections. He further warned China that the US would continue with its 'freedom of navigation' operations in the South China Sea. He warned that unless 'China changes its ways', the US would escalate its tariffs on Chinese goods indicating further sharp escalation of trade war against China.
Pence criticised China for setting 'debt trap" for countries that accept China's infrastructure loan. He alleged that these Chinese loans come with strings attached and projects undertaken with these loans were unsustainable. Such an attitude on the part of the USA is rather very hypocritical. Since the mid-1940s the US is the country which has used various forms of economic assistance either through its own agencies such as US AID and other agencies or indirectly through US-controlled international agencies such as the World Bank and the International Monetary Fund (IMF) to render the recipient countries trapped under perpetual debt trap which was then used as a leverage against these countries to fall in line to follow US diktats. And that US strategy of 'debt diplomacy' for economic and financial control, in particular of poorer countries, still remains in place.
Pence's deliberate aggressively provocative stance is clearly designed to send a message to China that the US will prevent any power to challenge its economic and military dominance by any means. But underlying those threats of economic warfare and military confrontation with China is a increasingly desperate bid of the US to hold on to the position as the unchallenged global hegemon at a time when signs of its irreversible economic decline are quite visible.
Muhammad Mahmood is an independent economic and political analyst.
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