Failure at APEC makes engaging more crucial – The Australian Financial Review

Scott Morrison and US Vice-President Mike Pence at a bilateral meeting on the sidelines of the APEC Summit in Port Moresby, Papua New Guinea.

The Asia Pacific Economic Cooperation summit was founded three decades ago to be a circuit-breaker for the region’s big economic and financial problems.

Defusing the looming trade war between its two biggest members by far, the United States and China, would have been a tall order for this year’s APEC meeting in Port Moresby. But instead it got worse, with the summit descending into an arena for posturing and confrontation between the two: for the first time ever the 21 members were unable even to sign off on a final, agreed communique.

Prime Minister Scott Morrison went to APEC with no intention of choosing sides between Washington and Beijing, and he did not do so. John Howard created the no-choosing foreign policy mantra to deal with the rising rivalry between our chief security ally and our main trading partner. But now the rivalry has begun to boil over, not just for us, but for the whole region. Both of the superpowers have in different ways upset the regional balance between security, and trade and prosperity, that had worked for 70 years. That balance needs to be restored. And it makes the role of middle powers like Australia even more important. 

At APEC Mr Morrison welcomed a powerful US partnership in Australia’s new naval base on Manus island, north of Papua New Guinea, intended as a watchful eye on China’s strategic reach into the islands.

But he also backed Chinese leader Xi Jinping’s call for an end to protectionism and unilateralism in trade policy. “No country gets rich selling to itself”, Mr Morrison told an APEC CEO forum, in words aimed squarely at Donald Trump’s misguided America First trade nationalism.

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There is truth in each side’s complaints. The long US naval hegemony in Pacific waters allowed the region to integrate with China’s economy, without fear of being militarily dominated by it. The US can be irrationally over-sensitive to the rise of other states — China did not need US permission to lift itself from poverty with its open door policies. But, China’s open door only worked because it could use a multilateral trading system that the US created and led. Now that China is powerful, it is showing every sign that it will never fully liberalise to commerce coming in the other direction. Beijing’s maritime claims and fortress-building in the South China Sea has upset the strategic balance in the most reckless way. And why is China pushing its presence in the faraway South Pacific?

Yet Mr Pence called at APEC for “free, fair and reciprocal trade”, at the same time as the Trump administration is turning to unrestricted tariff warfare. Many in Washington want the US to disentangle itself from China’s economy altogether, despite it being the world’s single biggest economic relationship. But the America First doctrine is also based on Mr Trump cutting his own deals with fellow strongmen like Mr Xi, at his traditional partners’ expense. Mr Trump’s confronting negotiating style may well break down doors to Chinese markets. If the US president’s record is anything to go on, a bilateral deal between Mr Trump and Mr Xi might mean a carving up of a global trading system that was once open to everyone. Mr Xi said in Port Moresby that “unilateralism and protectionism will not solve problems but add uncertainty to the world economy”. Making that true is Mr Xi’s chance to play statesman over Mr Trump, and Australia should help to make sure that he is as good as his word.

It is critical now for middle powers like Australia and Japan to step up and keep all the infrastructure of multilateral trade going — and to keep widening the circle of free trade with new agreements like the Regional Comprehensive Economic Partnership. Australia wants to lead reform of the WTO, which has descended into UN-like paralysis, so that it can once again set down collective rules that countries will follow — and induce back even the reluctant like the US. Because once the powerful start looking inward, it will be hard to stop global fragmentation into military, trade, technology and investment blocs from building momentum. That would leave us with impossible choices.

This cannot be left to two powers playing out a great game. Engaging not choosing is the key.

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