Tuesday, 2 August 2016

Dr. R. Evan Ellis: Will China upstage the U.S. at the November APEC Summit?




When I visited Beijing, China from July 16-31 of this year, it was the high point of summer both in Washington D.C. and Beijing; focused more on the sweltering heat and impending vacations, I wasn’t ready to think about the fall and winter. But my Chinese colleagues were already focused on the November Asia-Pacific Economic Cooperation (APEC) leaders’ summit.
APEC started in 1989 as a forum for Pacific Rim countries to promote free trade. The annual summit of member heads of states, which currently includes 21 countries, has become one of the most important high-level forums for countries on both the Asian and Latin American sides of the Pacific.
Although the APEC leaders’ summit rotates among member countries, this year’s meeting in Lima, Peru will be the first time in eight years that the event has been held in Latin America. The past two gatherings in Latin America (2004 in Santiago, Chile, and 2008 also in Lima), highlighted the region’s growing commercial relationships with Asia and showcased major new trade initiatives between the People’s Republic of China (PRC) and the region.
In my conversations with my colleagues from Chinese companies and academia, I realized how important this particular event will be for the PRC, the U.S. and the region—not just for the issues on the table for discussion but even for the symbolism and side discussions that will occur.
On the PRC side, between President Xi Jinping and Prime Minister Li Keqiang, since March 2013 (when Xi assumed the presidency) Chinese state leaders have made at least one trip per year to Latin America—with each featuring multiple stops and important policy announcements. In May 2013, just two months after assuming the Chinese presidency, Xi demonstrated his interest in the region by visiting Costa Rica, Trinidad and Tobago, and Mexico, meeting with a total of 11 heads of state from the region before arriving in Sunnylands, California to meet with U.S. President Barack Obama. In July 2014, Xi traveled to Venezuela, Cuba, Argentina, and Brazil in a conjunction with that year’s annual BRICS summit in Fortaleza, Brazil. The tour through the region provided the Chinese leader the chance to showcase multiple new initiatives toward the region, including the PRC’s new “1+3+6” approach to building its relationship with the region, referring to one plan, three engines (trade, investment and finance), and six fields (energy and resources, construction of infrastructures, agriculture, manufacturing, scientific and technological innovations and information technologies), and highlighting $35 billion in new loan funds promised for the region. In May 2015, Prime Minister Li Keqiang visited Brazil Colombia, Peru and Chile, affirming $27 billion dollars in deals during his stop in Brazil alone.
Although the Latin American countries that President Xi will visit this November en route to APEC have not yet been announced, the trip will likely be the centerpiece of PRC diplomacy toward Latin America this year.
The combination of a U.S. administration focused on the November presidential elections, and a region in need may make this year’s APEC leaders’ summit in Lima a triumph for Chinese diplomacy toward Latin America.
In 2004, President Hu Jintao’s trip to that year’s APEC summit in Santiago, Chile, put the PRC on the map for Latin America’s mainstream business and political leaders, with his talk of $100 billion in Chinese investment or trade with the region within the next 10 years. President Hu’s show-stealing presence at the 2004 APEC summit was due in part to the U.S.’s relatively weak showing. Then-President George Bush arrived at the event distracted by events in other parts of the world and brought to Santiago an agenda out of step with most Latin Americans’ interests: North Korea’s efforts to obtain a nuclear weapon, the strong U.S. dollar, and U.S. budget deficits.
In 2004, like now, Latin America was looking for answers to its economic challenges. By the time of the Santiago summit, Latin America had suffered several years of falling foreign direct investment as Western capital increasingly flowed to the PRC and other Asian destinations. Latin American heads of state arrived at the meeting looking for new answers to the challenges of development.
Similarly, this year, Latin American economies (particularly in South America), have been reeling from low global prices for commodity exports. This year alone, the region is expected to contract up to 1.3 percent, dragged down largely by the economic crises in Brazil and Venezuela.
This year’s summit will occur on November 19-20, just 11 days after the U.S. elections. In the lead up to the Lima gathering, White House staffers and senior U.S. policymakers will likely be distracted by the election, leaving little time to focus on preparation. In addition, President Obama will arrive in Lima as a lame duck, scheduled to leave office January 20, 2017, two months after his appearance at APEC. His appearance will largely be a farewell and an attempt to define and consolidate his legacy, meaning there will likely be only a few—if any—new initiatives.
The APEC leaders’ summit will also be the first major gathering of global leaders after the U.S. elections reveal the next president. As such, the conversations on the sidelines of the summit will be as important as the event itself.
U.S.-APEC scenarios
Given that both U.S. presidential candidates, Hillary Clinton and Donald Trump, have indicated opposition to the Trans-Pacific Partnership in its current form, the leaders gathered in Lima will likely be looking for signals whether the initiative, signed in Auckland in February 2016, will now wither away without the required approval by the U.S. Congress. If the conclusion is that it will die on the vine, the big question will be “where do we go from here?
In such a vacuum, China’s President Xi would likely push for his country’s own trade initiative, the Regional Comprehensive Economic Partnership (RCEP), as an alternative path to free trade. Yet because the RCEP does not currently include Latin America, moving down this path would likely be a major setback for trans-Pacific economic integration. By contrast to the TPP, the less stringent terms of RCEP, focusing principally on free trade rather than supporting issues such as intellectual property protection, would represent a loss to the U.S. and like-minded partners to define the emerging regime of the Pacific in a fashion congruent with Western interests.
If Hillary Clinton wins the election, the assembled leaders in Lima will likely be looking at rumored members of her new cabinet for clues about likely continuity and change regarding U.S. economic and security policy toward Asia. Particular focus will be given to how hostile President Clinton’s policy might be toward the PRC, and how the U.S. level of attention toward Asia and security commitments to Asian states might evolve.
If Donald Trump is elected, APEC will be the first high-level forum in which state leaders can evaluate the possible dramatic shifts in the Asia-Pacific’s economic and security environment. Trump’s declared intention to revisit both the TPP and U.S. membership in the North American Free Trade Agreement (NAFTA) could spawn wide-ranging discussions at the summit regarding how to re-work trans-Pacific trade integration without the United States.
If it’s felt that U.S. focus on free trade and TPP will likely diminish in the next administration, the summit may also serve to re-energize interest in the Pacific Alliance as a non-US alternative. This year’s host, Peru is a founding member, as a Pacific-oriented, pro-market, free-trade-oriented organization to integrate pro-market Latin American economies independent of the United States.
In the security realm, Trump’s announced intention to force U.S. allies to bear a greater share of regional security burdens and to support Japan’s development of nuclear weapons may prompt the countries of the region to rethink their response to the perceived threat of PRC expansionism in the South and East China Seas. Yet participants will also be wondering under what circumstances a Trump administration might unexpectedly intervene, in economic or other fashion, if the combative, thin-skinned president-elect feels offended.
Chinese-APEC scenarios
Even without a Donald Trump victory in the November, Asian security issues will be a backdrop of the summit, with China continuing to construct island military bases and otherwise assert its territorial claims in the South and East China Seas. My Chinese colleagues reassure me that the PRC government will likely attempt to calm tensions prior to the summit, so that it does not distract from other issues the PRC wishes to discuss. But, given the PRC’s recent actions, the other governments of the region are not likely to simply let the matter go.
While it’s impossible to predict the specific topics that China will push on the agenda at the summit, it will probably use the occasion to highlight its most important Asian initiative, One Belt One Road (OBOR) along with supporting Asia Infrastructure Investment Bank (AIIB). By the time of the summit the AIIB’s first projects will have gotten off the ground.
With respect to initiatives in Latin America, the PRC may take a new step forward with the multilateral loan funds it has set up through China Development Bank and China Import-Export Bank, which, to date, have not disbursed any funds. While it may not be in a position to announce new progress on Peru-Brazil inter-oceanic railroad, which remains stuck in the study phase, it’s also likely that China will showcase one or more headline-capturing new projects in the region.
As with prior summits, President Xi will probably also use the gathering to conduct bilateral meetings with Latin American leaders that he could not visit en route to Lima. This will include Chile’s president Michelle Bachelet and Peru’s newly elected President Pedro Pablo Kuczynski. Given China’s lingering frustration over the Mexican government’s cancellation of the Mexico City to Queretaro high-speed railroad just before the 2014 APEC summit in Beijing (and, just for good measure, a second time months afterward), a meeting between President Xi and Mexican President Enrique Peña Nieto is not guaranteed. But a side meeting would indicate that the PRC is ready to smooth over past differences.
It is possible, yet doubtful, that President Xi will include Ecuador and Bolivia as stops en route to Lima. While the level of Chinese business in each country and its good relations with their current regimes makes them logical candidates for a visit, China has not, to date, deemed either a “strategic partner” meriting such attention. A visit by President Xi to either country could indicate that they are being “elevated in importance” by the PRC among ALBA countries in the context of the implosion of Venezuela, as part of China’s evolving strategy toward the region.
Putin, Russia and Latin America
Beyond China, the summit will be an opportunity for Russian President Vladimir Putin to travel to the region. While traditional Russian allies in Latin America such as Nicaragua, Cuba and Venezuela will not be present in Lima, Putin’s presence, and any other Latin American stops he makes en route, will be Russia’s first public statement regarding the current state of its intentions toward Latin America in the wake of the U.S. elections.
Finally, the APEC leaders’ summit in Lima will also showcase the new government of Pedro Pablo Kuczynski. As when Peru last hosted the 2008 summit, this year’s gathering will allow the host to highlight its role as a destination for Asian investment, its importance as a trading partner, and its potential role as a nexus for trade between Latin America and the rest of the region. It will also call attention to Kuczynski’s high caliber economic team, and the return of the political pendulum in Latin America back toward governments that favor free trade and a market-based approach to development.
For the U.S., the November summit represents a complex challenge that should not be ignored. A generation from now, the Obama administration’s much-discussed “pivot to Asia” will be remembered for how he left it at APEC, as he transitioned out of office.
Whoever wins the U.S. election in November, members of the incoming president’s policy team should accompany the official delegation to Lima, both to provide indications about U.S. intentions and to hear the thoughts and concerns of the leaders assembled at the summit. Although such coordination may be particularly improbable if Donald Trump wins the election, it should nonetheless be considered for the greater good of America’s standing among its international partners and for launching the incoming administration in the best possible fashion.
Both the current administration and the incoming team must come to the APEC leaders’ summit prepared to talk about the path forward in a way that is relevant to the economic and security concerns of both Latin America and Asia. That includes the United States and the PRC and other powers such as Russia that will be at the table.
Even if an incoming U.S. administration intends to revisit the trade and security commitments that bind the U.S. to the region, it must make clear that such policy changes do not change the enduring bonds of geography, commerce and family that connect the U.S. both to Latin America, and to its neighbors across the Pacific. Most of all, it must show that the U.S. presence in the Asia-Pacific strategic and economic environment are core to its national interests and vision for the future.


The author is a professor of Latin American Studies with the U.S. Army War College Strategic Studies Institute. The views expressed in this work are strictly his own.