By James Borton
SAN FRANCISCO — The Golden Gate Bridge, a slender, often foggy passageway from the San Francisco Bay to the Pacific Ocean, is the backdrop for 21 leaders convening for the Asia-Pacific Economic Cooperation (APEC) forum through Friday to discuss international tensions and the way forward.
A meeting Tuesday between President Biden and Chinese President Xi Jinping, confirmed by the White House on Friday, will almost certainly be the media highlight of the gathering.
Yet as host of the weeklong event, Mr. Biden is also being challenged to reboot confidence among the leaders of other Pacific Rim countries who fear the U.S. is focused on other matters and has faltered in its commitment to traditional open market policies.
Domestic and foreign distractions are likely to intrude on the gathering. The host city has grappled with homelessness, a struggling downtown commercial environment, widespread drug abuse and high crime rates. While Mr. Biden and his team meet with Asian leaders, the White House is monitoring hot wars in Israel and Ukraine.
Despite a promising beginning and early successes since its establishment in 1989, APEC has come under scrutiny for sluggish delivery of concrete results in regional trade and investment liberalization, even after including some of the world’s most dynamic emerging economies.
“While a successful meeting with Xi could further key short-run economic and political priorities, the most impactful economic announcements coming from APEC likely won’t involve their sit-down,” Niels Graham, a China specialist and an associate director of the Atlantic Council’s GeoEconomics Center, wrote in a recent analysis. “That’s because the United States is expected to make multiple major announcements around its Indo-Pacific Economic Framework (IPEF) as well as a number of bilateral investment deals with APEC member economies.”
A numbers game
The need for U.S. engagement is evident as China emerges as an economic and security challenge across the region. The APEC region is home to 3 billion people and represents nearly 48% of trade in goods and services and 62% of the world’s gross domestic product.
Foreign direct investment from APEC economies in the United States has hit $1.71 trillion. Almost 56% of U.S. exports go to these Asia-Pacific economies, accounting for nearly 7 million American jobs, according to the latest “Asia Matters for APEC” report from the Honolulu-based East-West Center.
“The Indo-Pacific Economic Framework (IPEF) and this APEC program provide the basis to advance American priorities and, to a lesser and greater extent, the priorities of the 22 other APEC economies,” said Satu Limaye, vice president of the East-West Center Washington office.
APEC’s outreach channels have grown increasingly important, analysts say, as the U.S. and China disengage on several fronts and now compete openly for allies and influence in East Asia, the South Pacific and Latin America.
The challenges to the Biden administration differ vastly from those confronting U.S. administrations hosting APEC summits in 1993 and 2011. Twenty years ago, foreign leaders largely embraced globalization and free trade, but decoupling, “de-risking” and nationalism drive the dynamics in a more fragmented global governance.
The U.S. government, once considered a champion of open markets and freer trade, now has a different image. In many cases, Mr. Biden’s team has continued the Trump administration’s pullback.
“Most Asians, especially in developing Southeast Asia, see the U.S.-led Indo-Pacific Economic Framework as doing little to provide more access since they see the IPEF as mostly designed to please U.S. free trade critics who support President Biden,” said Murray Hiebert, research director at the Washington-based Bower Group Asia.
A growing bipartisan consensus in Washington holds that China does not adhere to a rules-based order, violates global trading rules and has created an unfair playing field for foreign businesses.
The Biden administration’s protectionist trade moves and failure to fully roll back Trump tariffs and other trade restrictions mean an absence of progress on traditional free trade deals.
As a result, the Indo-Pacific Economic Framework has made little movement. The program is not a traditional trade agreement and does not provide improved market access through tariff elimination, which is the fundamental reason for nations to enter such deals with the United States. Some say the APEC summit will allow the Biden administration to more fully lay out an approach that differs from traditional trade agreements.
“This host year allows the United States to advance an economic policy that benefits workers, businesses of all sizes, and families across our country and the APEC region,” said Monica Hardy Whaley, president of the National Center for APEC.
An opening to exploit
The U.S. may have an opening to exploit from increasing numbers of Southeast Asian countries, especially Vietnam and the Philippines, worried about Beijing’s widening clout, reflected in Mr. Xi’s signature Belt and Road Initiative and military modernization in the South China Sea.
“The United States should focus on making its initiatives more durable in order to continue fostering strong relationships with regional partners and allies, and this is true for [the Indo-Pacific Economic Framework],” said Ted Osius, a former U.S. ambassador to Vietnam and president and CEO of the U.S.-ASEAN Business Council.
He strongly advocated an Indo-Pacific Economic Framework secretariat to create a permanent administrative structure for the American outreach program.
Even with other foreign policy challenges dominating the headlines, Washington has tried to solidify its links with key players in the Indo-Pacific region.
In September, the U.S. and Vietnam upgraded to a “comprehensive strategic relationship” to broaden and deepen bilateral links. The agreement secured a reliable supply chain for Vietnamese semiconductors and a more favorable environment for American investment.
By 2011, almost two decades after the inaugural APEC gathering, China’s growing influence in regional geopolitics and economy had become a cause for considerable apprehension.
China reshaped the regional balance of power and challenged many of APEC’s fundamental principles. The United States has attempted to form partnerships and alliances to counter Chinese predominance in the region.
APEC shares similarities with the Group of 20 and the Organization for Economic Cooperation and Development. The leadership is subject to an annual rotation among member states, with the host country financing and taking the most prominent role in setting the agenda.
Some argue that distractions from the Middle East, Ukraine and the dysfunction in Washington are all the more reason for the U.S. to deepen its links in the dynamic Pacific Rim region. APEC nations keenly feel the problems thousands of miles away.
Matt Murray, the State Department’s senior point man on APEC affairs, said in an interview with Voice of America, “Whether you’re talking about food security, prices or energy issues, those are all substantive impacts that have derived from Russia’s invasion of Ukraine. So that’s a concern in the context of APEC.”
Channels for connection
APEC offers some unexpected channels for connection. In addition to helping midwife some of the significant multilateral trade compacts of recent decades, APEC is one of just two international organizations, along with the World Trade Organization, where the U.S., Taiwan, Hong Kong and China are all full members.
Still, analysts expect the tone of the debate this week to be significantly more negative and defensive than in years past. Free trade ideals are being challenged, the COVID-19 pandemic has disrupted global supply chains, U.S. leadership on trade issues has been battered, and China and the U.S. are trying to balance the level of cooperation and confrontation in their bilateral relationship.
Mr. Trump pulled the U.S. out of the Trans-Pacific Partnership, a massive regional trade pact. Even with Washington on the sidelines, the TPP morphed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, primarily because of Japan’s leadership.
The loss of momentum also has a clear impact on the marketplace.
As the U.S.-China relationship deteriorates and supply chains are rearranged, many corporations are relocating production facilities from China to Southeast Asia and exporting directly to Western markets. Many APEC countries are loath to choose between the U.S. and China, and the balancing act is increasingly hard to maintain.
The customary San Francisco fog may result in far more than lower temperatures for APEC leaders and their delegations. It may symbolize the difficulty of seeing what is on the horizon.
This article was originally published in The Washington Times on November 10, 2023. James Borton is the Editor-in-Chief of the South China Sea NewsWire.
