APEC Ends in Disarray After U.S.-China Dispute Over Final Statement

(Bloomberg) -- An Asia-Pacific summit ended in tumult after the U.S. and China failed to agree on language in a final statement, the latest sign that a trade war between the world's biggest economies won't end anytime soon.

For the first time since leaders began attending the annual Asia-Pacific Economic Cooperation meeting in 1993, no statement was issued after two days of talks in Papua New Guinea. The Pacific island nation's prime minister, Peter O'Neill, blamed “two big giants in the room” for the discord.

The failure to agree on a largely symbolic statement lowers expectations for U.S. President Donald Trump and Chinese counterpart Xi Jinping to reach a breakthrough when they meet a few weeks from now at a Group of 20 summit in Argentina. Financial markets have swerved in recent weeks as investors gauge whether an end to the trade war is near.

Tensions were already high heading into Sunday after Xi and Vice President
Mike Pence traded barbs in back-to-back speeches a day earlier. Pence warned nations against taking Chinese loans, saying the U.S. “doesn't drown our partners in a sea of debt,” while Xi said implementing tariffs and breaking up supply chains was “short-sighted” and “doomed to failure.”

The events in Port Moresby were unusual for a summit that is mostly regarded as a talk shop. The non-binding statements at the end of such gatherings consist of thousands of words covering anodyne topics such as urbanization, sustainable tourism, natural disasters and “MSMEs” (micro, small and medium enterprises).

The first sign of trouble occurred when reports dripped out that Papua New Guinea police were called after Chinese officials attempted to “barge” into the office of the country's foreign minister to influence the document. Chinese officials later denied the report, calling it “a rumor spread by some people with a hidden agenda."

As reporters waited for an outcome, it became clear something was wrong. After the closing press conference was delayed, Canadian Prime Minister Justin Trudeau eventually confirmed that negotiations over the communique had collapsed.

“I don't think it will come as a huge surprise that there are differing visions on particular elements in regard to trade,” Trudeau told reporters on Sunday. “That prevented there from being a full consensus on the communique document.”

When Papua New Guinea's O'Neill finally spoke to the press, initially he said a formal statement would come at a later date, and he left without taking questions. Reporters then chased him through the building, resulting in a chaotic scrum.

Eventually O'Neill confirmed that the topic of World Trade Organization reforms was the main cause of the dispute, though he said it wasn't “only the U.S. and China.” Nations have been calling for key changes at the WTO, including around dispute settlement, while the Trump administration has threatened to pull out of the body if it doesn't treat the U.S. more fairly.

“Of course the whole world is concerned about the debate about trade relations between China and the U.S.,” O'Neill said. “This is a situation where both the countries need to sit down and resolve. And I believe the G-20 meeting that is going to be on very shortly will be an opportunity for the leaders to sit down and resolve those issues.”

Both the U.S. and China sought to deflect blame.

Wang Xiaolong, a Chinese foreign ministry official, said “many countries” raised issues about the WTO. He didn't elaborate on specifics.

“Frankly speaking we are in an early stage of discussing these issues,” said Wang, director-general of the Department of International Economic Affairs at China's foreign ministry. “Different countries have different ideas about how to take this forward.”

A U.S. official familiar with the talks said it's inaccurate for China to say the communique was held up due to American concerns about the WTO. The U.S. agreed to language over improving the global trade body's dispute settlement function, the official said, adding that the talks collapsed because China objected to a line that all other 20 economies had endorsed.

‘This Is Not Frustrating'

At issue was a pledge by the governments to fight “all unfair trade practices,” which China thought was unfairly singling them out, said the U.S. official, who asked not to be identified as the discussions were private. The U.S. had agreed to a line on fighting protectionism, the official said, a concession designed to allow the communique to go forward.

The U.S. official said it appeared as if China didn't want to reach a consensus, and Chinese negotiators applauded when it was announced that talks had collapsed.

The chaos came amid other challenges associated with holding the summit in one of the region's poorest countries. A lack of hotel accommodation meant many delegates and journalists slept on a cruise ship. Port Moresby is notorious for being crime-ridden: The Lonely Planet says “visitors are tempted to spend as little time here as possible.”

O'Neill, Papua New Guinea's leader, sought to look on the bright side.

“We had almost 21 economies agreeing to the issues,” he told reporters. “This is not frustrating.”

--With assistance from Isabel Reynolds.

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net;Dandan Li in Beijing at dli395@bloomberg.net;Toluse Olorunnipa in Washington at tolorunnipa@bloomberg.net

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Edward Johnson

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