In the week of 11–17 November 2023, leaders from the 21 members of the Asia-Pacific Economic Cooperation (APEC) met in San Francisco for the APEC Economic Leaders’ Week with the theme of ‘Creating a Resilient and Sustainable Future for All’.
After a tense and tumultuous year for the leaders of the world’s two largest economies, sideline discussions between US President Joe Biden and Chinese President Xi Jinping this year took centre stage. Meanwhile, the regional economies discussed their joint vision for advancing trade and investment across the region through trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the US-led Indo-Pacific Economic Framework (IPEF).
For more insight on the significance and outcomes of the summit, USSC experts provided their analysis.
Xi and Biden show conflict is not their plan
Dr Michael J. Green, CEO
The Biden-Xi bilateral on the margins of the APEC Summit went pretty much as expected. Both leaders wanted to demonstrate to businesses and the international community that they can manage strategic competition without tipping into conflict. The friendly handshake at the top set the first and last positive tone of the meeting, though. Afterwards, Biden made clear in his press appearance that relations would remain rough, refusing to retract his previous statement that Xi is a “dictator” and pointing out that “he is a guy who runs a country that is a communist country.” The Chinese Foreign Ministry sounded an even harder line afterwards, emphasising that Xi opposed US support for Taiwan and declaring that unification is unstoppable. Having been in multiple US-China summits in somewhat happier times, I can easily imagine how choreographed the exchanges must have been and how diligently the two leaders probably went through talking points they knew the other side expected. Even the one significant agreement on resuming high level military talks will have only limited impact, I suspect. These commitments are promised in summits managed by the Chinese Foreign Ministry and then rarely implemented in full by a People’s Liberation Army that sees transparency and confidence-building as contrary to its goal of making US surveillance and patrol risky for the US side.
But the summit was a positive development nonetheless. Biden and Xi have met and spoken on the phone far less than presidents Clinton, Bush or Obama did with their Chinese counterparts — and at a time when leader-level dialogue is more important than ever. This is not because breakthroughs are likely from that dialogue, but because only the leaders can add clarity about their intentions to each other. The United States clearly intends to prevent China from coercing its allies or Taiwan and intends to protect US technology. China obviously intends to keep pressure on Taiwan and to use military and other tools to assert its claims in the Indo-Pacific. But Biden also made it clear that the United States does not support Taiwan’s independence and wants to avoid conflict, while Xi apparently made it clear that he intends to grow China’s struggling economy, which will be difficult without stable US-China relations.
There is some predictability in all this which is useful. The Xi-Albanese summit and the Biden-Xi summit were equally modest in ambition for both sides. The Koreans and Japanese report similar dynamics in their recent interactions with Beijing. Efforts at stabilisation by the leaders is important —not because we are about to enter an upward trajectory in relations with China, but because there are plenty of other sources of instability still lingering on the horizon.
Quite the departure from Xi’s last visit
Jared Mondschein, Director of Research
A comparison of the last two visits to the United States by Xi Jinping is quite telling of how US-China relations have evolved in half a dozen years.
The last time Xi Jinping visited the United States in April 2017, then-President Trump hosted the Chinese president at Mar-a-Lago, Trump’s private residence in Florida. The top issues for the presidents of the two largest economies in the world: North Korea and bilateral trade (a month after the visit, US Commerce Secretary Wilbur Ross announced intentions to expand bilateral trade in a number of areas, including beef and electronic payments). Perhaps most memorably, over what Trump called a “beautiful piece of chocolate cake,” President Trump told the Chinese president about US missile strikes in Syria – before the news media knew.
More than half a decade later, the US president once again sought to warmly welcome his Chinese counterpart to a warm US state, Middle Eastern developments remain challenging, and the United States remains protectionist in its trade orientation, but practically every other aspect of the bilateral meeting was starkly different.
Recently, the Chinese economy began facing its strongest headwinds in decades while the US economy grew at over four per cent last quarter; the Quad grouping has been elevated and strengthened while US alliances in Europe and Asia have arguably never been stronger, Japan and South Korea are ever closer to normalising their relationship; Australia is on its way to gaining nuclear-powered submarines; US force posture agreements in the region have only expanded. By practically every measure, President Biden welcomed President Xi from a position of strength, but such a dynamic is not a static one – the work facing the United States and its allies and partners remains daunting but not insurmountable.
Mixed results on IPEF a disappointing, but unsurprising, result for Biden
Samuel Garrett, Research Associate
Finalising IPEF negotiations by the APEC summit was always an ambitious goal for an agreement announced just 18 months ago. The substantial conclusion of talks on three of the four IPEF pillars is a positive sign of progress — but it was always going to be IPEF’s trade pillar on which divisions would be hardest to bridge. Amid domestic US pressures, USTR’s reversal last month of the longstanding US position on facilitating digital trade will come as a particular disappointment for some IPEF members, with trade cooperation now likely to focus on more limited facilitation measures, not a wide-ranging digital trade agreement.
For the United States, which had hoped to achieve ‘substantial progress’ on all four pillars this week, the need for“further work"on negotiations means it has lost an opportunity to use APEC to showcase its renewed economic engagement with the region. Members of the CPTPP, most of which are also party to IPEF, took the chance this week to affirm their desire for new countries to join the agreement. But with the United States not looking to join CPTPP, and IPEF predictably facing hurdles at the finish line, the extent of future US economic engagement in the region remains unclear. For the Biden administration, that is a missed opportunity.
Diplomacy and diversification front of mind for Albanese at APEC
Alice Nason, Research Associate, Foreign Policy and Defence
After a host of significant developments in Australia’s bilateral diplomatic and trading relationships over the past year, meetings in San Francisco have provided Prime Minister Albanese a chance to consolidate successes. Prime Minister Albanese broadly accomplished three related aims at APEC 2023: reinforcing Australia’s diplomatic partnerships, promoting dialogue with China and advancing the economic resilience of Australia and its partners.
During his 18th international trip since entering office, Albanese and his senior team have energised Australia’s bilateral partnerships on the sidelines of APEC. Bilateral talks with the leaders of the United States, Canada, Thailand, Papua New Guinea and Indonesia were all scheduled during APEC. These meetings all consolidate Australia’s alignment with its regional partners. President Biden’s remarks at APEC, declaring the Pacific “more vital than ever,” are a welcome demonstration of increasingly shared objectives.
The opportunity for dialogue with President Xi, building on the recent state visit, cements Australia’s efforts to promote ongoing dialogue with China as strategic competition continues. Trade Minister Don Farrell and Treasurer Jim Chalmers also met with their US and Chinese counterparts over the course of the week. Albanese, rightly, remarked that the Biden-Xi meeting “is very positive,” and helps to avoid “misunderstandings and miscalculations.” Deterrence only exists in the mind of your competitor — and open lines of communication between the United States and China are resoundingly beneficial in avoiding conflict.
APEC was also an opportunity for Australia to advance its efforts in trade diversification and supply chain resilience. As Trade Minister Farrell remarked, “we want to stabilise our relationship with China… we also want to diversify our relationship.” And at APEC, where many of Australia’s key trading partners were represented, Albanese found a receptive audience for his familiar message of “free and open rules-based trade.”
Making headway on climate ahead of COP-28
Tom Barrett, Research Associate, Emerging Technology
Australia’s Prime Minister headed to APEC with discussions of “environmental and sustainability issues” as a noted priority, while the sideline meeting between President Xi Jinping and President Joe Biden reiterated working together to “tackle the climate crisis in this critical decade.” Readouts from the sideline meeting reiterated the recent Sunnylands statement on China–US climate cooperation following meetings between their respective envoys. The statement included announcements around increased information exchanges by operationalising working groups and joint forums, accelerating renewable energy adoption, tackling methane, developing circular economy and resource efficiencies, and support for the upcoming COP28 summit.
The most comprehensive climate announcement at APEC was the conclusion of negotiations on the ‘Clean Economy’ pillar of IPEF between the 14 member countries, including Australia. This pillar pledges to accelerate the R&D and deployment of “clean energy and climate friendly technologies”, strengthen cross-border business and supply chains, increase the flow of investment and expand access to financing, including an IPEF Catalytic Capital Fund. IPEF also announced a new Critical Minerals Dialogue, which the Australian Prime Minister’s office noted, will involve Australia “using our critical minerals to assist the region in transitioning to clean energy and in turn [creating] diverse, resilient and sustainable supply chains.”
The Biden administration also released a comprehensive list of investments by US companies into APEC economies, including significant investments in sustainability and clean energy technologies — from the provision of water filtration technology, sustainable aviation fuel and carbon sequestration to open-source electricity modelling tools for policymakers and renewable energy assets.
With COP28 less than two weeks away, APEC offered an opportunity to highlight public-private partnerships and for economy leaders to align before their states meet to, amongst other things, discuss the first global stocktake (GST) — assessing progress on achieving the Paris Agreement’s objectives, following which countries are expected to update their national plans for climate action. How countries respond — they have until 2025 — will be important in “this critical decade.”