Published daily by the Lowy Institute

The challenges facing APEC leaders

A tense geopolitical environment is the backdrop to the upcoming leaders’ summit, with US-China rivalry on display.

The APEC Summit will be held in Port Moresby (Photo: Wikimedia Commons)
The APEC Summit will be held in Port Moresby (Photo: Wikimedia Commons)

The Asia-Pacific Economic Conference (APEC) Summit is being held at a time of enormous global and regional geopolitical uncertainty.

It is a tumultuous time for the region, and APEC 2018 provides a real opportunity for leaders to agree on the kinds of reforms that could make a positive difference. Will the host, Papua New Guinea, be able to steer the summit to achieve its stated goals?

APEC 2018 provides a real opportunity for leaders to agree on the kinds of reforms that could make a positive difference.

On Saturday, leaders from 21 APEC member countries will meet in Port Moresby, following this week’s business leaders’ forum and a year of preparatory meetings. According to its website, APEC’s overall goal is “to create greater prosperity for the people of the region by promoting balanced, inclusive, sustainable, innovative, and secure growth by accelerating regional economic integration.”

It aims to do so by, inter alia, liberalising and facilitating trade and investment at the border, across the border, and behind the border; reducing the costs of cross-border trade to assist businesses; and simplifying regulatory and administrative processes.

APEC decisions are reached by consensus and commitments are made on a voluntary basis.

Yet tensions between the US and China are making it increasingly difficult for Asia-Pacific countries to maintain what has always been a delicate diplomatic balancing act – especially for those concerned about or with competing claims in the South China Sea.

Several countries such as Sri Lanka, Indonesia, and Malaysia have been reconsidering existing infrastructure deals with China. President Rodrigo Duterte in the Philippines uses language emphasising his meek and humble attitude towards China, and working on cooperation in the South China Sea. At the same time, he maintains robust security cooperation with the US.

The dynamics between the US and China are also affecting how countries in the region interact with each other, and how they view regional and global institutions. The apparent thaw in relations between China and Japan is a good example. Fears over deepening global trade tensions are further encouraging some countries, such as South Korea, Thailand, and Indonesia, to actively consider joining the revamped Trans-Pacific Partnership. Concern over how to mitigate the fallout of the trade war has galvanised increased interest in the China-backed Regional Comprehensive Economic Partnership.

The rising US dollar, which has affected economies like Indonesia, and the existential crisis of adapting to and mitigating climate change also loom menacingly on the horizon for many Asia-Pacific countries.

In addition to global and regional instability, like much of the rest of the world, countries in the Asia-Pacific are also facing profound domestic challenges, many of which are related to the regional or global trends that are outside of their control. And, like the rest of the world, leaders in these countries are balancing political and economic demands as they make their policy decisions.

For example, as the ANU’s Stephen Howes points out, in PNG, the “Taskforce Sweep” campaign has been abolished, economic growth has stalled, one in two children under the age of five are stunted from malnutrition, and eradicable diseases like polio that were virtually wiped out are now returning.

In this tense geopolitical environment, how will the host country lead participants to negotiate the kinds of policies that can lead to positive outcomes? PNG will need to steer participants towards a focus on broader and longer-term agendas for the region as a whole.

There are also significant politics around how the agenda and discussions at the summit will be steered. As is well known, US President Trump and Russian President Putin are not attending – reportedly to the great disappointment of the host country. China’s President Xi Jinping, however, is arriving a day early, clearly demonstrating China’s interest in the region. Australia, too, is, of course, trying to ensure its voice is heard.

This year’s APEC provides a real opportunity for Asia-Pacific leaders to grapple with issues that are affecting countries all around the world. The PNG Summit could be where Asia-Pacific leaders get together to craft solutions that are designed to promote sustainable and equitable growth and development according to the specific circumstances of the Asia-Pacific region. Ideally, Pacific island countries will work together to ensure their collective and individual interests are best represented.

There are some fairly uncontroversial economic policy reforms that many accept will – if implemented properly – be able to make a real and positive impact. But as this summit shows, it is the tumultuous swirl of geopolitics that surrounds the economics that will really determine the region’s future. The host nation PNG has its work cut out for it in the days ahead.

You may also be interested in