Vice President Pence in Asia: Economic Outcomes
November 27, 2018
Vice President Mike Pence conducted a weeklong tour of Asia this month, standing in for President Trump at the annual Asia-Pacific Economic Cooperation (APEC) summit and events organized by the Association of Southeast Asian Nations (ASEAN) where he announced a series of economic initiatives with regional partners and held talks with numerous heads of government. In his public remarks, Pence reinforced the impression that the United States views itself in a zero-sum economic competition with China in the Indo-Pacific region.
Q1: What happened at APEC, and why does it matter?
A1: The economic centerpiece of Pence’s trip was the annual APEC Leaders’ Meeting in Papua New Guinea. For the first time in the forum’s history, the meeting concluded without a joint communiqué. According to Papua New Guinea prime minister Peter O’Neill, disagreements on trade between “the two big giants in the room”—China and the United States—were the cause of the impasse. The U.S. and Chinese foreign ministry statements on the matter, as well as media reports, suggest that the United States’ proposed language regarding “combat[ing] unfair trade practices,” which the Chinese side found unacceptable, viewing this as “excusing protectionism and unilateralism.” According to one report, the Chinese side also took umbrage at the wording on sustainable development. Although a source told CNN that every country but China had reached consensus on the communiqué, Chinese foreign minister Wang Yi accused “individual economies” of refusing to accept “reasonable advice for revision” from other parties as well.
Rifts between the “two giants” had already been exposed by the keynote speeches delivered by Vice President Pence and President Xi Jinping at the APEC CEO Summit the day before the Leaders’ Meeting. Pence repeated U.S. complaints he had outlined at a speech in Washington the previous month about China’s industrial policies and unfair trade practices. He also implicitly criticized China’s Belt & Road Initiative (BRI), warning other countries, “Do not accept foreign debt that could compromise your sovereignty . . . the United States offers a better option. We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence. The United States deals openly, fairly. We do not offer a constricting belt or a one-way road.” Xi, for his part, warned that “global growth is shadowed by protectionism and unilateralism” and that countries “should say no” to these “old practices.”
The annual APEC Leaders’ Declaration outlines an agenda for regional economic integration in the Asia-Pacific region. While the document is generally viewed as more words than substance, the failure of leaders to come to terms as a result of U.S.-China trade tensions suggests further fragmentation and heated competition in the region. It also augurs poorly for the G20 summit in Argentina this coming weekend, as well as for the meeting that presidents Trump and Xi are scheduled to hold on the sidelines of that summit to work out their differences on trade.
Q2: What economic initiatives did Vice President Pence announce on his trip?
A2: At various public appearances during the trip, the vice president announced initiatives on energy, infrastructure, the digital economy, and good governance, the same policy areas that Secretary of State Mike Pompeo highlighted in his July 2018 speech on America’s Indo-Pacific economic vision. The announcements included the following:
- Pence and Japanese prime minister Shinzo Abe announced new bilateral cooperation in energy, infrastructure, and digital connectivity, particularly in aligning Tokyo’s $10 billion plan for regional liquefied natural gas (LNG) infrastructure development with the U.S.’s Asia Enhancing Development and Growth through Energy (Asia EDGE) initiative. The U.S. aims to export more LNG to the region.
- In Port Moresby, the United States, Japan, Australia, and New Zealand announced a $1.7 billion partnership to develop Papua New Guinea’s electricity grid.
- The United States, Japan, and Australia declared a trilateral partnership to “work with governments of the Indo-Pacific to support and encourage infrastructure projects that adhere to international standards and principles for development, including openness, transparency, and fiscal sustainability.” Australian prime minister Scott Morrison recently committed to a $1.45 billion infrastructure bank and $720 million of export financing agency investment support directed toward Pacific Island nations.
- At the U.S.-ASEAN summit, Pence declared a S.-ASEAN Smart Cities Partnership, which the United States will support with an initial investment of $10 million.
- The United States and Singapore agreed to establish a U.S.-Singapore Cybersecurity Technical Assistance Program for ASEAN countries.
- During his APEC CEO Summit address, Pence announced the Indo-Pacific Transparency Initiative, with $400 million investment over two years to promote good governance, civil society, responsible borrowing, honest procurement and contracting practices, and judicial sector and legal reform.
On trade, Pence reiterated the administration’s stance of seeking bilateral trade agreements with interested Asian partners, suggesting that the United States and an unnamed Southeast Asian country—possibly the Philippines—were close to launching talks. He met with Taiwan’s envoy to APEC and vowed to report back to President Trump Taipei’s desire for bilateral trade negotiations. Pence also informed Vietnamese prime minister Nguyen Xuan Phuc of his expectation for a “more fair and reciprocal trade arrangement going forward.”
Q3: Did the Vice President’s trip advance U.S. economic interests in the Indo-Pacific?
A3: The initiatives the vice president announced this week put some helpful economic meat on the bones of the Trump administration’s free and open Indo-Pacific strategy. Additional infrastructure is sorely needed in developing Asia, and the priority the vice president put on U.S. support for infrastructure and energy investment, together with some new money, will be welcome in the region. In addition, Pence’s emphasis on transparency and good governance, and the promise of unleashing massive U.S. private investment in the region, played to perceived U.S. strengths.
However, the vice president faced a number of hurdles in his efforts to win over Asian hearts and minds. President Trump’s announcement months out that he would not attend the Asian summits was widely interpreted as a lack of commitment to the region. Moreover, the president’s early decision to withdraw from the Trans-Pacific Partnership (TPP) has left the United States without a credible trade policy in the region, as the administration’s preference for bilateral trade agreements continues to be viewed with skepticism there. And Pence’s thinly veiled criticisms of China and implication that U.S. partners face a choice between one or the other superpower make many in the region deeply uncomfortable.
Meanwhile, China continues to step up its economic diplomacy in the Indo-Pacific region. Immediately after APEC, President Xi made a state visit to the Philippines, where the two countries signed 29 agreements on the first day, including a memorandum of understanding on oil and gas development in the disputed South China Sea. BRI continues to expand, with Fiji, Tonga, Vanuatu, and the Cook Islands reportedly joining the initiative. (Tonga simultaneously announced a temporary reprieve from Chinese debt repayments.) Papua New Guinea itself was recently promised an additional $4 billion by Beijing for road development. If, as the vice president implied on his trip, the United States and China are in strategic economic competition in the Indo-Pacific region, Washington will need to run even faster.
Matthew P. Goodman is senior vice president and holds the Simon Chair in Political Economy at the Center for Strategic and International Studies in Washington, D.C. James Smyth, Simon Chair research intern, contributed to this Critical Questions piece.
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