Chile's APEC cancellation raises new hurdle for U.S.-China trade deal

Reuters, Kyodo, AP, Bloomberg

Leaders from the United States and China encountered a new obstacle in their struggle to end a damaging trade war on Wednesday when the summit where they were supposed to meet was canceled because of violent protests.

U.S. President Donald Trump said this week he hoped to sign an interim trade deal with Chinese President Xi Jinping during the Nov. 16-17 Asia-Pacific Economic Cooperation summit in Chile.

Chilean officials said they canceled the summit to focus on restoring law and order in the country.

President Sebastian Pinera also announced the cancellation of a U.N. climate gathering slated for Dec. 2 to 13.

The APEC summit was seen as a key opportunity for leaders from advanced and emerging economies to engage in bilateral talks on the fringes of the multilateral parley.

The first-ever cancellation of an APEC summit dealt a major blow to Chile’s image as a regional oasis of stability and economic development. It sent a clear message to the world that the crisis — the worst civil unrest in a generation — will not end anytime soon.

“This is going to damage the country’s image,” said Paulina Astroza, a political science professor at the University of Concepcion. “It is indicating that by the date of these conferences it won’t have things under control.”

Prime Minister Shinzo Abe was also expected to attend the summit. Interest had been building as to whether he would meet in Santiago with South Korean President Moon Jae-in. The two countries remain locked in a bitter dispute over wartime compensation and trade issues.

As for the 25th session of the Conference of the Parties on climate change (COP25), Swedish teenage activist Greta Thunberg was planning to attend as part of her ongoing efforts that have inspired many youths around the world to join the fight to curb greenhouse gas emissions.

Chile has been in turmoil, with crowds taking to the streets to demand the government address growing income inequality and provide better public services.

As the demonstrations escalated, accompanied by periodic looting and arson, local authorities were forced to shut down some of the capital’s subway stations.

At least 20 citizens have died since the protests began in the middle of October over an increase in subway fares. Although the government withdrew the fare hike, protests did not lose momentum, prompting the government to temporarily declare a state of emergency and impose a curfew at night.

The situation had stabilized somewhat by midday Wednesday. Except for the presence of a few hundred protesters, the streets of Santiago were mostly quiet, with no reports of vandalism.

Opposition and pro-government parties in Chile generally welcomed the president’s decision, saying that having the summits was unrealistic given the circumstances.

Trade and climate negotiators scrambled to find new locations for their summits. The White House said the United States still expects to sign an initial trade agreement with China in the coming month, but no alternate location had yet been set for Xi and Trump to meet.

“We look forward to finalizing Phase One of the historic trade deal with China within the same time frame,” the White House said in a statement that omitted a mention of the president or his planned meeting with Xi.

U.S. and Chinese negotiators have been racing to finalize a text of the “phase one” agreement for Trump and Xi to sign in November, a process clouded by wrangling over U.S. demands for a timetable of Chinese purchases of U.S. farm products.

Still, a critical date is Dec. 15, when new U.S. tariffs on Chinese imports such as laptops, toys and electronics kick in. Both the United States and China have an interest in reaching a deal and averting those tariffs.

Trump suspended U.S. tariffs that were planned for Oct. 15, following trade talks in Washington. But the White House has not announced any plans to defer or cancel the Dec. 15 ones.

Treasury Secretary Steven Mnuchin, who was traveling in the Middle East, said on Wednesday that U.S. discussions with China had been productive, and work on finalizing the text of the deal was continuing.

The White House intends to offer some U.S. locations as alternatives for the APEC summit, according to one source familiar with U.S. thinking. Alaska and Hawaii could be potential options that would be acceptable to China, said a second source familiar with the issue.

The White House had no immediate comment on alternate locations. But trade experts said pulling together a replacement summit at short notice would be tough.

“These summits — especially one involving 21 leaders — are a massive undertaking, and moving one with two weeks’ notice is all but impossible,” said Matthew Goodman, a former National Security Council official and an adviser at the Center for Strategic and International Studies, a Washington think tank.

The White House is “clearly signaling that it really wants the Trump-Xi bilateral to go ahead,” Goodman said. “But it seems more likely that they’ll have trade ministers or ambassadors sign the ‘phase one’ deal and save the leaders’ meeting for later.”

China has suggested Macau as a possible venue, according to one China trade source familiar with the issue.

Michael Hirson, with the Eurasia Group consultancy, said the last-minute switch could delay the signing of a trade deal somewhat, but he still saw a 70 percent chance of a deal by year-end.

“Both leaders have incentives to keep talks on track, avoiding further escalation that poses economic and political risks,” he wrote in an analyst note.

There is no obvious international meeting in the near future where Trump and Xi could meet on the sidelines, since Trump is not attending the East Asian Summit in Thailand next week, one diplomat said.

Trump has expressed interest in visiting Australia for the Presidents Cup golf tournament starting Dec. 9, which would put him in the region.