When it comes to Asia-Pacific free trade, China has a systemic problem: not enough nations trust it.
This is relevant in light of the Asia Pacific Economic Cooperation (APEC) summit in Vietnam, Friday, where Presidents Trump and Xi issued rallying calls to other world leaders in attendance.
President Xi of China pledged that in "pursuing economic globalization, we should make it more open, more inclusive, more balanced, more equitable and more beneficial to all." His message was obviously intended to separate perceptions of his trade leadership from those of President Trump, who has often stated his aversion to globalization. Put simply, Xi wants to usurp American leadership by offering lucrative trading relationships with other nations.
In contrast, President Trump called for new and more trading relationships but on terms that all sides adhere to. And while some commentators have suggested President Trump's speech was "America First" unilateralism, it was actually far more nuanced.
Trump began by reminding the assembled Asian leaders that America had proven its commitment to the rule-of-law based international system. Referencing imperial Japan in the 1930s Trump noted that, "... when imperialist powers threatened this region, the United States pushed back at great cost to ourselves. We understood that security and prosperity depended on it. We have been friends, partners, and allies in the Indo-Pacific for a long, long time, and we will be friends, partners, and allies for a long time to come."
This set the foundation for Trump's competing narrative with Xi: America can be trusted in good times as well as bad.
But Trump understood his audience. With a measure of well-placed humility, the president noted how, in Vietnam, "Americans and Vietnamese lost their lives in a very bloody war."
Then he looked to what has happened since and how global capitalism has improved lives. "In the early 1990s, nearly half of Vietnam survived on just a few dollars a day, and one in four did not have any electricity. Today, an opening Vietnamese economy is one of the fastest-growing economies on Earth. It has already increased more than 30 times over, and the Vietnamese students rank among the best students in the world."
The message: our mutual interests have now shifted to a common cause of peace and shared prosperity. The audience believed it and liked it.
Next, Trump articulated what a future of shared prosperity would look like.
"At the core of this partnership, we seek robust trade relationships rooted in the principles of fairness and reciprocity."
Trump continued, "When the United States enters into a trading relationship with other countries or other peoples, we will, from now on, expect that our partners will faithfully follow the rules just like we do. We expect that markets will be open to an equal degree on both sides, and that private industry, not government planners, will direct investment."
It was a message that struck implicit contrast with China. Trump wants nations to know that he seeks expanded trade, but with safeguards to prevent the dumping, intellectual property theft and market access restrictions that current affect too many arrangements. For all of Xi's pleasant words, the audience knew that China is the number one offender in everything Trump mentioned. They also know that the U.S. imports far more from the region that it exports, so they have a vested interest in continuing to keep America on the side. These are America's trump cards.
To conclude, Trump cleverly returned the historical argument. He noted that America's priority was protection for "individual rights, and freedom of navigation and overflight, including open shipping lanes. Three principles and these principles create stability and build trust, security, and prosperity among like-minded nations."
As audience followed that "shipping lanes" line with applause, Xi must have felt uncomfortable. After all, he knows that everyone in attendance is greatly concerned by China's efforts to militarize the East and South China Sea shipping lanes. In turn, Xi fears these nations continuing to believe the American rule-of-law based system is the better than his alternative.
He is right to be concerned.
Ultimately, Trump's trade agenda won't be easy implement. If he demands excessive protections in future trade deals, Trump may push foreign nations into China's hands as a matter of last resort. That said, pursuing practical reforms and ensuring continued U.S. leadership alongside strong allies like Australia and India, China will remain second place in APEC's favor.