Pentagon Chief Downplays U.S.-China Spat, Sees Deal Eventually
The two sides have several opportunities in the next few weeks to get discussions back on track.
(Bloomberg) -- Acting Defense Secretary Patrick Shanahan said the U.S. and China would eventually resolve their differences, downplaying the significance of escalating trade tensions even as he ripped Beijing’s leaders for behavior that “sows distrust” in Asia.
In a speech in Singapore that came hours after he met a top Chinese defense official, Shanahan indirectly blasted Beijing for employing a “toolkit of coercion” to “exploit others economically and diplomatically, and coerce them militarily.” He said the U.S. is strengthening alliances in Asia and “investing significantly” in advanced technology that will be deployed in the region.
Still, he objected when one participant asked him about a “face-off” between the U.S. and China, adding that the world’s biggest economies would reach a deal over time.
“Is there a face-off?” he said on Saturday in Singapore at the Shangri-La Dialogue, an annual forum that focuses on Asia defense issues. “I haven’t seen a trade war. There are trade negotiations that are ongoing. We’re building relations with the Chinese military.”
“Negotiations are always difficult,” he said. “You have two large countries that will eventually resolve these issues.”
The trade conflict between the U.S. and China took a dramatic turn for the worse in May when President Donald Trump hiked tariffs after accusing Beijing of reneging on commitments in negotiations. The spat is spurring fears that the two nations are lurching toward an intractable rivalry, one that has already caused jitters in markets around the world.
While the U.S. has threatened Beijing with more tariffs and pressured allies to ban Shenzhen-based Huawei Technologies Co. from emerging 5G networks, China has pushed back aggressively. A commerce ministry spokesman said Friday China will establish a list of “unreliable” entities said to damage the interests of domestic companies, a sweeping order that could potentially affect thousands of foreign firms.
The two sides have several opportunities in the next few weeks to get discussions back on track. Treasury Secretary Steven Mnuchin may meet with Chinese officials next week in Japan, and Trump earlier said he would meet President Xi Jinping at the Group of 20 summit at the end of the month in Osaka.
Ship-To-Ship
After months of disruptive tit-for-tat tariffs, Washington and Beijing are competing to sway skeptical allies in the region wary of finding themselves squeezed in an escalating global trade war that may ultimately force them to choose sides. On Saturday, Shanahan said no country should have to pick between the U.S. and China while calling on China to end “behavior that erodes other nations’ sovereignty and sows distrust.”
“Huawei is too close to the government,” Shanahan said, responding to a question on areas of mistrust between the U.S. and China. “The integration of civilian businesses with the military is too close.”
The Shangri-La Dialogue -- hosted by the International Institute for Strategic Studies -- was part of a broader regional tour for Shanahan that began Wednesday in Jakarta. During the event, Shanahan held meetings with his defense counterparts from Southeast Asia and Singapore Prime Minister Lee Hsien Loong, who called on both nations to avoid a “zero-sum dynamic” during a speech at the forum.
On Friday night, Shanahan met with Chinese Defense Minister Wei Fenghe for 20 minutes in talks he described as “constructive and productive,” according to Pentagon spokesman Joe Buccino. They discussed how both militaries can better cooperate to enforce UN Security Council Resolutions related to North Korea, he said.
Shanahan provided Wei with a book of images that showed North Korean ships conducting vessel-to-vessel transfers of oil in breach of UN sanctions, according to Pentagon spokesman Lieutenant Colonel David Eastburn. Preventing the transfers could be an area where the two work together, he said in a statement.
North Korea has successfully evaded sanctions to import as much as seven-and-a-half times the allowed amount of refined petroleum last year, with ship-to-ship transfers playing a large role in providing fuel and materials to the energy-starved regime, according to the U.S. government.
Wei, who is also the third-highest-ranked general in the People’s Liberation Army, will give a keynote address on Sunday, the final day of the Shangri-La Dialogue. He’s the first Chinese defense minister to visit the security conference since Liang Guanglie attended in 2011.
Shanahan told the Shangri-La Dialogue that competition between the U.S. and China doesn’t mean conflict, and should be based on international rules. He referenced his nearly 30-year career at Boeing Co. in explaining why he thought U.S.-China relations wouldn’t deteriorate into outright conflict even as they disagreed on key issues.
“My experience from working at Boeing really carries over because China was our biggest customer and biggest competitor,” Shanahan said. “And so you have to understand how to live in that duality.”
--With assistance from Philip J. Heijmans, Alfred Cang and Sungwoo Park.
To contact the reporters on this story: Glen Carey in Washington at gcarey8@bloomberg.net;Iain Marlow in New Delhi at imarlow1@bloomberg.net
To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, ;Daniel Ten Kate at dtenkate@bloomberg.net, Larry Liebert
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