28 November 2018
This Saturday, Donald Trump and Xi Jinping will meet at an unnamed restaurant after the G20 meeting in Buenos Aires for a summit – or showdown – to try to end their countries’ trade war. Ahead of the encounter, Trump threatened to impose further tariffs on $US267 billion worth of Chinese imports from 1 January 2019, a move that would likely trigger Chinese retaliation and lead to global consumer price hikes and stock market slides. On Monday, Trump said that these new tariffs could include a 10 per cent impost on iPhone imports; as a result, Apple shares instantly dropped 1.5 per cent.
Trump has two stated objectives: to reduce the United States’s trade deficit with China, and to combat Chinese practices such as subsidies for domestic industries as well as requirements that foreign firms transfer their technology to local partners. A third, less explicit agenda involves trying to limit China’s rise as a global power that can challenge US interests.
Australia, like most countries, strongly supports the second of these goals. Tacitly, as a US ally, it also backs Trump’s third aim. But this loyalty can lead to a temptation to overlook the US president’s dangerous tactic of reverting to tariffs and protectionism, which is likely to damage the global economy, stoke international tensions, and undermine trade rules and practices.
Worryingly, Scott Morrison has succumbed to this temptation. Earlier this month, he defended Trump’s trade policies by insisting – somehow – that they were not necessarily protectionist. “It is yet to be established that the US is pursuing a protectionist policy,” he told The Australian’s Greg Sheridan. “What [the US] have been doing until now has not produced [freer trade] so there should not be an expectation that they’ll continue to do things the way they have been.” These comments – and the view that free trade can be saved by destroying it – contradict Australia’s long-held approach to global commerce.
Morrison claimed that Australia should not intervene in the trade war because it has been “staying clear” of Trump’s tariffs and has continued to do business with China. Yet Australia was initially a target of US steel and aluminium tariffs. Australia received a last-minute reprieve, partly because it happens to have a trade deficit with the US and therefore shines in the president’s misguided belief that trade is a zero-sum game.
Australia should not encourage Trump’s protectionist impulses, especially since there is a better way to pressure China to end some of its unfair policies: by enforcing international trade rules. Earlier this year, for instance, the European Union launched action at the World Trade Organization against China’s technology-transfer practices. On the same day, it started proceedings against Trump’s tariffs. Trump has since threatened to withdraw the US from the WTO, saying that it rules against his country too often. (A study last year found that since 1995 the US has won 91 per cent of the 114 complaints it brought to the WTO, and lost 89 per cent of the 129 complaints against it.)
This weekend’s G20 summit is an opportunity for Morrison to press the case for trade sanity. He and seventeen of his counterparts will try to encourage Trump and Xi to resolve their differences, but – as the feud at the recent APEC summit showed – they are unlikely to be successful. Still, the G20 members can use the conference to try to strengthen the WTO, not only to protect it from Trump but also to ensure that it can take meaningful action against China.
After the APEC summit, Morrison said that if the US and China cannot agree, “we shouldn’t be pretending that they do”. Nor should he pretend – as 1 January looms – that Trump is conducting business as usual, when he is not.