Australian Prime Minister Touts Rules-Based Trading System, Future Cooperation on US Visit
Last week, Australian Prime Minister Malcolm Turnbull travelled to Washington for a series of meetings on economic cooperation, outlining his views on the future of trade in the Asia-Pacific and offering up a defence for open markets and the rules-based international trading system.
Turnbull held talks with US President Donald Trump on Friday at the White House, the fourth meeting between them since Trump’s inauguration in January last year, and addressed a gathering of ministers, diplomats, and US lawmakers at the yearly winter meeting of the National Governor’s Association (NGA),
“Our meeting today was a great opportunity to strengthen and deepen the engagement with the US, our most important strategic and economic partner,” Turnbull said in a joint news conference following their meeting at the White House.
Turnbull was accompanied by the largest contingent of Australian premiers, ministers, and CEOs ever to have travelled to Washington.
Rules-based trading system
In his keynote address to the NGA, Turnbull underlined the shared values that unite Australia and the US, the basis for a strong trading relationship and for thriving enterprise. “Now our shared commitment to open markets, transparency, and the rule of law has generated an enormous reservoir of trust between our businesses, consumers, and regulators and trust enables commerce to flourish.”
He also characterised this common ground as enduring in a time of significant change. The past few years have seen technological advances rapidly reshape trade patterns, business models, and structures of production amid shifting geopolitical dynamics.
Turnbull also spoke in support of the open, rules-based trading system as a guarantor of political stability and generator of economic growth. “This remarkable system which obliges nations big and small to play by those rules and to respect each other's
sovereignty has enabled our collective security and prosperity for the entire post-war period.”
“But we know we cannot take any of it for granted,” he added, noting the importance of continued American leadership. “The rules, the norms, the institutions that enable freedom, security, and opportunity have been painfully difficult to build. But easy to break.”
Turnbull’s remarks come at a time when economic globalisation and trade and their underlying frameworks have come under close scrutiny, where certain actors interpret the gains as being unevenly distributed. The trade policy pursued under the Trump administration has been predicated on safeguarding domestic industries and balancing out perceived asymmetries in relationships with major trading partners.
“I know it's fashionable to call the passing of American leadership and condemn democracy into a fate of inexorable decline,” said Turnbull. “Let me tell you that's not what I'm hearing from our trusted partners in our part of the world. Nor is it what the Trump administration is engraving into its most important policy statements.”
To the contrary, Turnbull said, Washington is in fact part of “upgrading a liberal rules-based system, not breaking it,” noting the US president’s rhetoric from Davos earlier this year: “America first does not mean America alone.”
Turnbull also referred to the ongoing debate over the future of the WTO and how governments should approach the next chapter in the global trade club’s history following last December’s ministerial conference in Argentina.
“We want to work with you to improve the WTO and make it a more effective forum for driving trade reforms and ensuring full compliance with the rules. And we will maintain a dialogue on how our respective systems protect technologies and facilities integral to national security while ensuring our markets remain open and transparent,” he said.
He also warned against protectionism, telling reporters that “I think you have to just make the case that trade, more trade means more jobs, more investment, more exports.”
Progress in the TPP
The Australian leader also commented on the state of play in the Trans-Pacific Partnership (TPP), a mega-regional trade pact currently spanning 11 countries in the Asia-Pacific, of which the US was previously a member. The US withdrew late last year, and the remaining countries are now preparing to sign a revised version of the deal that suspended some of the original provisions and led to some new side letters between participants. The accord is now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). (See Bridges Weekly, 26 January 2017)
“We entirely understand and respect the President's decision to honour his election pledge to withdraw from the Trans-Pacific Partnership,” Turnbull said. “Prime Minister [Shinzo] Abe of Japan and I were determined to keep that project alive and the TPP-11 will be signed next month in Chile.”
The 11 remaining members published the contents of the pact on Wednesday 21 February and are preparing to sign the deal on 8 March in the Chilean capital of Santiago. The Trump administration has recently hinted that there could be scope for the US to return, so long as it sees terms that are more preferable to them. (See Bridges Weekly, 22 February 2018)
“We do not expect the United States to return to the TPP any time soon,” Turnbull commented. “But by keeping this important trade pact on foot we have created a live option, which would otherwise not exist, for a negotiated US return – a possibility which the President himself has referred to.”
He also offered insights into the significance of the deal, as responding to urgent global economic priorities and forging ahead with new rulemaking. “We need to level the playing field for private sector companies, update the rules of the digital world, and ensure greater transparency and stronger rule of law in a world which is often short of both,” said Turnbull.
Towards closer economic ties
Australia and the US enjoy close economic ties. Two-way trade has grown by over 50 percent since the Australia-US Free Trade Agreement entered into force in 2005. Furthermore, two-way investment has doubled in the past decade, reaching US$1.1 trillion in 2016, where the US is currently the biggest investor in Australia – accounting for one quarter of foreign investment in the Oceanic economy.
“Our fair and reciprocal trading relationship is a model for other countries as we seek bilateral agreements,” Trump said during the joint news conference. The US’s third largest bilateral trade surplus is with Australia, a difference of US$25 billion.
The leaders agreed last week on a range of initiatives to deepen economic ties further, including expanding transparent energy markets, intensifying urban infrastructure investment in the US and the broader region, and redoubling cooperation on digital trade. “The President and Prime Minister reaffirmed their nations’ commitments to stronger partnerships with Pacific Island countries for a more secure, stable, and economically resilient region,” according to a White House press release.
The leaders announced the intention to launch the US-Australia Strategic Partnership on Energy to support energy infrastructure and promote low emission technologies. Washington and Canberra also agreed to intensify cooperation to support the growth of digital trade between the countries, work towards an open and secure Internet, and promote the liberalisation and facilitation of digital trade worldwide.
Eyes on China
In other Asia-Pacific trade news, Liu He, chief economic aide to Chinese President Xi Jinping, is also visiting Washington this week to meet with top US trade officials and business representatives. The visit comes as China sits on a planned package of reforms to open up its services and manufacturing industries and relax caps on foreign shareholding. Discussions are expected to cover trade relations between the world’s largest economies and seek to offset tensions over trade disputes.
Trump has noted an improving relationship with Beijing, but also gave voice to concerns with the US’ bilateral trade deficit. “We’ve developed a great relationship with China, other than the fact that they’ve been killing us on trade for the last long period of time — killing us, absolutely killing the United States on trade,” Trump told reporters on Friday.
The Trump administration is expected to introduce new trade actions in the months ahead, which could include tariffs and/or quotas on imports of steel and aluminium. There is also an ongoing investigation into China’s intellectual property practices. (See Bridges Weekly, 22 February 2018)
ICTSD reporting; “China leader's top economic adviser heads to the U.S. for trade talks,” REUTERS, 26 February 2018; “Xi’s economic adviser arrives in DC to avert trade chill,” FINANCIAL TIMES, 26 February 2018; “Australian prime minister delivers forceful defense of free trade,” WASHINGTON POST, 24 February 2018; “Trump, Australia's Turnbull seek common ground on trade, China,” REUTERS, 23 February 2018; “Trump is thinking about a huge 25% steel tariff that has Australian companies sweating,” BUSINESS INSIDER, 27 February 2018.