Frances Adamson on Australia’s plan to ride out Donald Trump’s trade war with China

By Stephen Easton

Wednesday September 19, 2018

Department of Foreign Affairs and Trade secretary Frances Adamson briefed business leaders yesterday as the trade war between the United States and China heats up, and said the government needed help to defend a system of rules for international trade.

Adamson said Australia and the US remained “close partners” despite our government strongly disagreeing with the return to protectionism under Donald Trump, and his administration’s disinterest in multilateral diplomacy.

“We may disagree with the approach of the current administration, but our response is to step up our engagement with them,” she said in a speech yesterday to the Trans-Tasman Business Council.

“We are certainly not pulling back.”

“On several fronts, the US is unsettling the international trading system that has underpinned global economic growth for 70 years. Perhaps most concerning for Australia, the United States has withdrawn some of its support for the World Trade Organization, while raising unilateral tariffs and quotas against some of its trading partners.”

“The great powers will sometimes act unilaterally — that is in the nature of things”

This is not breaking news, of course; she noted the prime ministers of Australia and New Zealand had both “emphasised the importance of resisting protectionism” in speeches to the trans-tasman leadership forum hosted by the same organisation in March.

“Now Australia is proud to stand alongside New Zealand, staunch partners against these rising tides,” then-PM Malcolm Turnbull said at the time.

Adamson said the government had “encouraged the United States to pursue their trade grievances through the WTO, and in ways that strengthen the liberal character of the trading system” but noted Trump’s trade war is part of a pattern of disengagement from multilateral efforts like monitoring Iran’s nuclear program, the Human Rights Council and the Paris climate change agreement.

Regardless of whether Trump’s policies turn out to be right or wrong for the US, Adamson said “smaller, open economies” like Australia, New Zealand and Singapore had a lot to lose from the superpowers leading a return to the trade barriers of the past.

“Credible economic modelling suggests Australia would be significantly worse off in the event of a regional or global trade war, with the extent of the damage depending on the extent and duration of higher trade barriers.”

Influencing or persuading the great powers to change course is not easy but our best bet is to continue working within an international system based on rules. “We must resist the idea that recent US policy is an example for us to follow,” said Adamson.

She said the multi-national effort to send peacekeeping forces into East Timor in 1999 was a good example of how international economic cooperation could lead to so much more.

“Amongst the various strands that led to this outcome was the fact that senior people from all over the region booked their flights to attend to the ordinary business of multilateral diplomacy — in this case, economic cooperation.

“As it turned out, they had a hand in writing our region’s history.

“And they also had a hand in identifying a growing need for leaders to gather to discuss regional, political and security issues — in what has become the East Asia Summit.”

Adamson made it clear that businesses could add a powerful voice to the diplomats trying to defend an international system based on agreed rules, and to those arguing against protectionism in the domestic political sphere. The alternative is the underlying principle of international relations, where power is the ultimate authority to act.

“The great powers will sometimes act unilaterally — that is in the nature of things,” the DFAT secretary commented.

“Yet our nations can and do make a difference. We can shape our international environment through persuasion and collaboration, and multilateral diplomacy provides important opportunities for this.

“In certain circumstances we can lead.”

Adamson believes it is important for business leaders and the government to understand each other’s perspectives on trade and foreign investment, and said business had an important role to play “in setting the general tone of public debate concerning international affairs”. The department will be hosting a “strategic dialogue with business on foreign policy and security” with the Business Council of Australia in November.

“Business must also provide the momentum, the constituency for further trade liberalisation. When diplomats negotiate, we bring your interests to the table.

“Meanwhile, as protectionist sentiment rises around the world, government and business need to be partners in making the case for trade and investment to the public.

“Business has the practical experience as participants in trade and investment, and can provide persuasive examples of how trade delivers real benefits across the Australian community.

“We in government need your support.

“The stakes are high, and small steps, taken in the right spirit, can make a big difference.”

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