Economy

Mar 12, 2018

Trump tariffs trade-off sheds some light on old lies

When our large trade deficit with the United States is held up as the reason we dodged Trump's tariffs, it's time to revisit some old claims about trade with the US.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

There are a couple of theories of how Australia got an exemption from Donald Trump's steel and aluminum tariffs. The government's preferred narrative is that a century of "mateship" (their word) between Australia and the US and Malcolm Turnbull's close relationship with Trump -- helped by Australia's very own Trump Whisperer, Greg Norman -- secured the exemption.

An alternative is that Trump, they say, is a "transactional president". He's using the threat of tariffs to force Canada and Mexico to agree to changes to NAFTA. He is demanding the EU drops their "horrific barriers and tariffs". And he did a deal with Turnbull: on Twitter, he complimented the Prime Minister for being committed to "a very fair and reciprocal military and trade relationship. Working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs." Sounds, for all the government's frantic denials that there's any "security agreement", like Trump believes there's a quid pro quo for the status quo

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34 comments

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34 thoughts on “Trump tariffs trade-off sheds some light on old lies

  1. Rais

    If we get too many more wonderful lucrative trade agreements of the kind Howard brought us we’ll be bankrupt. Unfortunately the TPP looks just as bad, especially if Trump bows to business pressure and joins it.

  2. Dominic Meagher

    Bernard,
    This article demonstrates the same complete misunderstanding about the value of trade that Donald Trump has. You imply that a bilateral trade deficit is a problem. It’s no such thing, nor is it a failure of trade policy.
    We have a bilateral trade deficit with the US because we’re primarily a primary industry exporter and the US is primarily a services economy. We export mainly to manufacturing countries, like China and the EU. We import mainly from ‘finished product’ countries, like the US.
    Global supply chains mean a product can begin life as Australian raw materials, ship to Asia for manufacturing, then to the US for finishing, then back to Australia for consumption. All that gives us a trade surplus with Asia and a trade deficit with the US. It’s natural, and not a problem. It reflects a) the nature of global supply chains, and b) the way trade data is collected.
    For you to write as though the Aus-US bilateral trade balance is in any way meaningful is as silly as Donald Trump launching a trade war

    1. Decorum

      I agree, Dominic. It struck me that this is an oddly mercantilist view from Bernard.

    2. Robert Smith

      Then why do we need a “free trade agreement” with the US? The supporters claimed there would be huge benefits for Aus.

      1. Venise Alstergren

        Hahahahahahaha! The whole thing is an elaborate scam-be warned. In any trade agreement like this the strongest partner gets all the cream. Australia is the perennial loser. Our politicians and many business groups are somewhat stupid.

        1. Ian Roberts

          They’re not all stupid – some are in a position to make localised profits at the expense of the rest of us. We should stop voting for them.

    3. RogerDty

      I’m agreeing with Dominic too.
      Bernard, the bullionist, could point to the flawed mantra of trade liberalisation as about “jobs and growth” or the fact that these “Free trade agreements” have been captured and perverted to Crony capitalist PTAs. Nearly all the benefits of free trade can be obtained unilaterally without giveaways to rent seekers.
      Roger

    4. Hunt Ian

      A mere trade deficit with the US is not a problem in itself but Australia’s persistent deficits paid by capital inflows for business investment is. The restrictions on trade created by copyright law eg. the ludicrous “zoning” imposed by patent holders in the US, is also a massive problem.
      The other huge problem in our trade deficit, including the so-called “services” deficit, is the use of US companies of transfer pricing to eliminate taxable profits in Australia.
      The US so-called “FTA” has assisted the exploitation of Australia that has been going on for decades.
      The US has not had as relatively large an inflow of capital for business investment. It has had a huge inflow of treasury purchases and is only now moving on business investment, as it sees the outflows of profits mounting over time. China, in particular, should perhaps consider selling US treasuries, an see how the inflated living standards of US business people fall.

    5. bushby jane

      Surely the point of the article is Howard’s lies re the fiscal benefits to us from the usfta, not the merits of world trade.

      1. Dominic Meagher

        Jane, I agree that Bernard wasn’t saying there’s no merit in world trade, but he was implying that a bilateral trade deficit with a particular country is bad. What really counts is your trade balance with the entire rest of the world, because that tells you if you’re buying more than you can pay for at the moment (or the other way around).

        At the same time, if you do have a trade deficit with the entire world, that mostly just tells you that people are confident enough in you that they’re willing to get their payment later even though they deliver their goods now. It’s basically good news. Unless your trade deficit is so large that you actually have to start dedicating half your effort to pay it off – *then* you’ve got a problem.

        On Howard and the Aus-US “F”TA, I fully agree, it’s basically a pile of shit, as is pretty much every bilateral trade agreement. We shouldn’t bother with them. They’re mostly rent seeking opportunities and have very little to do with “free” trade

    6. Nudiefish

      Only in fiction could a trade agreement mean that everybody wins. The whole scam is designed to rip off the smaller party. The only reason the LNP Neocons love them so much is that they are so wedded to big business that they scarcely see themselves as removed from the corporate body politic. They are no longer Australians, they are suits clamoring for the big table.

      Am I wrong? Just ask former Trade Minister, and former Australian TPP fanboi, Andrew Robb, where he is working nowadays.

      https://www.theaustralian.com.au/national-affairs/former-trade-minister-andrew-robb–takes-role-with-chinese-company-behind-lease-of-darwin-port/news-story/307aa3fa44c9188da7c28069aff18331

      1. Dominic Meagher

        You’re right. Just ask Professor of Economics at Harvard University’s Kennedy School, Dani Rodrik (a higher authority on these things than Andrew Robb probably ever heard of)
        These agreements are mostly rent-seeking opportunities. Which, as you say, is why the LNP love them: it creates an opportunity for the uber-haves to raise the drawbridge behind them. Economists love free trade because it creates competition. Business loves FTAs because they shut down competition

  3. johnnhogan

    Why haven’t these deals been regularly reviewed and adjusted as required? Isn’t that what good economic managers do? In the 2000s this came up repeatedly and Peter Costello among others batted the mere idea away as being silly. The numbers looked poor from the start and here we are 14 years later. Worse, the conduct of those negotiating was clearly focused on appeasing the US rather than having the people of Australia understanding and having input into the deal. This and the details that emerged made me think, “these people aren’t working for Australia.”
    It’s often been said by their critics that US and Israeli negotiators say one thing in public but then get very hard and unyielding behind closed doors. I always wrote that criticism off as racist nonsense. Now, over time, I believe they were right then and now. It’s not racist, it’s what they do.

    1. Paul Guy

      Because to review and adjust is admitting the original deal was wrong. And the LNP won’t admit that.

      1. johnnhogan

        But a basic review, of the kind they’ve been demanding for various projects, would put this all to bed. Like a lawyer in a Simpsons cartoon, “I’m confused”.

  4. cartoonmick

    If this deal and the TPP are such marvelous deals for Oz and the Aussies, so grandiose, so brilliant, so awesome, so beneficial,,,, then why are we not given ALL the details? Told about every nut and bolt in plain language,,, why not? Is there something to hide?
    Are we not able to make judgements ourselves? After all, we are adults, just like the elected members of our Government.
    OR, as I and many others suspect,,,,, are there elements in these deals which would put our government in bad light, elements which sell us short?? Embarrassing elements?
    Perhaps our grandkids will get to hear the entire (unwashed) truth in 30 years time.
    Cheers
    Mick

    1. klewso

      We’re probably not getting those details because their dog ate that homework?

      1. cartoonmick

        Yeah, and I’ll bet the Tax Payers are paying for the dog’s vet fees !!!

        1. klewso

          …. There is a doG?

  5. Fletcher Robert

    Looks like we need a Royal Commission into free trade agreements. Who is doing the research into the results of the free trade agreements we have in place? The Australian public deserves to know the truth. Presumably the fine print in the free trade agreement with the USA excluded steel and aluminium. Otherwise how could tariffs be on the table in any event?

    1. Dominic Meagher

      The Productivity Commission has reported to government on this. It’s available here, along with submissions from the public: https://www.pc.gov.au/inquiries/completed/trade-agreements/report

  6. klewso

    Sovereign servitude – how much have those F-35’s cost, the sale of which did so much for US manufacturing looking for rubes?
    When is a “liberalised trade” champion not? When it’s Ciobo or anyone in this government?
    “Children Overboard”/”Iraq”/”GST will bugger the black economy”/”AUSFTA” : “Labor’s negative gearing will ruin the economy and raze home values”/”TPP”/”Mate’s rates tariff exemptions” = same m.o; different rodent.

  7. Venise Alstergren

    I know I’m being simplistic but does it hurt to regard all TPPs as beng made to suit the most powerful partner in the relationship? Australia, possibly thanks to our midget minded politicians and business groups, is the perennial wall flower. As soon as there is media coverage of yet another TTP be warned, we are being set up yet again.

    1. cartoonmick

      To be honest, I feel they’re a bit out of their collective depth. Anything could happen and probably will.
      This cartoon for example . . . .
      https://cartoonmick.wordpress.com/editorial-political/#jp-carousel-968
      Cheers
      Mick

  8. brian crooks

    john howard a lying little rodent, no way, would little johnny ever tell a lie, did`nt he tell you all that workchoices was good for workers, didn`t he say there would never ever be a GST under a government he led, didn`t he say Iraq had weapons of mass destruction, how could anybody ever accuse johnny of lying, now they expect us to believe that honest Mal would lie to us, whats next, saying Abbott told lies to get elected, well I never, have you people no faith.

  9. CML

    Anybody with half a brain has known for well over a decade that these so-called free trade agreements are a load of rubbish, and detrimental to this country…every last one of them.
    No one has mention just two issues in said agreements which damage us:
    1) ISDS…where companies/corporations can override our elected government; and
    2) The unfettered right for the other signatory/s to import their own ‘workers’ for most projects here in Oz…thus denying our local unemployed a job.
    To amplify 2) above…recently an abattoir in a local town in SA was destroyed by fire, making many hundreds of workers ‘redundant’. To our surprise, very shortly after this news was made public, we were told that the vast majority of said workers were here on 457 visas! This should NOT be happening while ever our unemployment rate is over 5%…disgraceful!!
    And the latest version of this…the TPP…will probably be even worse. Does anyone know if this has to be voted on (to be ratified) by both houses of the federal parliament? If not, WHY NOT!!

    1. bushby jane

      I think it does have to go through parliament.

      1. CML

        Thanks BJ. Wonder of it will pass the Senate???

        1. Dominic Meagher

          Actually I’m pretty sure it doesn’t have to go through Parliament. I spoke with Penny Wong about it in 2015-6 and she said the only laws that actually needed to change related only to the tariff changes, which Labor (and all sensible people) support. All the bullshit can be done executively, apparently. Sorry.

  10. AR

    Oddly simplistic stuff from BK, given his usual puppy-pleasure in believing the exponents of the Dismal/Dysfunctiona ‘Science’.
    Given how we are always screwed by trade deals, perhaps one of the ‘P’s of the TPP could be moved to the front to mean Pyrrhic?
    To paraphrase that ancient king, “Another such deal and we are screwed” and he was only dealing with the Romans.

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