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Trump’s arrival means it’s time for Australia to review our relationship – and perhaps learn to say ‘no’

The Conversation

Tony Walker, La Trobe University

Prime Minister Malcolm Turnbull is discovering the political cliché “change the government, change the country” might have bigger implications for Australia’s relationship with the United States than anticipated.

We might re-engineer the cliché to read “change the government, change its foreign policy”, and thus how America manages its relationships with friends and foes alike.

If it has not already dawned on Turnbull and his foreign policy advisers then it should have: a new American administration like no other in recent memory will require a rethink in how Australia calibrates its relations with Washington.

Not since the Gough Whitlam’s Labor government of 1972-75 has such a potentially awkward relationship existed between Australia and its principal ally, or to use another description, custodial power.

Whitlam parted company with his predecessors in his testy interactions with the Richard Nixon White House. Whitlam felt under no obligation to espouse a “pro-American” perspective on matters relating to the war in Indo-China in particular.

Many Australians found this refreshing.

While it was inevitable that a moment would arise when Australian and US interests would find themselves out of kilter, it has perhaps come more quickly than anticipated, driven by the arrival in the White House of a man untethered from principles that have guided American foreign policy for generations.

In Trump’s Inauguration speech there was one passage that should have given Turnbull and his advisers pause, even if these words might be dismissed as a rhetorical flourish:

We assembled here today are issuing anew decree to be heard in every city, in every foreign capital, and in every hall of power. From this day forward, a new vision will govern our land, from this day forward, it’s going to be only American first, America first.

He added:

Protection will lead to greater prosperity and strength.

The latter observation could hardly have been more antagonistic to the free trade principles and practice on which Australian prosperity rests, or for that matter be regarded as anything more than an affront to America’s own history.

In 1930, Congressmen, Senator Reed Smoot and Representative Willis C. Hawley sponsored legislation that raised punitive tariffs on some 900 imports, and in the process added poison to the well of slowing global trade, as The Economist put it.

Smoot and Hawley did not cause the Great Depression or add significantly to it, but the legislation represented a populist response to political anxiety.

Nearly a century later, an American president appears to hold the view that an “America first” approach – or a form of isolationism – will serve his own country’s economy well and those of its friends.

This view, even if you accept that the trade liberalisation pendulum has swung too far, is not sustainable if economic growth globally is to be nurtured.

Otherwise, disaster beckons, including a global entrenchment that will serve no-one’s interests, including America’s.

Trump’s stroke-of-a-pen end to America’s involvements in the liberalising Trade Pacific Partnership gave expression to his antagonism towards trade deals generally and spelled a pause in American leadership of a laborious process of opening markets and reducing trade barriers.

From the establishment of the General Agreement on Tariffs Trade, to the formation of the World Trade Organisation, to progress towards open markets under the Uruguay Round – alongside a plethora of bilateral trade deals – an era of liberalising trade has underpinned global prosperity.

So, the question becomes: how should the Turnbull government respond to these new circumstances in a way that serves Australia’s interests, and in an environment in which the world is in disarray? And it is likely to become more so if the early stages of an idiosyncratic Trump administration is any guide.

Policymakers need to think outside the narrow confines of what has been regarded as “America first” policy postures that have dictated Australia’s foreign policy choices, to consider what might be regarded as a less dependent relationship on our security guarantor.

None of this is an argument to weaken Australia’s commitment to the ANZUS alliance, nor our alignment with what we have always regarded as America’s better angels. But the time has come for a reassessment.

Trump’s ascendancy to power reminds us there is no such thing as permanent alliances, simply permanent interests.

Australia is not obliged to make a choice between its security in the form of its treaty arrangements with the US and its commercial interests, namely with China. But it does need to move to a position where it gives itself more flexibility in addressing its security and other challenges.

In other words, arguments for greater self-reliance – including defence preparedness – grow by the day.

How Turnbull achieves such a shift will prove a test of his diplomatic and leadership skills, and indeed his understanding of our country’s history. After relying on great and powerful friends for our security, we may be entering a new and distinct phase.

Whatever judgements might be made about the likely trajectory of a Trump administration, early days suggest that what he said on the campaign trail will guide his actions in office.

So when he talks about a form of isolationism summed up by the phrase “America First” he must be taken at his word, until demonstrated otherwise.

This poses obvious challenges for Australian policy. Do we gravitate towards the sort of world defined by Trump – with its risks of a return to a 1930’s isolationism or perhaps a form of 19th century mercantilism – or do we assert our own separation from such a worldview?

Are we seeing the end of “pax Americana”, in which the US proved to be the indispensable cornerstone of global security in the rebuilding of Europe, the containment of the Soviet Union, and a security presence in Asia post the Korean war that has enabled an extraordinary economic transformation in our own region to our advantage?

Turnbull needs to ask himself whether it is in Australia’s national interest for institutions like the United Nations, World Trade Organisation, the North Atlantic Treaty Organisation to be weakened.

Is it in Australia’s interests for there to be a confrontation between the US and China on trade, or security in the South China Sea?

Or a return to a ground war in the Middle East that would demand a larger commitment from Australia with unknowable consequences?

Lessons might have been learned from an earlier disastrous intervention.

Finally, Turnbull should resist pressure from his the right wing of his party, salivating over the arrival of an authoritarian in the White House.

Turnbull was derided over his initial response to Trump’s decision to abandon the TPP, in which he said China may wish to fill the gap as if, reflexively, he needed to fall in line with Washington.

While the TPP may be dead, Turnbull and his ministers shouldn’t be blamed for trying to keep alive an idea that would have provided a basis for a liberalising trade and investment zone in the Asia-Pacific.

Contrary to the views of its critics, the TPP was always about more than simply a trade liberalisation mechanism. It was also aimed at providing a framework for further action in counterpoint to China’s growing dominance.

Finally, Turnbull might consider the example of former Canadian Liberal Prime Minister Jean Chretien, who politely declined when he came under pressure to join George W. Bush’s cavalry in the invasion of Iraq.

Chretien, as leader of a country that shelters under a US security umbrella and is a fellow NATO member, said “no”, or “non” in his native Quebecois.

Last time we checked the sky had not fallen in for Canada.

The ConversationTony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. (Reblogged by permission). Read the original article.

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Australia should assume Trump won’t step back from his campaign commitments

The Conversation

John Hewson, Australian National University

World leaders have responded, variously, to the shock victory of Donald Trump in the US Presidential Election. Few took the opportunity as well as Germany’s Angela Merkel to specify their “terms of engagement” with the new President elect.

Merkel said:

“Germany and America are bound by their values: democracy, freedom, respect for the law, and the dignity of human beings, independent of their origin, their colour, religion, gender, sexual orientation or political position.”

She added:

“On the basis of these values I offer the future President of the US, Donald Trump, close cooperation.”

I am sure that Australian Prime Minister Malcolm Turnbull, too, would claim to have made similar comments. He too would have gained “assurances” as to Trump’s attitude to our alliance, and to our region. But probably not as succinctly, and with such clear intent as Merkel.

Understandably, there is considerable global confusion, and some concern, as to just how Trump will govern. And how well. There are significant checks and balances in the US political system when it comes to the exercise of power, especially relative to the Congress, in relation to domestic policies. But the President’s role as Commander-in-Chief is much less constrained.

Just which of the myriad of “promises and commitments” will he stick with, and which will he jettison? Will he actually build “the wall,” resort to tariff protection, tear up trade deals, ban Muslim and other immigrants, dramatically cut taxes, build all those roads, bridges and other infrastructure, step back from global defence, security and climate engagements, and a veritable host of others?
Some believe now that he has won, he will step back from much of this. However, I think this view misses the very point of his victory.

He ran a consistent and focused “anti-establishment” campaign – broadly, anti-globalisation, anti-freer trade, anti-immigration, and anti-Washington. His voters see him as a “game changer”. They expect him to deliver. I believe he will do his utmost to do so.

It has been characteristic of successive, previous “Establishment Presidents” to step back from most of their campaign commitments. To meet the expectations of his constituency Trump can’t, and won’t, do this, to the maximum extent.

Not surprisingly, he would initially offer “soothing assurances” to the likes of Turnbull, just as he made “soothing and healing” utterances in his acceptance speech. These included “governing for all Americans,” “unifying America,” reiterating the promises of new infrastructure, new businesses and new jobs.

His big wins were in the mid-West, manufacturing, rust belt, states of Michigan, Wisconsin, Ohio, and Pennsylvania, and in small-town, regional and rural America. They want jobs, and market “protection,” and don’t want migrants, or to have to live with the dictations of minorities, and the intrusions of Washington, dominated by powerful vested interests.

So, expect tariffs on China (probably after asserting currency manipulation) and on other “trade predators”, including Mexico. The Mexicans, and financial markets, obviously believe this given the almost immediate and historically significant collapse of the Peso. The real unknown is how such countries will respond, and in what form, and with what intensity, and just where such a process would end.

Similarly, he can be expected to renegotiate, if not tear up, some existing trade deals, especially NAFTA, and not to sign any new ones, including the TPP. He can also be expected to restrict immigration, and to chase those who have arrived illegally. He can be expected to backtrack on climate change, which he described as a “hoax”.

He may well treat Congress with contempt, at least initially. He owes very few of them, very little. Indeed, he may be wise to hit the Congressional ground running, by challenging them, as an early priority, to pass a bundle of legislation consistent with his anti-establishment platform.

However, I doubt his fiscal economic agenda, as much as we can ascertain it, is deliverable. With a still significant budget deficit and debt overhang, he will have very limited capacity to fund his promised infrastructure programs, large tax cuts, and increased defence expenditure, even with significant cuts to large expenditure areas such as health.

However, to the extent Trump is able to implement his trade and economic strategies they will be disruptive to global trade, and probably global growth, and inflationary, in time. This would probably lead to higher interest rates and a higher US dollar. It will be an important question whether any boost to US growth is sustainable.

The essence of Trump’s anti-establishment program is very nationalistic and isolationist. His constituency has a very clear idea of what they expect to make “America Great” again.

Much of this could be very bad news for Australia, with far reaching national and regional consequences. We will need a very clear sense, and electoral sign off, as to what is in our national interests. It will not be good enough to rest on our laurels, and to just keep citing the importance and strength of our US alliance, in the vain hope that somehow we will be treated differently, that we will be “special”.

Indeed, we will need to earn the relationship moving forward. We will need to be proactive, and may need to be prepared to renegotiate a new “US alliance”. We would be wise to begin this process against the background of rapidly developing our alliances with key Asian neighbours, especially Japan and South Korea.

The ConversationJohn Hewson, Professor and Chair, Tax and Transfer Policy Institute, Crawford School, Australian National University

This article was originally published on The Conversation. (Reblogged by permission). Read the original article.

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Trump can kill trade deals but he can’t kill globalisation

The Conversation

Remy Davison, Monash University

2016 will go down as a watershed year for all the wrong reasons: Britain’s EU exit faces strong opposition; Syria remains plunged in civil war; and in the wake of the US election politics in the two major Anglosphere democracies are now deeply polarised.

In Britain and the US, the majority of voters have embraced candidates and movements that eschew globalisation, immigration and free markets. Instead, they preach nationalism, closed borders and protectionism.

But it is hyperbolic to suggest that the post-2008 financial crisis era is beginning to look very much like the 1930s in the wake of the Wall Street crash. This is not a clash between fascism, communism and democracy. But what the Brexit and US presidential votes do show is that modern democracies have proven incapable of dealing adequately with income inequality, unemployment and declining opportunity.

With Trump as president, US policy is likely to become more unpredictable, but the business of government and policy implementation must go on nevertheless.

Despite Republican majorities in Congress, Trump will not be able to treat the legislature as a mere rubber stamp. In the US system, Congress holds the whip hand. Moreover, Trump is at war with so many senior Republicans, he is unlikely to enjoy a smooth ride. Where congressional Republicans and Trump do agree is that tax cuts are needed.

Unchartered waters

In this respect, we are really navigating unknown waters as to how Trump will behave in office as president. Trump has no public sector background. He will be the first US president to enter the office without any gubernatorial or congressional experience, or any previous role in an administration.

Ronald Reagan, Bill Clinton and George W. Bush served as state governors; John F. Kennedy and Barack Obama were junior senators (Obama also served as a state senator from 1996); George H.W. Bush served in multiple roles, including the vice presidency. In the post-war period, only Eisenhower comes close to Trump as a political cleanskin. But Eisenhower had a substantial military career, a reputation as a war hero, and had been a key adviser to both the military and the Department of Defense before and after World War II.

Trump’s victory has been built on his image as a Washington outsider. But his isolationist, nationalist and protectionist policies are not new; the first US Secretary of the Treasury, Alexander Hamilton, was an unabashed protectionist, viewing American infant industries as central to the US’s commercial rivalry with industrial Britain.

On defence and trade policy, Trump is close to many of the positions articulated by the America First movement in the 1930s and 1940s. Substantial figures, such as Charles Lindbergh and future president Gerald Ford, sought to keep America out of the second world war. But once Washington entered the war, it did not make the same mistake it made after Versailles in 1919; instead, the US became a global economic and military superpower, eschewing the isolationism of 1920–41.

As a self-declared neo-isolationist, one of the keys to Trump’s victory was his denunciation of the free-trade orthodoxy that has dominated Washington’s economic agenda since the Bretton Woods conference of 1944, which created the IMF, World Bank and, later, the GATT, the predecessor to the World Trade Organisation.

Let’s take a look at the state of play of the US’s current and mooted free trade negotiations. We’ll also briefly canvass how President Trump is likely to deal with Janet Yellen and the Federal Reserve.

Dead in the water. Olivia Harris/Reuters

The Trans-Pacific Partnership (TPP)

The TPP was initiated under George W. Bush’s administration, but President Obama pushed the 12-member bloc, obtaining fast-track trade promotion authority from Congress in June 2015. This allowed him to press forward with the finalisation of the agreement, which was released in October 2015. However, Trump’s opposition to TPP, along with Hillary Clinton’s second thoughts about her support for it means the deal is unlikely to pushed through during Obama’s final weeks in office.

In November 2015, Trump declared TPP “insanity”. Trump’s anti-TPP campaign demonstrated how he and the Tea Partyists had so convincingly vanquished the traditionally pro free trade Republican Party. By July this year, Republicans began to erase all trace of TPP support from their websites. By September, staunch TPP supporters Marco Rubio and Pat Toomey performed a volte-face; having praised the TPP, now they sought to bury it. Both Obama and Hillary Clinton were depending on the pro-TPP Republicans to get the pact through Congress.

Verdict: Dead in the water. Many Australians will applaud Trump for killing the TPP, as it was far from popular.

A Bush legacy soon to be lost?
William Philpott/Reuters

The North American Free Trade Agreement (NAFTA)

NAFTA was a product of the Reagan-Bush years, building on its 1998 predecessor, the Canada-US Free Trade Agreement (CUSTA). George H.W. Bush’s administration did most of the heavy lifting, but Bill Clinton pushed NAFTA through Congress in 1993, expending considerable political capital as he faced off against the unions, the Democrats’ biggest supporters.

Trump has labelled NAFTA “the worst trade deal ever”. True, NAFTA may have destroyed 879,000 US jobs, according to one study. But it also provided a low cost labour base for both the US and Canada, as they strove to compete with Asian manufacturing and the EU’s newly opened eastern periphery.

Verdict: No happily ever NAFTA. Likely to stay, but regulatory changes will be made.

Europeans came out in force against the TTIP. Francois Lenoir/Reuters

The Transatlantic Trade and Investment Partnership (TTIP)

TTIP may be dead already, mostly due to the fact that it’s as popular as Hillary Clinton. It is in Europe that TTIP has found its strongest opponents, with thousands protesting against it.

Clinton, Sanders and Trump’s position against TTIP coalesced early, as it was clear it was a vote loser within all three candidates’ voter bases. In a pitch to Sanders supporters, Clinton declared she would quash any deal that hurt American jobs.

Clinton’s opposition to free trade deals demonstrated how decisive both the Sanders and Trump campaigns had been in shaping the narrative of the anti-free trade debate. Equally, the union base of the Democratic Party had always opposed FTAs. Had Clinton won the election, it is likely she would have attempted to revive TTIP during her tenure, as both the EU and US had pushed for a transatlantic FTA in some form since 1990.

Verdict: This is an ex-parrot.

Trump wants to put Britain ‘at the front of the line’ in any trade deals. Hannah McKay/Reuters

A UK-US free trade deal?

President Obama infamously intervened in the UK Brexit debate earlier this year, declaring Britain would go “to the back of the queue” if it left the EU and sought a FTA with the US. Theresa May, Boris Johnson and Liam Fox will be hoping that President-elect Trump will welcome a special free trade relationship.

During the campaign, Trump advisers indicated that he would be willing to discuss a FTA with the UK. Indeed, Trump stated that Britain would “always be at the front of the line” when it came to trade deals. This would be critical to Brexit Britain; the US is the UK’s largest third-country market, with more than £30 billion in exports.

But the UK also enjoys a trade surplus in goods and services with the US, and Trump’s administration is unlikely to grant substantial concessions to an ally that already makes substantial hay from its existing tariff arrangements.

In other words, why would President Trump do a deal that gives UK firms more access to the US market?

Verdict: Boris needs to grab that American passport of his, head for Washington and start speed-dating. Soon.

Trump has suggested he would replace Janet Yellen as US Fed chair. Andrew Gombert/EPA/AAP

Audit the Fed!

What future for Janet Yellen, Federal Reserve Chair? The Donald has expressed his dislike of the Federal Reserve chair on more than one occasion.

In September 2016, Trump took aim at Yellen’s near zero interest-rate policy, arguing it existed only to make Obama look good. Janet Yellen wasn’t about to take this lying down. In a press conference, she responded – implicitly – to Trump, arguing that:

“I can say emphatically that partisan politics plays no role in our decisions…We do not discuss politics at our meetings.”

It’s unknown whether Trump would seriously attempt to remove Yellen. But in May this year, he did state that he would “most likely” replace her as she was “not a Republican”. In September, Trump’s position hardened; he said he would audit the Fed and replace Yellen in the first 100 days of his administration.

There are precedents; in 1981, US Treasury Secretary Donald Regan began to brow-beat Fed Chair Paul Volcker for maintaining his tight monetary policies as the Reagan administration sought to introduce wide ranging tax cuts. Despite Reagan’s early support for Volcker (a Carter appointee), by 1987, the President had had enough; he ended Volcker’s tenure, bringing in Alan Greenspan.

Verdict: Anyone looking for a central bank chief? Used for one term only. Low, low interest rates.

Apple is not about to repatriate iPhone production and establish manufacturing onshore. Bobby Yip/Reuters

Another brick in the wall

Trump’s triumph is partly built upon faulty and drastically over-simplified conceptualisations of the operation of the US and the global economy. Corporations, banks, finance and even consumers are no longer “national” entities. They have not been for many years. Manufacturing and services are not local but global. This complex web of interdependence has manifested itself over many decades.

Globalisation has even brought jobs back to America; but in the post-GFC environment, this has produced US jobs that, on average, pay 23% lower than they did prior to 2008.

Mexican walls, Chinese trade negotiations and bans on Muslims: if Trump were to implement some of these initiatives it may have some impact upon people movements. But low-tech manufacturing jobs en masse are not coming back to America. The US used to build vast numbers of radios and TVs; these have not been made in America for a long, long time. Similarly, Apple is not about to repatriate iPhone production and establish manufacturing onshore. And US corporations are not about to stop doing business with the rest of the world.

This is the brutal reality that Trump cannot smash, but his supporters appear to believe he can. He is wrong and they are wrong. And they will be bitterly disappointed.

The ConversationRemy Davison, Jean Monnet Chair in Politics and Economics, Monash University

This article was originally published on The Conversation. (Reblogged by permission). Read the original article.

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