December 16th 2017

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Articles from this issue:

COVER STORY The meaning of Christmas

CANBERRA OBSERVED Parliamentary stampede tramples freedoms

EUTHANASIA Palliative care remains the true solution

FOREIGN AFFAIRS The more Zimbabwe changes, the more it stays the same

AGENDA FOR AUSTRALIA Putting the 'fair' back in the fair go for farmers

OPINION The new Reformation: How Christians found themselves on the 'wrong' side of history

PHILOSOPHY AND SOCIETY Why Marxists will not engage with opponents

ECONOMICS Kim Beazley rides in as a white knight for the TPP

INDUSTRIAL RELATIONS Mergers could give unions a striking profile

MUSIC Sounds like ...: A vain search for meaning

CINEMA Casablanca: Contender for the 'perfect film'

BOOK REVIEW Australia behind the scenes in WWII

BOOK REVIEW Political sparks at the 'Friendly' Games

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Kim Beazley rides in as a white knight for the TPP

by Colin Teese

News Weekly, December 16, 2017

Since his arrival back in Australia after around six years as our ambassador to the United States, Kim Beazley (pictured below) has seemed to be trying to establish himself as something of an expert in matters geopolitical. Now apparently, he is extending his expertise to matters of international trade as well – if not globally, then certainly in respect of trade in Asia.

Kim Beazley

During his term as Ambassador – perhaps unwisely extended by Prime Minister Tony Abbott – Mr Beazley, negotiating on behalf of the Commonwealth Government, became an enthusiastic supporter of the Obama/Clinton initiative for the Trans-Pacific Partnership (TPP), which was torpedoed by President Donald Trump.

The Australian Financial Review of November 30 has Mr Beazley stating that President Trump is in the process of engineering a trade war with China. Well, really! If true this would indeed be news. (For the record the world has not witnessed a global trade war since the 1930s, which followed a major breakdown in international trade relations, and ended only with the outbreak of World War II.)

Could even a total trade breakdown between China and the United States lead to a rerun of what happened in the 1930s? Almost certainly not.

Let us look at what is actually happening today and compare it with the events of 80 years ago. Going on what the President has said and done, we are a far from any trade war. We do know, however, that the President is dissatisfied with the trade behaviour of a number of the U.S.’s major trading partners – including China and the European Union.

Yet thus far he has done nothing more than direct the U.S. International Trade Commission (ITC) to conduct an inquiry into whether Chinese steel products are being dumped into the U.S.

This is, in itself, a bit unusual, and may be questionable in terms of World Trade Organisation (WTO) rules. The inquiry has been initiated by the U.S. Department of Commerce. No U.S. steel producer has complained about low-priced competition from Chinese imports.

If the ITC makes any adverse finding against Chinese steel imports, China will certainly contest the finding in the WTO. The matter would probably not be resolved for many months, if not a year or more. Thus, no trade war is likely arising from President Trump’s action.

What about the prospect of a trade war between the U.S. and China, assuming that Mr Beazley’s prediction is ultimately proved right? Well, the first thing to be said is it would be unlikely to have global consequences remotely comparable with those of 80 years ago.

The WTO’s role as policeman may be seriously weakened, but it still does embody binding rules to which most of the world’s trading nations subscribe, including the U.S. and China. Nothing comparable existed in the 1930s.

If a bilateral trade clash between the U.S. and China does eventuate, the question arises, which country would suffer more? As things stand today, it could be that the U.S. would be harmed more than China. Many major U.S. companies rely on Chinese imports into the U.S.; others have flourishing export businesses into China.

A decade or so earlier the opposite would certainly have been true, but not any longer. China’s economy is now much more resilient and diversified as to export markets.

No less important, China is moving away from the idea of export-driven growth. With a middle class of 300 to 400 million poeple and growing, it is well placed to do so.

During Ambassador Beazley’s time in Washington – covering the Rudd/Gillard and Abbott prime ministerial periods – he became Australia’s principal negotiator of the TPP, an agreement shaped behind a veil of secrecy. He represents it as a document intended to advance trade in Asia. In particular, he notes, Mr Trump rejected it, despite the fact that it would have promoted the interests of U.S. companies in Asia.

What remains unexplained is, if the TPP’s purpose was enhance trade, why was the biggest trading nation in the region (China) excluded from the negotiation?

We all know the answer. Trade was a smokescreen. The TPP’s real purpose was geopolitical. In fact it was the centrepiece of an Obama/Clinton plan to (using Cold War terminology) “contain” China’s economic and political reach.

Whether the TPP would have succeeded in this aim we can never know. It foundered when President Barack Obama was unable to push it through in his “lame duck” period.

Of course we all know a version of the TPP has re-emerged in an even less credible form. Neither of the two largest trading nations in the world is now a signatory to it.

In light of all this, one wonders how Mr Beazley can justify describing the position of the U.S. as “locked and loaded for war in terms of its trading relationship with Asia”.

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