It’s not just ‘fake news’ media lining up against Donald Trump, world trade experts are warning Australia about the fallout from the President’s protectionist policies.
But University of Adelaide George Gollin Professor of economics Kym Anderson argues the outcome from the biennial meeting of the World Trade Organisation (WTO) in December told a “pretty disappointing story”.
“Australia takes the view the best way to improve its trade standing is through the WTO, where we can get agreement among all countries, so you can negotiate once and get a global outcome,” he said.
Mr Trump is a strident critic of the WTO and the US threw its weight to hold up negotiations over future trade deals and blocked the appointment of Appellate Judges to the WTO’s dispute resolution body, creating a logjam of bickering nations.
The President has a very shallow understanding of how trade works, and he doesn't seem to understand that imports aren’t a bad thing for an economy
The US withdrew from the Trans Pacific Partnership (TPP) last year and Mr Trump is flirting with an exit from the North American Free Trade Agreement (NAFTA).
However, on the domestic front, a president’s influence on domestic subsidies and price regulation is buried under the weight of lawmakers in Senate and House ag committees who control the US Farm Bill - and routinely in favour of the partisan interests of their states.
Australia is lobbying Mr Trump to back away from his protectionist policies, but Malcolm Turnbull recently said he did not expect the US to join the TPP “anytime soon”.
“We're certainly not counting on it. It would be great if they did, it is a real engine for jobs, for investment.”
Mr Anderson spoke at the Australasian Agricultural and Resource Economics Society’s conference in Adelaide this week.
“The alternative is time-consuming regional bilateral negotiations. But the risk is that the next day another county comes along, signs another agreement and all our benefits are diluted,” he said.
The US may yet be tempted to sign up and gain its slice of the long-awaited deal between 11 Asian and South American nations, expected to be confirmed in March.
“There are several options which the US could take. It could join under the terms of the current arrangements, but it’s likely Trump would want to dictate terms,” Mr Anderson said.
“There is also the prospect China may look to join the TPP, which would be a great achievement in its own right, and that might frighten the US into joining.
“If China joins there might be some losses to existing preferential trade arrangements, but overall it would be a great gain for our economy.”
While US producers support Mr Trump’s agenda to “make America great again”, commodity traders and Democrat and Republican politicians are finding common cause in limiting impacts from his “random behaviour”.
That is according to Montana State University professor of economics and visiting director at free enterprise think tank the American Enterprise Institute Vince Smith, who also spoke in Adelaide.
“There is one issue where both the Senate and House agricultural committees are in agreement about and that’s international exports from their respective states,” Mr Smith said.
“The President has a very shallow understanding of how trade works, and he doesn't seem to understand that imports aren’t a bad thing for an economy.
“His administration, not everyone in Washington, but those in the Whitehouse, appear to have taken a stance based on 17th Century mercantilism, which says a country only does well when it exports a lot and doesn’t import much.”
Mr Smith said Mr Trump was ignoring the downside to his isolationist policies.
“It’s a classic failure to understand that you gain from trade through comparative advantage, and the US clearly has agricultural export comparative advantages, not for every product but certainly overall,” Mr Smith said.
“There is a very serious set of concerns among major commodity producers, such as wheat, soy bean and beef, that the President’s apparent willingness to tear up the North American Free Trade Agreement (between the US, Canada and Mexico) will seriously disadvantage them.
“And from any reasonable economic perspective they’re correct.”
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