We may not like US President Donald Trump and oppose tariffs, but the imposition of tariffs was approved by US voters and our defence in a hostile world is weak. We need the 1951 ANZUS treaty.
The failure of both Anthony Albanese and Leader of the Opposition Peter Dutton to grasp the issues has now allowed the left of the ALP to attempt to drive a wedge into the US defence alliance at a crucial time.
To be viewed as the next Prime Minister, Dutton should be explaining to Australians what is happening in the US and how Australia must adapt.
At the moment, neither Albanese nor Dutton are listening to the tariff and defence messages from the US to Australia. Yet in the context of its situation, the US has not treated Australia badly. Indeed, it has actually set a framework for a much closer alliance.
The first Australian major party leader, (whether it be Dutton or Albanese) to wake up and respond to what is actually happening – instead by being sidetracked by sections of the media — and set appropriate policies should be Prime Minister after the next election.
In the 2024 Presidential election, the American population voted in favour of the clearly enunciated Trump plan to impose tariffs on a wide range of goods to enable the US to restore its badly run down industrial base. Other parts of the industrial base restoration would involve lower energy costs and tax incentives to invest.
We have been sidetracked by the US-China-Canada-Europe trade tangle, plus the slowdown in the US economy created by the great uncertainty among the government employees and illegal migrants likely to be deported. The slowdown is impacting Wall Street. The markets also recognise that Trump has too many balls in the air, including an inability to fight in the Middle East and Ukraine. Australia must look past these distractions to the longer term.
In this context, on Tuesday, I will take readers through the surprising detail in the new US approach to lower energy costs and reduce emissions – an integral part of the Trump pact with his voters.
Secretary of State Marco Rubio set out, in the clearest possible terms, that the restoration of the industrial base tariff strategies are completely separate from defence arrangements.
And so, when it came to aluminium, of course there would be a tariff. But then the Americans started looking more closely at Australia’s four aluminium smelters, which generate almost all their revenue from exports. Power is their biggest cost, and theoretically all should have been closed down because power costs in Australia have risen at a much higher rate than the CPI as a result of high-cost renewables.
But cleverly concealed but necessary power subsidies insulated our aluminium producers. The Americans now understand this, so Australia had no hope of avoiding the tariffs.
Meanwhile, Australia’s GDP is declining under the burden of higher power prices and if the iron ore/ gas markets become weak these subsidies may be unaffordable, particularly given the required big rises in defence expenditure.
Steel was more complex because the Australian company BlueScope has massive steel production capacity in the US and those exports integrated into the US business.
But making a fuss about it at this time was strategically stupid. Later it may be possible to do a deal given our unique situation with steel exports.
Rather than worry about US tariffs we need to worry about our energy policies and how they make Australia uncompetitive.
And the imposition of tariffs on China and other countries means that there will be a surplus of steel and other products in the world.
We will need to make a decision whether we want a steel industry, and that of course will be linked to our energy policies.
When it comes to defence the US in some ways has enhanced the relationship because they have set out clear Australian obligations to defend ourselves under ANZUS.
We will be required to spend three per cent of our GDP in defence. Dangerously, our Prime Minister said Australia would determine its defence expenditure, and it wasn’t a matter for the US to decide. Accordingly, we plan to increase our expenditure from two to just 2.3 per cent over ten years. Given the clear clauses in the ANZUS treaty, it was perfectly reasonable for the US to put on the table what they believed Australia needed to spend to defend itself. The US recognises that we have set up our defence forward estimates in a way that the AUKUS submarine deal is sucking defence money from other areas, making us very vulnerable. So not only is the US entitled to put a three per cent figure on the table, but they were actually acting in our own interests.
Meanwhile, if we are going to maintain our standard of living, we are going to need to sell ourselves to America and the world as a reliable source of minerals.
In the case of the US, we are in a position to provide them terbium and other heavy rare earths, and potentially we will be much more reliable than Ukraine can be. In our gas and iron ore and coal exports Australia has established itself as a reliable source but as a result of the government’s industrial relations legislation environmental games we are putting that in jeopardy.
To be PM, Dutton has to explain all the above to the Australian people. He is lucky that the Brisbane cyclone delayed the election because there is a lot of work to be done. And for Dutton, the danger is that the PM will use the delay to eat Dutton’s lunch.
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By not recognising the will of the US population and our ANZUS obligations, it is Australia that has become the recalcitrant country that is endangering the alliance and not the US.