Joe Hockey warns United States it’s at risk of abdicating economic leadership role
Australia’s ambassador to Washington takes aim at Donald Trump’s aversion to trade deficits.
Australia’s ambassador to Washington, Joe Hockey, has warned the United States is at risk of permanently abdicating its global economic leadership role and taken aim at Donald Trump’s aversion to running trade deficits.
Mr Hockey said that a retreat to protectionism would discourage growth and reward mediocrity, warning that history showed economic isolationism was a “precursor for war.”
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Speaking at Westminster College in Missouri, Mr Hockey said America’s national success was built on free trade and argued that it would “keep you great.”
He said the imposition of tariffs amounted to a tax on consumers, and that a decision to abandon free trade would punish farmers and risk stoking domestic nationalism fuelling “outward facing aggression.”
The warnings were sounded just one month before the APEC Leaders’ summit in Chile where Mr Trump is expected to meet with Chinese President Xi Jinping and formalise a deal to help end the trade conflict between Washington and Beijing.
Watch Joe Hockey delivery his speech below:
“If a nation becomes economically isolated, then history proves it can end up accelerating domestic nationalism fuelling outward facing aggression,” Mr Hockey said. “I find the debate in the United States on free and fair trade rather baffling. Being open to the world made America great in the first place. It will keep you great.”
He took aim at the decision by Donald Trump to haul the US out of the Trans Pacific Partnership — a major Pacific-rim free trade deal — and his refusal to enter into other major multinational agreements as examples of faltering American economic leadership.
“If you abdicate leadership you rarely get it back. So the US must not allow itself to walk away from it’s economic leadership in the world, otherwise it will pay a very significant price,” he said.
“Now, more than ever the United States should be leading the world in the debate in favour of free and fair trade.
“The United States of course was leading the charge to deliver the Trans Pacific Partnership. It walked away from its own leadership. But Australia and Japan stepped up to the plate. The TPP 11 — which was meant to be 12 countries — is in place and delivers more and better access to markets for the eleven member countries, all United States allies in the Indo Pacific region.
“Similarly, the United States should be knocking on the door of the Regional Comprehensive Economic Partnership, another agreement which is being negotiated by 16 countries in the Indo Pacific region including China and India, but not the United States.
“And the United States should have joined the Asian Infrastructure and Investment Bank. The Bank was initiated by China and America and Japan have let themselves down by not joining the initiative.”
He also ridiculed the notion of “winning” in a trade relationship by running trade surpluses with other nations, saying that no-one thought about their “personal trade deficit with the supermarket or the butcher or the baker.”
“I’ve heard suggestions — and perhaps you’ve heard them too — that to win in trade with another country you need to sell more to them than you can buy from them. That is, you need to have a trade surplus. Well I disagree.
“I don’t have time to get up, milk the cow, bake the bread, till the fields, build my house, manufacture transport and so on. Neither do economies,” he said. “Australia has a big trade deficit with the United States. We’re not complaining.
Read Joe Hockey’s full speech here for mobile, or below
“Through free trade we also have deeper and more meaningful relationships with other countries. It brings nations together, brings differing cultures together. History proves that economic isolationism is a precursor for war. Plentiful trade is a facilitator of peace.”
Mr Hockey argued that US producers — including Missouri and soybean farmers — would be big losers from a trade conflict.
“The US is the world’s largest exporter of agricultural products. One in five farmers in the United States would be forced off the farm if it wasn’t for trade. That number is much higher for some products grown here in Missouri such as soybeans.
“Protectionism discourages growth and it rewards mediocrity.”
He warned that, while the US was the most innovative nation on earth, it would “beaten if it thinks it can do it all on its own.”
However, Mr Hockey also argued that global trade rules did need to be updated over time and noted that China — while it consumed most of its own steel production — had also used industry subsidies to sell heavily discounted steel to other countries.
“The current world trade rules on industrial subsidies and state owned enterprises are not good enough. Just last month, speaking in Chicago to the Council on Global Affairs, Australian Prime Minister Scott Morrison said: ‘Global trade rules are no longer fit for purpose.’
“We need to keep working at improving the system, rather than destroying the legacy.”
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