When the US Ambassador to Australia, Arthur B. Culvahouse Jr, arrived in Canberra last year he was concerned at all the attention that Australia’s relationship with China — our largest trading partner — was getting and wanted to promote the strength of Australia’s economic relationship with the US.
Fast forward to this week and the American Chamber of Commerce in Australia has worked with Deloitte Access Economics to produce a report arguing that the US is Australia’s most important economic partner.
The State Department-funded report plays down the fact that Australia has a trade deficit with the US of around $26bn (depending on the year) compared with Australia’s pre-COVID era trade surplus of some more than $80bn with China.
It relies heavily on talking up the importance of US investment in Australia and its contribution to the Australian economy.
It takes the unusual step of adding the value of Australian exports to the US with an estimate of the “income generated from US investment in Australia” and comes up with a figure of around $131bn — which it says means that the US is contributing “a staggering” 7 per cent to Australia’s economic growth, one which it argues is “roughly the size of the Australian mining sector”.
It’s a novel approach to say the least, and one designed to produce the largest possible figure on the value of Australia’s trade and economic ties with America.
That said, while one could argue about the methodology and then conversely argue about whether this 7 per cent GDP contribution should also be offset by deducting the value of Australian imports from the US and the income generated by Australian companies in the US, the report does achieve Culvahouse’s goal of placing the spotlight on the strength and importance of the economic relationship.
It notes that there are 1100 US majority-owned companies operating in Australia, employing some 320,000 Australians, many of them earning over $100,000 a year, and another 240,000 Australians living in the US.
It notes that US companies spend more than $1bn in research and development in Australia a year.
The report emphasises that the US is now by far the largest source of foreign investment in Australia, with some $205bn in 2019 alone, with US companies putting 40 per cent more into Australia in 2019 than they did into China.
There is a strange irony in the US boasting that it is the largest foreign investor into Australia while populist criticism has been directed at the much lower level of Chinese investment into Australia, levels which are continuing to fall.
Historical view
Ironies also abound for anyone wanting to take a more historical view of decades past in Australia, when “American multinational” was a pejorative term.
But there is a whole generation of Australians who now have a very different view of US investment in Australia and the importance of the trade and economic ties — a post-Vietnam War demographic who have never heard of the words “United Fruit” or “Air America” and, quite understandably, just can’t wait to live and work in Manhattan, Los Angeles, Silicon Valley, San Francisco or even Austin or Denver, and watch the latest American movie.
The report seeks to bring balance back into some of the discussion about Australia-US ties.
Just as the debate on Australia’s ties with China has focused on the strength of the trade relationship — to the point where its critics wrongly argue that it is all about business transactions — the more recent debate on Australia’s ties with the US has been focused far too heavily on the security relationship.
Of course those issues are important to Australia.
But the emphasis has gone too far in the one direction, which risks depicting Australia as a country which all too eagerly says “me too” when it comes to US security concerns — with the never ending emphasis on how many joint wars Australians and Americans have fought together — and undersells the importance of the strong personal, business and cultural ties which have thrived for well over a century regardless of which governments are in power or their respective policies.
As Culvahouse said in releasing the report, there should not be any artificial distinctions between economics and security. “Economic security,” he said, “is national security.”
US investment into Australia, the report notes, has been critical to enabling mining and resource exports including LNG, not to mention other sectors from banking and finance to healthcare and technology.
Australia does very well out of its export trade with China as it supplies a range of high-quality goods which China wants, from beef to wine, healthcare products to commodities.
America does not need these products from Australia in such great quantities, which is why the economic ties between Australia and China and Australia and the US are very different — and why Australia needs to keep both relationships as strong as possible.
Critical time
The report comes at a critical time for Australia’s relations with both China and the US, with ties with China strained while ties with the US are strengthening.
Continued US investment in Australia will help economic prosperity and create and save jobs.
But Australia also needs to nurture its different trade and personal ties with China.
When the world talks about “deglobalisation” it is in fact a new buzzword for reduced ties with China.
China sadly does a terrible job of “soft power” diplomacy, which Culvahouse alluded to on Tuesday in a speech, when he said a US ambassador to Australia would never threaten trade ties.
It was a comment that cheerfully passed over the period when Trump was set to impose tariffs on Australian exports of steel and aluminium and an era when President Obama effectively upbraided Prime Minister Turnbull for allowing Chinese investors to buy an interest in the Port of Darwin.
That said, the report throws a much-needed focus on the fact that Australia’s strong economic ties with the US play a critical role in our prosperity and are set to increase, at a time when the future looks uncertain.
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