Paul Keating praises Donald Trump’s policy on China

The former Labor PM backs Trump for ‘surprisingly’ adopting the right policy on China, unlike Clinton, Bush and Obama.

Paul Keating speaks at the Wharton Global Forum in Sydney today.

Paul Keating has thrown his support behind Donald Trump, saying the three US presidents before him squandered their opportunities to fully engage with China and accept its growing influence in the Asia-Pacific.

The former Labor prime minister praised Mr Trump today for “surprisingly” adopting the right policy on China — notwithstanding conflict over his decision to impose tariffs on steel imports mainly targeted at Beijing.

Mr Keating said the President had shied away from a more traditional US policy of seeking strategic dominance, and instead showed himself to be pragmatic about China’s rise.

“So perhaps strange, but true,” he said. “President Donald Trump is following that formula. He says, ‘Let’s have a better relationship with China. You’ve got to keep them honest on steel and tariffs, but let’s have a better overall relationship’.”

Arguing his case during an address to the Wharton Global Forum in Sydney, Mr Keating said Mr Trump was quoted only this week saying Chinese President Xi Jinping was “great, he’s always treated me with respect and understanding”.

He also cited a major foreign policy speech last April when the US President said: “We desire to live peacefully and in friendship with Russia and China. We have serious differences with these two nations, and must regard them with open eyes, but we are not bound to be adversaries.”

The former Labor PM said China would continue to reject outright the democratic foundations of the west, and the Communist Party would continue “occupying the emperor’s chair with a competent bureaucracy underneath”.

With China’s gross domestic product projected to equal the $US18 trillion of the US by 2021, Mr Keating said it no longer made sense to treat Beijing as a strategic client of the US and subject to American dominance. It was hardly surprising, he said, that China would react badly to US navy patrols in the seas 6km from its territory — just like the US would react if Beijing put warships off the coast of San Diego.

At the same time, he said, the key to the US preserving peace with China depended on finding the right balance of restraint, force and legitimacy.

“America’s future in Asia is as a balancing power, the way Britain was to Europe during the period of Bonaparte, during the period of Kaiser Wilhelm, and during the period of Hitler.

“It was always the offshore power, and provided the balance of power, in those three important conflicts. You see, America can still frame and guarantee the Atlantic, providing it can come to terms with Russia, but it can no longer frame and guarantee the Pacific.

“China would simply not be a strategic client of the United States in the way Japan has been a strategic client for 70 years. It’s simply not going to happen.”

In praising US policy direction under Mr Trump, Mr Keating lamented the “forlorn prospect” that Hillary Clinton, if she had won the 2016 presidential election, would have preserved the position of Barack Obama in endorsing US hegemony with military superiority over China.

While calling himself a “true friend” of the US, and acknowledging that the US had given “so much” globally, Mr Keating claimed that Washington had nonetheless not been alert to power shifts in recent decades.

He said president George H.W. Bush, in serving only one term, did not have time to take account of China — and then opportunities for the next three two term-serving presidents were lost.

Mr Keating said Bill Clinton was too focused on the domestic US economy. As Labor prime minister, he had to “get him in a headlock” to accept APEC, and even persuaded him to support the organisation by pretending it was a trade body with the Asia-Pacific.

Mr Keating said George W. Bush then “blew” two terms by falsely trying to link Saddam Hussein to the 2001 terrorist attacks on American soil, and a failed attempt to democratise the Middle East — while China grew.

Mr Obama, he said, had the “greatest opportunity” of all three presidents but lost another two terms during China’s rise because of “timidity”, “lacking policy ambition”, and because he was “nonplussed”.

“Obama kept the world free of major conflicts,” Mr Keating said. “In doing that he certainly underwrote substantially the American economic recovery, by American fiscal policy and the employment of (Reserve chairman Ben) Bernanke, but in terms of the big game, we lost two more terms.”

The former PM’s remarks, in “surprisingly” offering support for Mr Trump, appear consistent with some political commentators who advise looking not so much at what the US President says in his outspoken tweets and other comments — but at what he does.

Mr Keating was critical of Mr Trump today for funding corporate tax cuts “on the credit card”.

He said the US budget deficit would now be 5 per cent of GDP in the US.

One possible economic upside was that Mr Trump might secure funding from congress for infrastructure spending when the economy was doing well, while Mr Obama was unable to gain congress backing for budget stimulus when the economy was at a low ebb.

Mr Keating’s only direct criticism of China was its continued reluctance to shift from a fixed exchange rate.

He said China could not run an open economy with exchange controls, and must ultimately float its currency.

He expected a “tsunami” of Chinese capital investment in Europe, and return investment in China, once the RMB was floated.

Mr Keating also predicted China would ease off on the economic “speedometer” — similar to the experience in Japan — once its GDP reached the US level of $US18 trillion.