Give businessman Donald Trump time to make trade deals

US President Donald Trump signs an executive order withdrawing the US from the Trans-Pacific Partnership, flanked by Vice-President Mike Pence, left, and White House chief of staff Reince Priebus.

Donald Trump is the fulcrum of world politics. Every global issue revolves around the new US President. Every political discussion anywhere comes back to him

In this extraordinary first week of his presidency, Trump took actions that directly affect Australia.

The most important was killing off the Trans-Pacific Partnership by issuing a presidential decree withdrawing the US from it.

The TPP is dead, even though, bafflingly, the Turnbull government pretended for a few days that it wasn’t, and this has big economic, and even bigger strategic, fallout for us.

Trump’s spokesman, Sean Spicer, made several tough statements about China. Trump himself banned, temporarily, migrants and refugees from some Muslim countries including countries that some of the asylum-seekers on Manus Island and Nauru came from, thus perhaps imperilling the deal under which the US will take 1000 such people.

And at the end of the week, Trump threatened a 20 per cent tax on all imports from Mexico because Mexico refused to pay for the border wall Trump has promised to build. This is important to Australia because it indicates Trump may well resort to new tariffs. Spicer said the 20 per cent tax should apply to imports from all countries. However, in the face of acute hesitation from congressional Republicans, the Trump administration seemed to walk that back.

This was a hyper-energetic and somewhat chaotic first week.

However, before we all have a nervous breakdown, we should remind ourselves that it was the first week. New administrations take time to find their feet. They often make spectacular early misjudgements. In his first 100 days as president, the sainted John Kennedy authorised the farcical Bay of Pigs attempt to invade Cuba.

The Trump administration is not yet in place. Rex Tillerson will not be confirmed as secretary of state until next week. James Mattis has just started as Defence Secretary.

There is still an enormous amount of positive possible in a Trump administration.

There are two prisms for interpreting Trump that his supporters offer, beyond the normal media speculation on Trump’s undeniably narcissistic personality and his astonishing sensitivity to criticism.

The first is that he will be president in the style of a state governor. Economic development is top priority. Trade matters, nearly above all else, but only in so far as it creates jobs.

The other prism is that Trump’s business model is making deals rather than running corporations.

The 20 per cent tax on Mexican imports may be a negotiating gambit. There is every reason to think this extreme transactionalism is likely to prove an ineffective and destructive way to run international relations. But it might give some explanatory context to Trump’s penchant for saying sometimes extreme and inconsistent things.

GRAPHIC — Team Trump

The biggest move, for Australia, was killing the TPP.

Trump’s general critique of international trade, and trade agreements, is that too many nations don’t behave fairly, abide by the rules or accept the disciplines, so the system is rigged against the uniquely virtuous US.

Trump has appointed economist Peter Navarro to head his new National Trade Council. Navarro is the author of works highly critical of China. In particular, he has argued that dishonest trading practices, which breach the spirit if not the letter of trade agreements, account for more than 40 per cent of China’s competitive advantage in relation to the US.

But Trump doesn’t like any nation’s trading relationship if it runs a trade surplus with the US. China’s surplus with the US is $US320 billion ($425bn), nearly half the total US trade deficit. Next largest is Japan, with a trade ­surplus with the US of more than $US60bn. Germany is just a ­couple of billion behind that.

Trump doesn’t like any of those US trade deficits and in the past his rhetoric against Japan has been ­almost as strong as his rhetoric today against China. Trump ­further believes that trying to ­reform the global system to ­produce fair rules under which the US can re-establish trade parity, or its own surplus, is impossible.

Therefore he plans to fix these problems one by one, by direct ­action, by negotiating bilateral agreements. Trump is not a reader and has no interest in theory of any kind. He believes he can transform all this by making “great deals”.

One tragedy of the death of the TPP is that it answered some of the legitimate element of Trump’s grievances. Its greatest long-term significance was that it opened up, and subjected to rules, trade in ­services and investment. It offered much better intellectual property protections than any previous deal. It also included environmental, labour rights and corruption commitments and standards of transparency regarding state-owned enterprises.

It is absolutely inconceivable that China could have joined the TPP in its current guise. I would stand a better chance of winning the Ladies Professional Golf ­Association Tournament.

It is also the case that the US would have kept the small measures of protectionist architecture it has with Asian trading partners, but they would have reduced significantly their much larger levels of protection against US products.

Kurt Campbell, assistant ­secretary of state for East Asia in Barack Obama’s first administration, who did more to bring the TPP near to fruition than anyone else, declares in his definitive book, The Pivot, that: “The TPP’s standards are too high for China to meet at this juncture.”

The Turnbull government was flummoxed and a bit hallucinogenic in its response to Trump’s announcement.

It floated four frankly ridiculous propositions. The first was that it would ratify the TPP anyway, even though under the TPP’s own provisions it cannot come into force unless it is ratified by countries covering 85 per cent of its GDP. That means the TPP cannot exist unless both the US and Japan ratify it. So Australian ratification, which should preferably have occurred months ago, would be symbolic and a little ludicrous.

Second, it suggested the TPP could be amended to exist without the US. But the whole agreement is structured around the US economy. It would need to be renegotiated to exist without the US. That may be a worthy goal, but it is not the TPP.

Third, it allowed and encouraged the idea that China might join the TPP. In effect, if not by ­explicit intent, it gave the impression that China could join the TPP instead of the US. As we have noted, this is utterly and altogether impossible. It would involve either the complete restructuring of the TPP or the complete restructuring of China. The Turnbull government thereby produced almost ­exactly the result it didn’t want, a popular conception that the US had abandoned Asia and its place would be taken by China.

And fourth, it publicly canvassed the idea that Trump would in due course change his mind his mind on the TPP. With Trump, anything is possible. But it is difficult to imagine any diplomatic ­response less likely to maximise our leverage with Trump than that.

The Turnbull government ­deserves praise for its steadfast free trade rhetoric, but you cannot promote free trade generally by promoting a series of falsehoods about a recently deceased free trade agreement.

The greatest tragedy in Trump killing the TPP is its strategic loss. In The Pivot, Campbell makes plain the strategic significance of the TPP. It embodied a profound melding of strategic and economic interests between the US and Japan. The US Pacific Commander, the redoubtable Admiral Harry Harris, was one of the TPP’s strongest backers. So was the US Pacific Fleet commander, Admiral Scott Swift.

But we must now consign the TPP to the dustbin of history.

The greatest blame for its ­failure lies with Obama. He did not expend one ounce of his capital fighting for his own agreement; he built no congressional or community consensus behind it. It should have been ratified by the US long ago.

In any event, the TPP is yesterday’s story. It’s the last administration. Don’t neglect the future while you fight over the past. Now it’s up to the Trump administration to craft its own new and ­distinctive story of positive ­engagement with Asia.

Reassuringly, to that end ­Mattis will make his first trip as Defence Secretary next week, to Japan and South Korea.

Everything Mattis and Tillerson have said is reassuring to US allies.

Spicer repeated in a briefing this week loose statements that Tillerson made about the US possibly seeking to block Chinese ­access to islands Beijing has ­illegally built, occupied and militarised in the South China Sea. However, there is no hint at all that the US plans any military action along this line.

Trump was elected by a war-weary nation partly on the promise he would not go to war any more and that he would stop spending trillions of dollars to ­defend other nations’ borders while neglecting US borders.

His overwhelming priority with China seems to be trade. He will be, all round, much tougher with China than Obama was. In the South China Sea this is likely to mean more frequent freedom of navigation exercises and much greater diplomatic and perhaps economic pressure on China.

Beijing may well yield a little to this pressure. There was the sense it was racing at breakneck speed in the South China Sea to exploit Obama’s manifest weakness. The inconsistency and lack of serious effort by Obama has led some US allies in southeast Asia to doubt US commitment. Beijing has ­certainly massively increased its influence with Cambodia and Laos, and to a lesser extent with Thailand and Malaysia.

But Trump wants, above all, a trade outcome, presumably starting with restrictions on Chinese steel and further appreciation of the Chinese currency.

The Trump/Beijing dynamic could well be quite unstable, ­especially as they get to know each other and get a sense of how each will respond to the other.

But this week, Trump was in ­effect still behaving as a candidate. His was still a one-man show. Nothing is predictable with Trump but it is overwhelmingly likely that his administration will mature, as every previous administration has done beyond its first week. In the national interest, Canberra still must work hard to maximise its position with Trump.