US v China: no contest, really

The contrast could not be more stark or disagreeable. Washington versus Beijing. The friendship versus the friendship plus alliance. So what did they deliver yesterday?

Yesterday Andrew Robb, surely already one of Australia’s most significant trade ministers, and his Chinese counterpart, Commerce Minister Gao Hucheng, finally signed the free trade agreement. Negotiations for it began under John Howard. No real progress was made on it in the Rudd-Gillard years, despite Labor’s alleged affinity with China.

By the way, let’s pause to note that the Abbott government seems to have arrived at a perfectly good balance in its China policy. Despite the hand-wringing of the usual suspects, and all the faux wise commentary that our US alliance would imperil our relationship with Beijing, here we have this giant FTA, covering trade already worth $160 billion a year. When it is implemented, about 95 per cent of our exports to China will not face any tariffs.

You can take with more than a grain of salt any modelling that claims to forecast what the gains will be, but they are substantial, for our existing big sectors and for the big-skies future of our services industries.

At the same time, we have disagreed with Beijing when necessary. We protested the Chinese declaration of an air defence identification zone in the East China Sea. We protested Beijing’s outrageous territorial aggrandisement in the South China Sea, opposed its unilateralism, foreshadowed that we would oppose a Chinese ADIZ in the South China Sea, consistently upheld freedom of navigation and made it pretty clear we would support the Americans if they demonstrated freedom of navigation by flying or sailing within 12 nautical miles of China’s artificial islands.

We were right to do all this. The point of recalling it now is that it has not stopped us having a hugely productive trade and investment, and increasingly people-to-people and culturally rich, engagement with China.

The commentariat hates this, but on the basis of the John Howard and Tony Abbott records, there is a case that conservative governments do better with Beijing than Labor governments.

Now look at what the week has yielded from our ally and friend in Washington.

President Barack Obama was utterly humiliated by the US House of Representatives when it rejected legislation that would allow him to complete the Trans-Pacific Partnership trade deal.

Obama is emerging as one of the weakest, most feckless and ineffective foreign policy presidents America has ever had. He could only summon a truly embarrassing 40 Democrats to support his trade legislation.

George W. Bush, having fought two unpopular wars and with the media almost completely against him, was never that weak with congressional Republicans.

At the moment, Obama can do nothing and achieve nothing. The manoeuvres in congress are dizzyingly complex.

The Senate, based overwhelmingly on Republican support, passed the trade promotion authority necessary but linked it to a trade adjustment program which the Democrats have historically promoted, indeed which they founded. It provides some assistance to people who lose their jobs because of trade. It’s a fairly ridiculous program but the normal sort of stuff.

The house Democrats split this legislation into two separate bills and actually voted down their own trade adjustment program, with only 40 Democrats in favour. They did this because it meant that even if the trade promotion authority was passed it could not go to the President’s office for signature. In a symbolic and non-binding vote, TPA was then passed by the House.

Nancy Pelosi, the leader of the Democrats in the house, and Hillary Clinton, the likely Democratic presidential nominee, have now both come out against the TPP in principle. Nothing is impossible, even a good result. The White House and the Republicans are trying to work out ways to get the legislation passed. But it is very difficult to see house Democrats reversing themselves.

The union movement played a decisive role in killing the TPP. Like the Australian union movement, it represents an ever declining share of the workforce. Fewer and fewer people want to join unions. But the unions still have a lot of money and have compensated for their loss of worker support by becoming ever more fiercely active in the internal affairs of the Democratic Party. This is similar to Australian unions which have never represented a smaller percentage of the workforce but have also never had tighter control of the Labor Party.

Obama will now have to get TPA passed in the Senate without the trade adjustment program, or he will have to get house Democrats to pass the trade adjustment program. Every Democrat who votes in favour of the trade legislation will likely face fierce union opposition in a party primary, and will be putting themselves in opposition to the party’s most popular figure, who is Hillary Clinton.

Her position is disappointing but understandable. She knows TPP is good for both the US and global economies. She was a tireless promoter of it when she was secretary of state.

But it is too much to expect her to rescue Obama’s incompetence. This failure is entirely Obama’s failure and represents strategic misjudgment by the President personally. Over the past several years White House officials have told everyone in Asia that the TPP was the most important part of Obama’s “pivot” to Asia. Asians were sceptical because Obama never spoke of the TPP, indeed he never spoke of Asia, to American audiences.

White House officials reassured Asians that this didn’t matter. The masterful President knew exactly what he was doing. He was talking to the right people privately. No one was a better judge than he of US politics.

In reality Obama’s approach was lazy and disengaged. He never built a constituency for the TPP in his party. He preferred to be lecturing the world on how he would stop the oceans rising and taking bows from the Nobel peace prize committee to actually doing any of the hard work of leadership.

The only reason people think America is in decline in Asia is because of Obama.