CANBERRA: Prime Minister Malcolm Turnbull’s recent trip to Washington has highlighted the divergent paths the American and Australian governments are taking in their approach to the People’s Republic of China.
Since President Donald Trump took office in January 2017, relations between the United States and the PRC have become more adversarial.
Furthermore, the decision to apply tariffs on imported washing machines and solar panels, followed by the announcements to impose tariffs on imported steel and aluminium, has sent a strong signal Mr Trump’s ‘America first’ policy is more than just a slogan.
In contrast, on the eve of his US trip, Mr Turnbull explicitly rejected the idea the PRC was a threat to Australia, and warned against “cold war” thinking.
Australia in recent years has been an advocate of opening up markets with its trade partners.
It has implemented free trade agreements with Japan, South Korea, and the PRC, and played a key role in resurrecting the Trans-Pacific Partnership Agreement among the remaining 11 members after Mr Trump withdrew US support.
Whether the two close allies can genuinely maintain a different strategic thinking toward the PRC remains to be seen. What is clear is that following the US down a path of increasing trade protectionism toward our largest trading partner would be a bad outcome for Australia.
While a full-blown trade war between the world’s largest two economies would be bad for everyone, Australia included, a period of more targeted trade sanctions between the two could have mixed results for Australian exporters, with some sectors potentially able to capitalise on the market disruption.
When a country responds to punitive trade measures, it will naturally look to do so in a way that will least harm its own economy.
If PRC-based importers can replace certain US products with equivalent products from other countries without too much disruption, the PRC will look to retaliate in these sectors.
US fruit, nuts and other smaller categories are now all targets of retaliatory trade sanctions and are products Australia exports.
US beef exporters, only recently allowed to re-enter the PRC market after a mad cow disease scare 13 years ago, could find themselves shut out again.
