THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
Email: Comments@gbdinc.org
 
No. 4 of 2019
TUESDAY, JANUARY 15, 2019

Click HERE for last Wednesday's quote on USMCA and the metal tariffs.  
AUSTRALIA: A TALE OF TWO PARTNERS  

"China is by far our largest trading partner, but, overall, the U.S. is our largest economic partner."  
 
Elisabeth Bowes  
December 19, 2019 
 
CONTEXT
Let's not call it a trade war yet.  But certainly the tit-for-tat tariffs between the United States and China is a significant skirmish.  It kicked off in earnest last March, when the U.S. announced its intention to impose punitive tariffs on $50 billion of imports from China.  That initial action arose from the finding that

[China] coerce[s] American companies into transferring their technology and intellectual property to domestic Chinese enterprises.  These policies bolster China's stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as "Made in China 2025."

China, of course, felt it had to respond, and so now the U.S. imposes punitive tariffs on $250 billion of Chinese exports and the China does the same on $110 billion in imports from the United States.  Much of the ongoing analysis of these developments - and speculation about the results of the current negotiations - centers on the effects these tariffs are having on the economies of the United States and China.  Which country is being hurt more?  

But, of course, the U.S. and China are not the only two actors in this play.  One way or another much of the rest of the world is involved.  That was the premise behind GBD's last event of 2018.  The topic was  
 
When Giants Quarrel:
Third Country Reactions to the U.S.-China Trade Disputes.   
 
Elisabeth Bowes, Minister-Counsellor at the Australian Embassy, led off the discussion.  Today's featured quote from Ms. Bowes highlights Australia's strong economic ties to both protagonists.  It came at the outset of her remarks. Here is a bit more from those opening paragraphs:

Australia has a relatively unique perspective on trade relations with the two economic giants, the U.S. and China.  As for many countries in the Indo-Pacific Region, China is by far our largest trading partner.  But, overall, the U.S. is our largest economic partner.  And both our relationships are underpinned by free trade agreements, which is also something of a rarity, with both those countries.  

So, at the outset, I thought I'd just give a quick overview, a comparative overview of our respective and investment relationships with each of these giants, starting with the United States.  Two-way trade in goods and services is currently valued at about $68 billion.  Of that, the U.S. enjoys a trade surplus of approximately $29 billion, according to the Bureau of Economic Analysis.  

Australia's major exports to the U.S. are primarily agricultural commodities, whereas our imports from the U.S. are industrialized products.  The bilateral investment relationship, however, is quite significant and is valued at over $1 trillion U.S. dollars.  

China, as I have said, is Australia's largest trading partner and accounts for nearly 30 percent of Australia's exports.  In fact, our bilateral two-way trade reached a record almost $200 billion Australian dollars in our last fiscal year 2017-2018.  Now, that's about $140 billion U.S. dollars and is more than double the two-way trading relationship that we enjoy with the United States.  Of this amount, Australia's exports to China accounted for approximately $123 billion Australian dollars in goods and services.  That's about $86 billion U.S.  

That means, Australia has a surplus with China of about $50 billion Australian dollars or $35 billion U.S. dollars.  Now, our trade with China is predominantly in commodities, primarily resources and agriculture. Iron ore and coal feature heavily.  But we also have expanding services exports, particularly in education services and tourism.
 
*** 
 
To repeat a familiar refrain, you will want to listen to or read Ms. Bowes' full statement, and the links below will direct you to those options.  You will find things there, important things, which you will not find here, such as Ms. Bowes' comments on Australia's support for WTO reform.    
COMMENT
As we listened to Ms. Bowes, we were especially struck by these ideas:  
 
The Region.  Today, Australia clearly sees itself as part of the Indo-Pacific Region, and fortunate to be so.  It is, she said, the most dynamic region in the world.  To illustrate the point, she noted that:
 
By 2030, Asia will be the home of about $3.5 billion people in the middle class.  Eight of the Australia's top trading partners are in the region, and Canberra has FTAs with seven of them.  Australia's economy will complement those of a growing Asia.  Demand for our minerals and energy will continue, and there will be significant opportunities to supply regional economies with services and premium agricultural products.
 
We used the word "today" above because, it seems to us, that Australia did not always self-identify so strongly with Asia, and the distances in the regions are so enormous that such identities were once quite subjective.  Trade patterns are making them less so.   
 
The Rules and FTAs.  Ms. Bowes talked a lot about the rules, both in new agreements and old.  She took note of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which was then just weeks away from entering into force. (That happened on December 30, 2018.) She also took note  of other agreements in force and of agreements being negotiated, such as the 16-country negotiation for a Regional Comprehensive Economic Partnership or RCEP, and Australia's negotiations with the Pacific Alliance (Chile, Colombia, Mexico, and Peru).   
 
The Rules and the WTO.  Ms. Bowes, who previously served at Australia's mission to the WTO in Geneva, repeatedly underscored the relationship between her country's FTAs and the bedrock principles of the WTO and the GATT.  She followed her list of key FTAs for Australia with the observation that
 
While these agreements form the cornerstone for our bilateral and regional economic relationships, they are underpinned by WTO rules.  In other words, the rules that are embodied in the WTO, provide the foundation for our trading relationships, including with the biggest participants in the system, the U.S. and China. 
 
Ms. Bowes did not purport to speak for any country but her own, but she was expressing a widespread sentiment when she said:  
 
We have a systematic interest in all members abiding by WTO rules and upholding them in their own trading relationship. 
SOURCES & LINKS
Transcript is a link to the GBD transcript of Ms. Bowes remarks at the GBD event "When Giants Quarrel," which was held in Washington, D.C. on December 19, 2018.  This was the source for today's featured quotes.  Related items include the Audio of Elisabeth Bowes, which is an MP3 recording of this session and On C-Span, which takes you to a video of the full event.  
 
Australia and the Pacific Alliance is a link to a note on these negotiations on the website of Australia's Department of Foreign Affairs and Trade.  
 
The 301 Action takes you to a USTR statement from April 2018 on proposed U.S. tariffs against $50 billion in Chinese imports.  
 
A Chronology is a list of trade actions in the U.S.-China trade disputes prepared by Dezan Shira and Associates

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