US President Donald Trump’s unilateral tariffs, and their negative impact on global markets, have shocked the world. Assessment of their impacts on the future of Australia-US trade relations should be informed not only by the history of those trade relations, but also by the US rejection of post-war United Nations human rights principles.
As the world’s most powerful economy, the US has always been able to interpret trade rules to suit its interests, exemplified by the 2005 Australia-US Free Trade Agreement (AUSFTA). Negotiations between the Bush administration and the Liberal-National Howard government began after the 11 September 2001 attacks on the US, at the time linked to the defence alliance. Australia had previously favoured multilateral negotiations through the World Trade Organization. Supporters argued that, although the Australian economy was then only four percent of the size of the US economy, with correspondingly weak bargaining power, a free trade agreement with zero tariffs and other barriers would deliver economic benefits by integrating Australia into the US economy.
The then US Bush administration sought both reduced Australian tariffs and changes to Australian public interest regulation, including medicine price regulation through the Pharmaceutical Benefits Scheme, Australian content rules for audiovisual media, biosecurity regulation, labelling of genetically modified food, and the Foreign Investment Review Board—claiming they were non-tariff barriers to trade. Strong Australian public opposition limited Australian concessions on these issues. But the final agreement did reflect Australia’s weaker bargaining power, giving the US far more access to Australian goods, agricultural, and government procurement markets than vice versa. Studies have shown that the lopsided AUSFTA outcomes delivered few economic benefits. Australia has a trade deficit with the US, and US exports are only five percent of total Australian exports.
Trump’s unilateral tariffs violate AUSFTA commitments not to raise tariffs and resurrect similar demands to change Australian public interest regulation. So far, the Australian government has resisted offering concessions. But Trump’s broader tariff wars and the repudiation of United Nations agreements have global implications which require a deeper response from Australia and other countries than the bilateral trade negotiations that Trump is demanding.
Trump has exploited flaws in current neoliberal trade rules
Neoliberal trade rules say that each country should produce only what it can produce most efficiently and import everything else with zero tariffs, with no local industry policies and minimal other regulation. These rules are negotiated by governments through multilateral agreements of 166 countries in the WTO and through bilateral and regional trade agreements. But these rules are flawed, maximising global corporate trade and investment while trapping some developing countries in a cycle of low-value raw material exports. In practice, the Australian and other governments have now moved to more interventionist industry policies in response to both the supply chain failures of the COVID-19 pandemic and the transition to low-carbon industries required by the climate crisis.
Global corporations strongly influence trade negotiations, but workers and communities are excluded because trade deals remain secret until after they are signed. Some bilateral and regional agreements include additional corporate legal rights like investor rights to sue governments (ISDS) and stronger monopolies on medicines. Corporations have also moved investment to lower-cost locations, resulting in deindustrialisation in some richer countries. Although expanded trade can bring economic growth, it can also have unequal local and global impacts on jobs, communities, and the environment.
Trump has mobilised support from the failures of neoliberalism in US rust belt communities, by promising that tariffs will bring back corporate investment and jobs, without any evidence that this will occur.
Trump’s America First policies
Trump’s America First policies appear chaotic but are based on a on rejection of some neoliberal trade rules and active repudiation of human rights principles.
The US has withdrawn from the United Nations Human Rights Council, the World Health Organisation, and the Paris Agreement on net zero carbon emissions. This supports policies for US corporations to absolutely dominate global trade, particularly pro-Trump US corporates in the fossil fuel, big tech, and pharmaceutical industries. Another stated aim is to collect more government revenues through import tariffs paid to government to fund corporate tax cuts. But importers will pass on price rises to consumers, causing US inflation, and few manufacturing industries are likely to return to the US. If other countries retaliate, tariff wars will increase inflation, slow economic growth, and could cause a global recession, with worst impacts for low-income countries.
Trump first implemented country-specific tariffs on Canada, Mexico, and the EU and specific industry tariffs on steel, aluminium, and automobiles. The broader “reciprocal” tariffs of up to 50 percent are aimed at countries with trade surpluses and tariffs on US imports. But the policies themselves have caused collapses in stock and bond markets, forcing Trump to pause them for 90 days and implement what he called ten percent base rate on all countries, with higher rates for Canada, Mexico, and the EU, and even higher for China He is now using the 90-day reprieve to attempt to divide and rule through bilateral negotiations to force governments to offer concessions. The US is also again targeting public interest regulation.
Trump tariff impacts and Australia’s response
Despite Australia’s trade deficit with the US, and zero tariffs on US imports, Trump has targeted policies like biosecurity rules for food imports, the digital media bargaining code requiring big tech companies to pay for the use of local news content, local content rules for audiovisual media, and price regulation of pharmaceuticals through the Pharmaceutical Benefits Scheme.
Australia now has the ten percent base tariff applied to all countries and 25 percent steel and aluminium tariffs. Because US exports are only five percent of Australia’s total exports, impacts are limited, but impacts on global growth will affect Australia.
The Labor Government response has reflected the strong public opposition to Trump’s policies. The government has refused to use tariffs or make concessions on national policies. It has instead offered funding support for the steel and aluminium industries, preference to local companies in government purchasing, and other industry support policies. It is also working with other countries to further diversify exports. But bolder efforts are needed.
Future trade relations require fairer multilateral trade and strong human rights principles
Trump’s policies are likely to continue to be volatile in response to public opposition and investment reactions to their negative impacts in the US and globally.
Australia should continue to reject bilateral concessions and should use its diplomatic status as an important middle level power to work with other countries in our region and elsewhere to diversify exports and support a more transparent and equitable multilateral trade system as an alternative to both US divide and rule tactics, and to flawed neoliberalism. Australia should also work with others to strongly support United Nations principles, including ongoing agreements to address the climate crisis.
Important elements of such a trade system include: ending secrecy of trade agreements through broad community consultation and by publishing the text of agreements before they are signed to enable public and Parliamentary scrutiny; government support for local industry development, including the development of low carbon and renewable energy industries; comprehensive special and differential treatment for developing countries to assist economic development; exclusion of public interest regulation from trade agreements and ensuring governments’ rights to regulate in the public interest; exclusion from trade agreements of additional corporate legal rights like investor rights to sue governments and stronger monopolies on medicines, and strong commitments to human rights, labour rights, and environmental sustainability, including net zero carbon emissions.
Dr Patricia Ranald is an honorary research associate at the University of Sydney. and the convener of the Australian Fair Trade and Investment Network of community organisatons. She has published widely on the social impacts of globalisation and trade agreements. Her publications range from books, refereed journal articles and book chapters to submissions to parliamentary inquiries and opinion pieces in newspapers.
This article is published under a Creative Commons License and may be republished with attribution.
