A crack in strong ties? US President Barack Obama and Australian Prime Minister Malcolm Turnbull meet during the Apec Summit in Lima, Peru November 20, 2016. Photo: Reuters/Kevin Lamarque

Australia, one of the United State’s closest allies, is looking nominally to communist China to lead the drive for open markets in the Asia-Pacific, following Donald Trump’s election on a platform critical of free trade and globalization.

Trump has vowed to pull the US out of the 12-nation Trans-Pacific Partnership Agreement on his first day in office, sounding the death knell for the economic plank of President Barack Obama’s so-called “Asian pivot.”

Australia has been one of the most ardent supporters of the pact, which would reduce tariffs, standardize patent rules and establish procedures to resolve disputes between governments and foreign corporations.

Having avoided recession during the global financial crisis, “the lucky country” has been largely unaffected by the wave of economic populism sweeping the US and Europe. In contrast to Trump’s description of the TPP as a “potential disaster,” Australia’s center-right Prime Minister Malcolm Turnbull has hailed the trade deal as a “gigantic foundation stone for our future prosperity.”

With US appearing ambivalent about carrying the torch for free trade in the region, China, which was not included in the TPP, has stepped into the vacuum. It has proposed two distinct trade pacts of its own, the Regional Comprehensive Economic Partnership and the Free Trade Area of the Asia-Pacific, both of which would include Australia.

Within days of Trump’s upset win, Australian Minister for Trade, Tourism and Investment Steve Ciobo said his government would support the Free Trade Area of the Asia-Pacific. This would involve the 21 Pacific Rim nations of the Asia-Pacific Economic Cooperation grouping.

If you look at the data, free-trade agreements, regional agreements, China has been the most active for the past 10 to 15 years in the world

Australia’s biggest trade partner has been China for almost a decade, but it continues to rely on the US for its security, an assumption that has been thrown into doubt by Trump’s critical rhetoric about American defense commitments abroad.

Even as its economic dependance on China has grown, Canberra has been a vocal supporter of the Obama administration’s increasing military focus on Asia, welcoming US Marines to set up a base in Darwin and carrying out “freedom of navigation” patrols in the South China Sea.

“For countries like Australia, I think it is increasingly awkward because Australia has benefited greatly during the last 20 years,” Giovanni Di Lieto, a lecturer at Monash Business School in Melbourne, told Asia Times. “No wonder Australia was one of the, if not the only democratic country that didn’t really go into recession during the GFC [global financial crisis]. That’s because, I think, it was playing on two fields in a way.”

Canberra has avoided public statements that might suggest frustration with the US president-elect’s stances. But Di Lieto, who attended the recent World Chinese Economic Summit in Malaysia with such high- profile guests as former Australian prime minister Kevin Rudd, said there was a growing sense that China seemed a more reliable champion of trade.

“If you look at the data, free-trade agreements, regional agreements, China has been the most active for the past 10 to 15 years in the world,” he said.

Di Lieto said current and former politicians at the summit were of the mind that “if the US really becomes more isolationist or protectionist in terms of trade and investment, then China is stepping up.”

But for Australia, closer alignment with China also risks exacerbating the tensions it already feels in its competing relationships with Washington and Beijing.

“The hope for the Australian government would be that this realignment, this economic cooperation would be made collectively and not just led by China, but would be in a way taken into a broader scope of cooperation and integration,” said Di Lieto.

“The status quo is the best possible solution for Australia, Japan, South Korea – countries like that, the middle states, let’s say,” added Di Lieto. “But if they have to choose [between the US and China], that would be interesting.”

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

3 replies on “In Trump’s shadow, Australia sees China pave path on trade”

Comments are closed.