America’s trade war with China was based on legitimate concerns with Beijing’s behaviour, but both sides can still show “common sense” and back off before serious economic damage is done, Treasurer Scott Morrison said.
Speaking to AFR Weekend on Friday before flying to Buenos Aires for a G20 finance ministers meeting, Mr Morrison said he did not believe the worst-case scenario forecasts of the trade war writing half a percentage point from global growth would eventuate.
“None of these things have really taken effect yet. You’re still in a very early phase of these exchanges and I don’t think anything is really concreted in yet,” he said.
“There is ample opportunity for walking back from where things are at, and its important that at this (G20) meeting no reason is given to take further steps down the path that has already been embarked on.”
In an escalating tit-for-tat conflict, US President Donald Trump is drawing up a hit list targeting US$200 billion in Chinese goods after he initially slapped tariffs on US$34 billion on Chinese imports and Beijing responded in kind. It will be the first G20 Finance Ministers meeting since the trade war escalated, and the Treasurer said “I have no doubt that will be dominating discussion … given the significance of that to the global economy”.
Mr Morrison said while he disagreed with the US actions, they were in response to “legitimate issues” such as China’s intellectual property theft, which the US estimates costs it about US$600 billion a year.
“There has to be a recognition that these things haven’t happened in isolation,” Mr Morrison said.
“There’s some legitimate issues that have been raised by the US and those things can’t be dismissed simply because of the nature of the way these issue are unfolding.
“The US’s grievances about IP issues have been around for a long time, they’ve been raised by different administrations and this one is obviously taking a very different approach.
“While some may criticise how they are doing that it doesn’t take away from the real issue that sits there.”
He believed, ultimately, that the US was motivated by trying to create a fairer trading environment for itself, rather than embrace protectionism for the sake of it.
“I don’t think it’s anyone’s intention at the end of the day, and I would certainly hope not, that we end up with a situation where more doors are closed to trade than open,” he said.
“The government’s going forward on the basis that everyone’s trying to achieve the resolution of these issues which results in more open trade in the future, but that requires acknowledging and dealing with all of the issues, not just the actions of one.”
It was incumbent on both parties to behave responsibly because ultimately, they would only damage their economies.
He said Australia’s long stretch of economic growth was an example to the world of the benefits of free trade and investment.
“One of the things we can always say at these meetings … is we’re in our 27th year of economic growth,” he said.
“No-one around that table can talk to that.
“Few if any economies in memory have actually come out of the other side of a mining investment boom like we had and not crash landed.
“We can say these things with a lot of authority in terms of how they’ve impacted our own economy and equally we can say it by demonstrating by what we’ve been able to achieve recently whether it’s (FTAs with) China, Japan, Korea or the Trans-Pacific Partnership-11, the regional free trade deal Malcolm Turnbull helped resurrect after Mr Trump pulled ut.
“TPP was particularly important because it showed a tenacity and an ability to continue to convince others to stay on that course and leave it open for others to join,” he said.
Mr Morrison also agreed that far from leading to copycat behaviour, the rush to protectionism by the US and China was being exploited by others, as evidenced by Japan and the European Union sealing a free trade pact this week.
“People will find other ways to get there, the objective doesn’t change,” he said.
He said the “most compelling argument of all” was the figures which showed that between 1990 and 2017, two-way trade’s contribution to the Australian economy had grown from 32 per cent to 42.5 per cent; Canada’s has grown from 50 per cent to 64 per cent, China from 22.2 per cent to 37.9 per cent, the UK’s from 43.3 per cent to 62.5 per cent and the US’s from 19.8 per cent to 27.1 per cent.
Mr Morrison quoted former New Zealand prime minister Bill English: “People don’t get rich selling things to themselves.”