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Australia To Lose in Looming Trade Deal Between USA and China

Ned K.                13 April 2019
 
The US and China, the two biggest economic powers when it comes to world trade, are on the verge of a new trade deal. The US has a US$400 billion trade deficit with China and Trump is desperate to increase US exports to China before the next Presidential election.
 
Problem is that any increase in purchase of US goods by China will come at another country's expense, including Australia.
 
An example of Australia's vulnerability is the export of Liquefied Natural Gas (LNG). The US is pressing China to buy more LNG from the US. Will this be at Australia's expense?
 
There is a scramble from LNG producing countries to win a good share of the Chinese expanding demand for LNG.

In January 2019, China announced that it intends using 34 coastal terminals to import 247 million tonnes of LNG by 2035. World trade in LNG in 2017 was only 289 million tonnes.

The US want the lion's share of that LNG increase in demand by China. If they get their way it is likely to see a drop in exports of LNG from Australia to China if the experience of coking coal exports is any indication.

In February 2019 exports from Australia to China of coking coal fell 21% per year while China’s imports of coking coal from Mongolia rose by 47%. This wiped billions of dollars off Australian generated mining stocks, not to mention in reduced jobs.

Following the US and Canadian lead by banning Huawei added to the mess the Australian Government finds itself in when it comes to relations with both China and the US. "Free Trade" deals that Australia signs up to with the big imperial powers mean nothing when it comes to those big powers doing deals between themselves which disadvantage smaller countries including Australia.

As the two main political parties talk up their "economic credentials" for running the country in the lead up to the 18 May election, the reality is that there are storm clouds gathering due to increased trade tensions and deals between the big powers China and the US which will have unpredictable impacts on Australia's development and the people's living standards.

Take the wine industry as another example. The wine industry is a key exporter and a big employer in many parts of Australia. An important and growing export market has developed to both China and the US, not just to Europe.

Currently US wine exports to China incur a tariff of about 40%. From 1 January 2019, Australian wine exports to China were tariff free. This trade advantage over the US regarding wine exports to China is highly likely to evaporate at short notice under pressure on China from the US to drop the 40% tariff.

As long as Australia has an unbalanced economy dependent on dictates and demands of the big powers rather than an economy based primarily on self-sufficiency and trade as a secondary aspect, there will be no stability and economic security for the working people of Australia.

Only an independent Australia led by the working class can navigate an economic course for a sustainable future.
 

 

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