Morrison toughens stance on China, US over ‘collateral damage’ on trade


Prime Minister Scott Morrison will set out a more assertive Australian stance on the growing trade war between China and the United States in a new warning about the threat of “coercive power” that damages the global economy.

Mr Morrison will acknowledge key complaints on both sides of the escalating dispute, but will call on both “great powers” to accept that the collateral damage from their conflict will hurt other nations as well as themselves.

In an important declaration of his approach to negotiations at the Group of 20 summit of world leaders in Japan this Friday and Saturday, Mr Morrison will declare that Australia will not be a “passive bystander” if China and the US cannot resolve their dispute in peace.

“Trade tensions have escalated. The collateral damage is spreading. The global trading system is under real pressure,” the Prime Minister will say in a speech to be delivered on Wednesday.

“Global growth projections are being wound back.”

Mr Morrison will back the case for changes to the World Trade Organisation (WTO) but will emphasise the onus on both the US and China to settle their differences.

This is a significant stance ahead of his likely meeting with US President Donald Trump at the G20 and possible talks with Chinese President Xi Jinping at the same event in Osaka at the end of this week.

While he acknowledges the US has “legitimate” complaints about Chinese trade rules, he also criticises the US and says any change to the WTO must not hurt smaller nations.

“As a rising global power, China also now has additional responsibilities,” Mr Morrison says in a draft of his most significant foreign policy speech since the election, to be delivered to Asialink in Sydney.

“It is therefore important that US-China trade tensions are resolved in the broader context of their special power responsibilities, in a way that is WTO-consistent and does not undermine the interests of other parties, including Australia.”

Mr Morrison reiterates Australian support for the rise of China but argues that this comes with new responsibilities.

“The ground has now shifted. It is now evident that the US believes that the rule-based trading system – in its current form – is not capable of dealing with China’s economic structure and policy practices,” he says.

“Many of these concerns are legitimate. Forced technology transfer is unfair. Intellectual property theft cannot be justified. Industrial subsidies are promoting over-production.”

The Prime Minister’s emphasis on this new “threshold level of economic maturity” suggests a stronger stand on treating China as a major developed economy rather than as the developing nation it was in the past.

“Of course, there are risks of further deterioration in key relationships and consequent collateral impacts on the global economy and regional stability,” he says in the draft.

“There is also the challenge of adjusting to the potential for [a] decoupling of the Chinese and American economic systems, whether this be in technology, payments systems, financial services or other areas.

“But these are not insurmountable obstacles.”

While the speech does not set out specific changes to the WTO or other trade rules, it accepts that change is needed to deal with the rising trade tensions.

“Our current trading system seems incapable of acknowledging, let alone resolving, these issues,” Mr Morrison says.

“The rules-based system is in need of urgent repair if it is to adequately respond to these new challenges, including the rise of large emerging economies, changing patterns of trade and new technologies.”

He also sets out a more assertive role for Australia and suggests a stronger role for other nations in making sure China and the US do not intensify their conflict.

“So we will play our part. We will not be passive bystanders,” he says.

“Our approach will be based on key principles. A commitment to open markets with trade relationships based on rules, not coercion. An approach which builds resilience and sovereignty.

“Respect for international law and the resolution of disputes peacefully, without the threat or use of coercive power. And a commitment to co-operation and burden-sharing within strong and resilient regional architecture.

“None of those principles is inconsistent with the natural instinct of sovereign nations to compete. And it is not inevitable that competition leads to conflict.”

In a nod to his predecessors, Mr Morrison will praise the major trade deals former prime minister Tony Abbott sealed with China, Japan and South Korea, while also praising his predecessor, Malcolm Turnbull, for keeping the Trans-Pacific Partnership alive when the US withdraw from the regional agreement.

David Crowe
Sydney Morning Herald


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