Commentary |
24 March 2021

Quad’s great leap forward leaves free trade behind

Originally published in The Australian.

Ben Scott
Ben Scott

US President Joe Biden hasn’t uttered the words “free trade” since coming to office. In fact, it’s hard to find anything much positive about trade in his administration’s official documents and pronouncements. That’s a problem for Australia and will weaken the US-led effort to balance Chinese power.

Biden’s meeting on March 12 with the prime ministers of Australia, India and Japan — “the Quad” — was a great leap forward. The Quad leaders’ joint statement, and follow-up op-ed, describing the “Spirt of the Quad”, reaffirms the Quad’s “shared vision for the free and open Indo-Pacific” and advancing “security and prosperity”.

But it says little about how prosperity will be realised. The “rule of law, freedom of navigation and overflight, peaceful resolution of disputes, democratic values, and territorial integrity” are all listed in the Quad statements. But there is no mention of trade.

The Biden administration has declared its readiness to co-operate with China on hard issues like climate change and arms control but not on seemingly simpler issues of commercial exchange. Although Donald Trump’s unilateral tariffs on China were decried in the Democratic Party platform as being “reckless” and “self-defeating”, they remain in place.

If the US and its allies are to develop an attractive alternative to a regional order dominated by China, they will need to do more than combine their military clout. The Quad vaccine initiative is an excellent first step. But the free and open Indo-Pacific still needs a broader economic agenda. Barack Obama’s defence secretary Ash Carter argued that US membership of the Trans-Pacific Partnership would be as important for US security as another aircraft carrier. Obama signed up but Trump pulled out.

In the absence of the US, the countries of the Indo-Pacific haven’t lost their enthusiasm for regional trade agreements. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in 2018. And last year Indo-Pacific countries signed the Regional Comprehensive Economic Partnership. The world’s largest regional trade agreement includes Australia and China, but not the US or India.

Australia benefits from rules-based international trade but the proliferation of such complicated preferential agreements has obscured simpler messages about the mutually-beneficial nature of the free exchange of goods and services.

The return of geo-economics has compelled to states like Australia to take greater account of the security dimensions of international trade and investments. But, for a country like Australia, the starting presumption remains the same: free trade and foreign investment are good for us — and good for our counterparts.

Washington’s willingness to back Australia against China’s use of geo-economic coercion is reassuring. According to White House Indo Pacific Co-ordinator Kurt Campbell, the US will not improve bilateral relations with China “at the same time that a close and dear ally is being subjected to a form of economic coercion”. But Australia’s economic relationship with China is less likely to normalise if it is framed as a Chinese concession to the US than if it is framed as restoration of “win-win” co-operation and compliance with commonly-agreed rules.

Of course, fear of resurgent Trumpism is driving the Biden administration’s trade leeriness. Accepting the familiar argument that globalisation only benefitted American elites, the Biden team is focused on making “foreign policy for the middle class”.

But claims of ordinary Americans’ hostility to globalisation and free trade are not supported by public opinion polling. Gallup polling shows that the number of Americans who view free trade positively has been growing for at least a decade. Seventy-nine per cent now view it as an “opportunity for growth” rather than “a threat to the economy”. Leadership matters here because, despite these positive sentiments, free trade remains a low priority issue for most Americans.

It’s politically unrealistic to expect Washington to sign up to the CPTPP anytime soon but there looks to be a growing danger of it heading in the opposite direction. The convergence of national security and economics, technology industry policy and supply chain security are producing a path of least political resistance that looks incresingly protectionist.

The best way for US leaders to answer the questions posed by Blinken would be to go back to basics and start explaining the benefits of free trade again. A simple reiteration of Obama’s statement that “trade has helped our economy much more than it has hurt” would be a welcome step. And it’s one that interested allies like Australia should encourage the US to take.

Ben Scott is director, Australia’s Security and the Rules-Based Order Project at The Lowy Institute.