Malcolm Turnbull is using Donald Trump as a celebrity endorsement for his plan to give corporate Australia a $50 billion tax cut. But, like all dealings with people who are famous for being famous, the risks can be greater than the returns. Take Trump’s views on free trade.
First published by the Australian Financial Review – here
The US President is considering a 20 per cent tax on Mexican goods imported to the US, a “border adjustment tax” on countries with which the US has a trade deficit, and, of course, he has already made travel to the US virtually impossible for hundreds of millions of Muslims. Does Turnbull want Australia to take Trump’s advice on the virtues of those policies as well?
Trump promised that the US would not pick up the tab for his $25 billion wall along the Mexican border, but of course it is American consumers who will pick up most of the tab for Trump’s tax on trade.
From China to Chad
The idea that the US should impose differential tariffs on countries according to the size of their trade surplus with the US is weirder still. The whole point of trade is to buy things you want from those who have them and sell things you have to people who want them. The idea that buying more things from Chad and less things from China will make America great again is as novel as it is ridiculous.
But Turnbull is not making such criticism. Nor is he condemning Trump’s discriminatory new immigration policy which affects both the global economy and Australian residents. Rather, our Prime Minister is soft-pedalling on Trump’s recklessness so that he can continue to rely on Trump’s endorsement of the Coalition’s tax cuts. That, and Turnbull dare not criticise the notoriously brittle US President lest he renege on Barack Obama’s deal to take refugees from Manus and Nauru.
Turnbull came to office promising to raise the level of economic debate in Australia. Gone, we were told, were the three word slogans and instead a mature conversation was to be had. But that approach vanished as quickly as Turnbull’s popularity. Now he is taking his lead from a man who writes policy 140 characters at a time.
Free trade firearms
The uncomfortable fact for the Coalition is that the choice between free trade and protectionism has always been a phoney one. All countries support restrictions on some sorts of trade. Most, but not all, Australians are glad we restrict imports of guns, child pornography, body parts and land mines. David Leyonhjelm wants us to trade more freely in rapid-fire shotguns, while the “free-traders” in the National Party are adamant that importing fresh fruit and uncooked meat is a terrible idea. Getting the right balance is harder than calling people protectionist.
The so-called “free trade agreement” between Australia and the US is more than 1000 pages long. Its length is necessitated by the need to codify so many mutually agreeable trade restrictions. Similarly, the Trans-Pacific Partnership, had it not been sunk by our Prime Minister’s preferred economic adviser, would have created not just thousands of pages of new regulations but a brand new international dispute settlement body to add to the burden of regulation.
Now is precisely the time that we need a sophisticated debate, not just about trade, but about tax, inequality and, of course, climate change. But at precisely the time when Malcolm Turnbull’s renowned skills as a debater and communicator might have come in handy, he has been forced by his party to take our public debate back to the name calling and sloganeering that has ruined not just the last four prime ministers, but the faith of Australians in the capacity of our political class.
If we really wanted to align our tax and trade systems with that of the US we could do so. We could replace our currency with theirs and we could pass legislation that ensures our own tax laws simply mirror those of the US. But no Australian Prime Minister has ever argued that all Australia needs to do is copy the US – even when the President wasn’t so, to put in nicely, unpredictable. If Malcolm Turnbull wants to win a debate about cutting our tax rates, he is going to need more credible allies than Donald Trump.
Richard Denniss is chief economist at The Australia Institute @RDNS_TAI