US Commerce Secretary urges Australia to back US in trade war

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The Trump administration has noted the low value from Chinese investment in Australia in a blunt message about the importance of the United States trade relationship instead as it seeks global support in its trade war with Beijing.

US Commerce Secretary Wilbur Ross blamed China for a "massive" dislocation in the global economy while emphasising the strength of the trade and investment between the US and Australia at a speech in Sydney.

US Secretary of Commerce Wilbur Ross said the US is "addressing fundamental issues" in its trade relationship with China.

US Secretary of Commerce Wilbur Ross said the US is "addressing fundamental issues" in its trade relationship with China.Credit:Alex Ellinghausen

While Mr Ross acknowledged the significant rise in Australian exports to China, he portrayed this as a more shallow relationship than the longstanding ties with the US when foreign investment was taken into account.

"We represent 27 per cent of foreign investment in Australia, and American companies employ more than 400,000 Australians," Mr Ross said in Sydney on Thursday.

"China, by contrast, represents less than 2 per cent of foreign investment in Australia.

"So I think it's easy to blow out of proportion who has the more significant relationship with Australia.

"China imports more from Australia than the United States does, but their value add to the Australian economy – and to the lives of Australians – is much more limited than the role and the participation of the US.

Mr Ross made the remarks at an American Chamber of Commerce lunch in Sydney after meeting Prime Minister Scott Morrison, Trade Minister Simon Birmingham and Resources Minister Matt Canavan.

His visit to Australia, days after he visited Singapore and parts of India, has focused on global trade policy, cooperation in the space industry as well as plans to develop more rare earths – such as lithium – that are essential to high-tech products.

Mr Morrison signed the agreement on rare earths with US President Donald Trump during his state visit to Washington DC last week, with some observers seeing this as a way to counter Chinese dominance in the small but crucial market.

Mr Ross used his speech in Sydney to keep pressure on Beijing to back down in the trade war with the United States, arguing it was breaking global rules for fair trade.

He said the "rules-based order" was at the heart of the Trump administration's dealings with China.

"We are not opposed to trade with China," he said.

"In fact, we [are] hosting negotiations with them later this week in Washington.

"But we are addressing fundamental issues in our trade relationship with China, including forced technology transfers, cyber intrusions, the stealing of [intellectual property] and industrial subsidies to state-owned enterprises.

"China continues to cause massive dislocations due to overcapacity and dumping excess production into global markets.

"If we can get China to abide by the global rules of trade, every nation in the world will benefit - including China. China is, after all, a real powerhouse. It is growing rapidly. And with its success comes responsibility - it's responsibility to act as a member of the global community."

Mr Ross did not list Chinese breaches of the World Trade Organisation rules but said China was breaking the rules.

"China was admitted into the WTO under the theory that it would live up to its obligations," he said.

"But there were no effective enforcement mechanisms, and China has refused to change its behaviour.

"In fact, its practices have become more protectionist than before."

While critics of Mr Trump have warned that American consumers will pay for his higher tariffs and the American economy will suffer, Mr Ross pointed to the latest economic figures to claim the trade policies were working.

"I might note, that during this long-overdue restructuring of our trade policy, sceptics predicted an economic calamity for the United States," Mr Ross said.

"But it really hasn't happened. US GDP is up. Wages are up. Employment in the United States is up, by 6.4 million since the election in 2016."

Mr Ross also listed 136,000 new jobs in September.

"Poverty is at the lowest level in almost two decades. Retail sales are up by 4.6 percent in the last 12 months.

"And, interestingly, very much in contrast to what the naysayers had forecast when we put the tariffs on, the US import price index fell by 2 per cent over the past year," he said.

"It actually went down, not up as the naysayers said it would."