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America
At Westminster College,
Fulton, Missouri
history.
I would like to give a shout out to my good friend Senator Roy Blunt.
I know he has other pressing duties tonight back in Washington DC but he is the
very best of public service and I thank him, Abby and the family for all that
You have been as welcoming for me as you must have been for Winston
Churchill on the 5th of March in 1946 when he famously came to this College
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It was a speech that reflected both Winston’s values and the enduring principles
troubling time for Churchill. He should have been euphoric and optimistic
following the defeat of fascism and his role in saving the world.
Alas, just a few months earlier, that imperfect system of democracy that
Churchill had saved in Britain, had thrown the great war time leader out of
office.
Freedom can be brutal. The British people feared that Mr Churchill could not
deliver the post war prosperity they needed and desired. They wanted a new
world order.
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Because I am a diplomat I will follow the traditions of this address, and will
speak candidly.
To “speak only for myself” as one famous speaker at this forum once said.
It is self evident we are living in “anxious and baffling times”. It’s the term
Winston Churchill used to describe his world, seventy-three years ago. A world
that was beginning to live an uncertain peace with the darkening clouds of
The West set up the new world economic order and the United States led the
debate.
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It began in 1944 at the Mt Washington Hotel in Bretton Woods, a small town in
New Hampshire. There, 44 countries signed an agreement that mapped out the
destiny of monetary policy, currency exchange and trade in the post war era.
It facilitated new trade architecture like the General Agreement on Tariffs and
Trade (GATT), which over time evolved to become the World Trade
Organization, which over 160 countries have joined. The United States was the
leader in designing the rules of this truly global trading system that all member
institutions such as the International Monetary Fund (IMF) and the World Bank,
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Combined with its system leadership over the last century, the United States has
Whilst China recently overtook the US as the world’s largest exporter of goods,
Trade represents close to 30% of the United States economy (GDP) and one in
When Winston Churchill stood here to deliver his speech, trade represented just
10% of the US economy and supported far fewer jobs than it does today.
Whilst global trade continues to grow in goods and services, that growth has
So now, more than ever, the United States should be leading the debate in
favour of free and fair trade. Tariffs should only be used as a very short term
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The US of course was leading the charge to deliver the Trans Pacific
Partnership. It walked away from its own leadership but Australia and Japan
stepped up. The TPP11, which was meant to be 12, is in place and delivers
more and better access to markets for the 11 member countries, all US allies, in
the Indo-Pacific.
countries in the Indo-Pacific including China and India, but not the United
States.
And the United States should have joined the Asian Infrastructure and
Investment Bank. Even though it was initiated by China, America and Japan let
themselves down by not joining the initiative that supports new infrastructure
across the Indo-Pacific. 74 countries have joined and 26 others are negotiating
to join. My signature as Treasurer was the first signature in the world on the
founding document.
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If you abdicate leadership you rarely get it back.
So the US must not allow itself to walk away from its trade leadership role
Western values won the “Cold War”. As time passed, it became obvious that
The economic engine of socialism was running out of other people’s money and
improvement.
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2. Why free trade
Most people in our communities want to be in control of their own lives. They
desire a free and open society that facilitates the pursuit of happiness and a
The benefits from trade are complex and dispersed. However, no one argues
higher quality. They obtain more income from selling goods and services into
foreign markets.
better valued – goods and services than what we can produce in Australia alone.
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Buyers and sellers, consumers and producers, they all win because they get
I have heard suggestions – and perhaps you have heard them too – that to “win”
in trade with another country, you need to sell more to them than you buy from
them – that is, that you should have a trade surplus. I disagree.
make my own food and sew my own clothes. Trust me, no one wants that.
No one in a free market thinks twice about their personal trade deficit with the
supermarket, or the butcher or the baker – they just need to have more money
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Since Adam Smith and his logic of the baker and the butcher, we have accepted,
I don’t have time to get up and milk the cow, bake the bread, till the fields, build
Neither do economies. They specialise in what they excel in and trade the
I want my doctor to be the best doctor they can be. I don’t expect them to be
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Australia has a big trade deficit with the United States.
We are not complaining. In fact, we celebrate that your trading surplus has
increased from $10bn a year with Australia to $29bn a year since we signed a
Under the deal we get access to affordable goods and services that we couldn’t
get without the US, including the world’s best mining equipment and
agricultural equipment.
A great deal of that equipment comes from Missouri by the way – from
Through free trade, we also have deeper and more meaningful relationships
with other countries. It brings our nations, with differing cultures, closer
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Australia has used trade to heal old wounds with Japan. It has used trade as a
tourism and education services alone, the interactions between China and
We also happen to have a huge trade surplus with China. They currently need
our resources. And we can only extract those resources with the help of
Australia, like the United States, is a rich nation because whatever it doesn’t
consume, it then sells around the world. And both nations are blessed with
plenty.
We both have abundant resources and energy. We produce more food than we
consume, and those sales help us to deliver to our people the health, education
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We also have amazing innovation that can facilitate a better quality of life for
They usually come out to argue for special favours for particular industries that
other hardworking Australians are expected to pay for. The critics trade on
The sensible middle ground of society understands that when we trade freely
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Protectionism discourages growth and rewards mediocrity.
Consumers pay more for the average, rather than less for the best.
To be the best in the world you need the best inputs in the world.
A Boeing 787 Dreamliner assembled in the US has around 2.3 million parts.
These 2.3 million parts are supplied by over 20,000 companies – in the US and
across the globe, including firms in Australia. More than 150 countries feed
into Boeing’s massive supply chain. And, because Boeing planes are
manufacturing base. Indeed, 80% of current orders with Boeing are for
international customers.
The United States is the most innovative nation on earth but, like every market
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Sooner or later the remaining 95% of the world population that lives outside the
But as the competition increases we need firm rules for the system. And those
3. Trade as a tool
If unilateral tariffs and quotas are used to punish bad behaviour, then you need
to make sure that the message is getting through to the culprits and that a
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President Trump is deploying all the tools he can to get a fairer global trading
system for the United States. I understand the reasons for his frustrations.
But these types of measures are not a sustainable long term solution. Through
tariffs and quotas, big government becomes bigger. Government controls prices.
Let’s be really clear. Tariffs are taxes imposed by governments on their own
people. Quotas are access limits placed by governments on their own people.
If citizens of other countries don’t have the same restrictions, they win.
sovereignty is powered by the free flow of goods and services around the world.
The end game must always be a free and fair global trading system.
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Every major credible economic analysis proves that getting more free and fair
trade across the world lifts prosperity and delivers people out of poverty.
We believe in the importance of markets in setting prices and in the rule of law
capital, goods and ideas, as well as rewards based on the effort and ingenuity of
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4. The United States and Free Trade
The United States is a great trading nation. It has to be, given it is home to less
than 5 per cent of the global population but is responsible for 18 per cent of
Your capital markets are the engine room for global commerce.
So I find the debate here in the United States on free and fair trade rather
baffling.
Being open to the world made America great in the first place. It will keep you
great.
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It was American exceptionalism that helped make today’s consumer sovereign
Ironically, standing up for free trade can feel unpopular in the United States
when measured against elite commentary. However, opinion polling shows that
general population support for free trade has never been higher. Americans
don’t want to pay more and end up getting inferior goods and services.
And Americans know that free trade is a crucial part of the modern American
success story.
been shared with the world and, by doing so, it has made Americans richer.
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You could go to any country in the world and the people would be able to name
you twenty or thirty US companies that have changed the world – such as
Motors, Disney, Morgan Stanley, FedEx and we can go on and on. Even
For all other countries, you would fail the same test.
It gives Americans global reach and breadth that others don’t have.
The US is the world’s largest exporter of services, an area which will dominate
US Services exports were worth USD 830 billion in 2018 - more than double
the exports of the United Kingdom, which is the world’s second largest services
exporter.
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5. How the United States wins on free trade
US service providers have transformed and are transforming the world from the
way we share moments with our friends and family, to the way we use
information to be more efficient; to the drugs we use for new diseases when our
loved ones are sick; to making us laugh and changing the way we shop. This
The US is also the world’s second largest exporter of goods, with exports worth
well over USD 1.6 trillion in 2018. American exports approximately the same
amount of goods as the combined exports of Japan, South Korea and France.
Whilst there are important stories about the decline of manufacturing in the
on. The US manufactures and exports goods that are worth more than the entire
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Every country goes through a level of pain when its manufacturing base
Workers naturally want higher wages. Even China, which lost 19 million
manufacturing jobs in the late 1990s, now has a push for higher wages that
Governments try and inevitably fail to manipulate an outcome that preserves the
status quo.
Subsidies are often used to bolster inefficient industries for political gain. Of
through tough unforeseen events like drought, trade wars and economic
downturn.
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For example China is the biggest steel producer in the world.
The dislocation within China has been enormous. And I acknowledge that
But China’s other responses to its own excess production have been
disappointing.
Even though most of China’s steel production is consumed within China, they
have also chosen to sell their heavily discounted steel into other countries. This
has caused global price depression, putting at risk the survival of steel plants –
elsewhere. Not because our steel plants are less efficient but simply because the
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Australia currently has anti-dumping and countervailing duties in place against
But the current WTO rules on subsidies do not go far enough. New rules are
needed to level the playing field. This is one of the many areas on which
Like the President, we want new rules on industrial subsidies and state owned
enterprises. Just last month, speaking to the Chicago Council on Global Affairs,
the Australian Prime Minister said that “global trade rules are no longer fit for
Some say it’s too hard to get new rules. But new rules shouldn’t be seen as
impossible. The global trading system has been in a constant state of negotiation
since 1944 and major trade rounds which changed the rules occurred every ten
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As Prime Minister Morrison said in Chicago,
the world has just reached a change point, that’s all. There’s no need to
there’s a much more practical issue at the heart of all this and we just
have to reset to ensure that we can provide the same peace and stability
So we need to keep working at improving the system rather than destroying the
legacy. Otherwise the critics will win. And we will all be worse off.
Too often, the critics get away with blaming trade liberalisation for job losses
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But we know – and much has been written about this – that most of the job
Technological development.
Competition that comes from trade plays a role, especially where foreign
parallel growth in the services sector. But it ignores the fact that a retrenched
Austin, Texas.
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In the meantime, we should not give up on particular industries. Nor should we
Some paint a picture of doom and gloom about US manufacturing and the
foreign goods.
The US now produces more than it ever has before in manufacturing. It has
done this with relatively low levels of tariff protection. And it has done this
despite the rise of China, Latin America and South East Asia as major
manufacturing hubs.
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One in five farmers in the US would be forced off the farm if it wasn’t for trade.
That number is much higher for some products grown here in Missouri such as
production.
Combined our farmers are not only the best and most productive in the world,
Nothing better illustrates the benefits of free trade than modern agriculture.
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The US and the European Union used to be the largest consumer markets for
21% of all wheat consumed in the world is eaten in China. Similarly 30% of all
rice and half of all pork in the world is consumed within China.
Farmers here in the United States and in Australia have prospered as China’s
middle class has grown and its demand for food has increased. This will
Over the next century the emergence of a massive middle class in Africa will
And today prices for basic agricultural commodities in China are much higher
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This is due in part to demand but also because of the market price support
programs China runs for certain agricultural commodities, which inflate prices,
As I have said before, these subsidies don’t work over the long term. These
Global prices for wheat, rice and corn are now set by Beijing and New Delhi.
The Chicago Futures Exchange used to be the benchmark price for most
agricultural commodities traded on global markets, but now prices for wheat
and rice usually include the reference prices set by the Chinese or Indian
Governments.
through its subsidy programs. China spends more on trade distorting subsidies
for wheat alone than what the United States spends on trade distorting subsidies
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The US Farm Bill, once the biggest ire of agricultural exporters such as
compensatory measure for policy decisions taken by Beijing and New Delhi.
Don’t get me wrong, Australia is no fan of some parts of the US Farm Bill. The
sugar program (and a few others) are still incredibly trade distorting. And we
aren’t going to stop calling those programs out - just don’t tell my South Florida
enacted in Beijing, New Delhi and historically across the European Union.
There are just two countries in the world that have taken a stand against these
new challenges. They are the United States, which took a WTO case against
China for its subsidies on wheat, rice and corn; and Australia, which has
Some have suggested we should go as far as stopping trade with those countries
that break the rules by unfairly subsidising, but to stop trading with China or
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India is actually the worst possible policy response we can have to the question
of subsidies.
agriculture in China.
Chinese subsidies keep prices high within China, which means that every
American and Australian bushel of wheat sold within China is being subsidized
While our farmers benefit from much higher prices within China, China’s
subsidies are distorting global prices and creating uncertainty in global markets.
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This is a well-worn path: Europe and the US for a long time pursued similar
market price programs before moving to more efficient, less trade distorting
forms of subsidies that didn’t have the impact of subsidising imports from other
countries.
6. Conclusion
When Winston Churchill declared in this place that “From Stettin in the Baltic
to Trieste in the Adriatic, an Iron Curtain has descended across the continent”
In many ways, free trade has failed to paint the picture of prosperity. How can
you compete with Billy Joel who in 1982 wrote Allentown, a song about a steel
And how do you address the visual of an out of work mining family or a farmer
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It certainly doesn’t help when new age billionaires flaunt the wealth they have
created from new industries that have cost other people their jobs.
But to win the hearts and minds of our communities we must never hide the
truth.
The facts are that we have a better quality of life today then that of our parents.
and communications.
There is still much work to be done to improve our environment and provide
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