Features Australia

What, no Nobel Peace Prize?

29 April 2017

9:00 AM

29 April 2017

9:00 AM

Trump’s first 100 days: A big failure and a new low in the polls, blasted the Washington Post in March, after only 68 days, not even bothering to wait until 29 April. The media drubbing Trump’s efforts will receive on Saturday is as predictable as the paeans heaped on Obama, who, after 100 days, was well on his way to winning a Nobel Peace Prize.

But Trump’s supporters are unfazed. The most recent polls show that only 2 per cent of them regret their vote and Trump would win an election with an increased majority if it were held today.

Trump’s report card is mixed. His biggest success has been his energy policies, which the New York Times denounced as risking ‘the Planet’. In fact, his policies will not only reduce the cost of power, boosting American competitiveness, but reduce the flow of funds to some of the world’s most unsavoury, destabilising regimes, including Iran, Saudi Arabia, Russia and Isis. And reduce emissions.

For example, Trump approved hydraulic fracturing (fracking) on federal lands, reversing an executive order issued by Obama. Fracking has led to a surge in shale gas, which saw US emissions fall by more than 3 per cent last year, while the economy grew by 1.6 per cent.

In addition, reversing Obama’s deep green executive orders is creating jobs. In March, the State Department granted a permit to build the Keystone XL pipeline. Obama rejected the pipeline on the basis that the economic benefits were overstated and emissions would be damaging, but the construction of the pipeline will create up to 20,000 jobs and transport oil more safely than by road. Trump also reversed Obama’s executive order delaying the construction of the Dakota Access Pipeline, lowering transportation costs for operators to help them stay in business.


Indeed, investments in oil fields rose 72 per cent in the last quarter of 2016, with the US Energy Department predicting increased shale drilling could see US oil production in 2018 reach 10 million barrels in the final quarter, just shy of the November 1970 record. That should bring the oil price down by more than 2 per cent compared with previously projected prices to around $52 a barrel this year.

Trump economic adviser Stephen Moore argues that each one cent reduction in petrol prices puts $1 billion dollars in consumers’ hands, so a $1.50 reduction in price — the fall between 2014 and 2016 — resulted in a $150 billion economic stimulus. Certainly, the biggest booms in the stock market occurred in the 1980s and 1990s when oil prices fell dramatically, whereas the 1970s, when oil prices soared, was the worst decade for the economy since the Great Depression.

But there is a catch. The Trumpian paradox is that while promoting pro-market policies at home, Trump espouses anti-market trade policies abroad. The aggressive advocacy of unilateral, protectionist trade measures to ‘make America great again’ sounded dangerously like they might provoke a trade war with China and undermine the multilateral rules-based system that is vital to the prosperity of a small, open, trading economy such as Australia. Trump’s key trade advisers — Robert Lighthizer, nominee for US Trade Representative, Peter Navarro, head of Trump’s National Trade Council and author of books such as Death by China, and Commerce Secretary Wilbur Ross — argue, against all the evidence, that trade deficits are bad. As free traders tirelessly point out, trade deficits reflect the extent to which capital is being borrowed from abroad and are usually associated with economic growth.

Since the US president has extensive powers to impose tariffs and terminate trade agreements, Trump’s declarations that he would renegotiate or tear up NAFTA, declare China a currency manipulator ‘on day one’, and revisit bilateral FTAs, had to be taken seriously. The good news is that so far, Trump has not delivered on most of these threats.

Ironically, Trump’s withdrawal from the TPP has benefitted Australia, which already has privileged access, through free trade agreements, to US, Japanese, Korean, New Zealand and ASEAN markets that few other countries enjoy.

Happily, Trump has admitted that China is no longer manipulating its currency to increase exports; indeed, it is preventing the yuan from falling, making Chinese exports more expensive. Indeed, in his first meeting with Chinese President Xi Jinping, Trump negotiated greater access for financial services and beef, more good news for the US — although it will increase competition for Australian exporters.

Rather than putting up tariffs of up to 40 per cent, Trump has commissioned a study to report on all unfair practices by trading partners that contribute to trade deficits. This still leaves the way open to impose punitive tariffs, but even if Trump does, he will not be the first president to do so. The 20 per cent tariff Trump slapped on Canadian lumber this week is less than the 27 per cent tariff imposed by Bush in 2002. While Trump called for all new pipelines to be built using US tools and materials, he tempered this, adding ‘to the maximum extent possible and to the extent permitted by law’.

As for the wall between the US and Mexico, Trump is showing flexibility and the Democrats may save him from himself by only agreeing to new surveillance equipment and access roads, estimated to cost $380 million. This would be a win for fiscal conservatives, since prudent spending would reduce cross-border crime without needlessly driving up the deficit.

Trump’s foreign policy performance so far, particularly airstrikes in Syria, won praise across the spectrum for using force sparingly but judiciously to send a message to rogue regimes such as Syria, Iran and North Korea.

The biggest concern going forward is that Trump’s economic policies — reduced corporate tax rates and increased spending on defence and infrastructure — without sufficient offsetting reductions elsewhere, will increase the budget deficit, harming future taxpayers and, incidentally, increase the trade deficit. If that happens in the lead-up to the mid-term congressional elections, Trump may be tempted to impose tariffs that would be damaging to the US and to global trade. But if his domestic policies boost employment and growth, his response may be more measured. For Trump supporter Bob Holmes that’s what counts. ‘I think he’s doing really good,’ Holmes said this week of Trump’s 100 days. ‘He’s fighting the fight … saving thousands of jobs.’ And to his loyal deplorables that’s worth more than a Nobel Peace Prize.

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