20 October 2003

Howard's friendship with America does not go as far as China

But any benefits of the Thai deal would be dwarfed by those arising from a free-trade agreement with China or the US, two deals the Government is pursuing with vigour in the face of the World Trade Organisation's lack of progress towards trade liberalisation. Australia has been locked out of a proposed free-trade zone among South-East Asian nations, a failure that has spurred the Government's drive to negotiate bilateral free-trade agreements.

In a rare departure from support for US policies, Mr Howard backed China in its strong resistance to US pressure.

'We don't automatically take sides with the US in relation to the currency levels of other countries,' Mr Howard said here yesterday.

US politicians are blaming competition from cheap Chinese goods for their stalled economy, and unions in Australia are also concerned that jobs are being lost as manufacturers switch their operations to China.

I had thought the onyl disagreement between Howard and Bush would be over US requests for the ADF to go back to Iraq (although 1200 ADF personnel remain in non-combat roles). This is almost a textbook case where security politics (the only kind the Bush administration seems to know about) bumps directly into economics and does not come off very well.

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