By Adam Rollason
Mitt Romney’s choice of small government champion Paul Ryan as his VP running mate has been like an energy drink for many pundits, sparking widespread chatter about the candidates’ economic credentials and bringing the focus of the campaign back onto all things fiscal.
Romney and Barack Obama are still in the process of outlining their economic and international policies, but there are already some indications of what paths they might follow – meaning it’s also possible to start examining which candidate is likely to be better for Australian business.
SLASH AND BURN
The selection of Paul Ryan, author of the ‘Path to Prosperity’ budget plan, is a signal that Romney is “serious about shrinking the scale of the US government”, according to Geoff Garrett, chief executive of the University of Sydney’s United States Studies Centre and dean of the university’s business school.
While some conservative columnists have suggested Ryan-esque reforms are the key to reversing the decline in America’s economic power, Professor Garrett says UK-style austerity measures in the US could be damaging for Australia and the global economy as a whole. “If Romney did that, potentially it puts a real brake not only on the US recovery but on the global recovery as well,” he says.
International relations specialist Dr Michael McKinley from the Australian National University agrees austerity is unlikely to “solve the problems globally and particularly in the United States”, noting that America is fighting a losing battle against the loss of manufacturing and white-collar jobs to emerging countries. “I see Paul Ryan as somebody that is probably going to make things worse,” he adds.
However, an analysis by The Carnegie Endowment for International Peace says the ability of either Romney or Obama to implement major structural and fiscal reform will be limited by the make-up of the US Congress, meaning both would need to compromise significantly to pass any “meaningful legislation”.
Romney’s comments on China are also relevant. The Republican has been outspoken in his criticisms of China’s economic policies, warning in a 2011 primary debate that the Asian powerhouse must “play by the rules” if it wants open trade with the US.
In that debate, he said as president he would go to the World Trade Organisation to bring action against China as a “currency manipulator”. “We can’t just sit back and let China run all over us. People say, ‘well you’ll start a trade war’. There’s one going on right now folks, they’re stealing our jobs and we’re going to stand up to China,” he added.
Professor Garrett says American investment in Australia is on the rise, particularly in commodities, and that’s largely because of “Australia’s position in Asia, and above all, with respect to China”. And Romney’s comments raise questions about the impact his presidency might have on Australia’s role as a US-China go-between. On balance, however, he believes that as president Romney would be forced to come back to the centre on China, which should minimise any disruption to Australia’s business relationship with its powerful Asian trading partner.
Dr McKinley is less optimistic. He says the tension that exists for Australia in “trading with China and having an alliance with the United States” is likely to expand no matter who’s president, “as China becomes more assertive, and also more demanding”.
FREE TRADE IN THE PACIFIC
Obama’s desire to push forward with the Trans-Pacific Partnership (TPP) could have unexpectedly negative consequences for Australian businesses. The president has made no secret of his desire to drive through the proposed Asia-Pacific trade agreement, but Professor Garrett warns the realities of negotiating the deal could be problematic for Australia.
“On the one hand I think Australia would want to support TPP, because if Doha’s not dead it’s on life support, so an Asia-Pacific free trade area is probably the best deal that’s on offer,” he says.
“But on the other hand I think certainly several Australians I’ve spoken with are concerned that the price the US might pay for winning a TPP deal might be to lower the quality of the free trade agreement. For example, to include a country like Japan in TPP you’d have to take agriculture off the table.
“So if Obama wanted to do TPP, largely for geopolitical reasons, and I think that’s invariably the case in the US, that’s something that Australia would have to be a little wary of I think.”
Romney is also generally supportive of the TPP, but has spoken out against the inclusion of Japan at this time.