Australia’s US tariffs problem is more about the Coalition than Kevin Rudd

Kevin Rudd, it turns out, is not what’s causing a threat to Australian steel and aluminium makers.

His colourful critiques of Donald Trump in years gone by appear to have troubled the president about as much as his own vice president once calling him “America’s Hitler” and his secretary of state labelling him a “con artist”.

Far from being put in the freezer over his past comments, Australia’s ambassador to the United States has been able to arrange early access to the Trump administration from the top down.

The problem, when it comes to the threat of tariffs hanging over Australia, has more to do with a real trade issue, funnily enough, and assurances given by the former Coalition government.

As the opposition has been happy to point out all week, the Turnbull government managed to secure an exemption from the blanket steel and aluminium tariffs imposed by Trump during his first presidency. This followed a full-court press of Australian lobbying, hammering all the points about the US having a trade surplus with Australia, and the strength of the alliance.

There’s been little mention, however, of the quiet assurances Australia gave at the time not to export too much steel and aluminium to the United States.

Winning this carve-out was never going to be easy. The first Trump administration included powerful voices both for and against an Australian exemption.

Aluminium exports to the US nearly doubled

Amongst those in favour of an Australian carve-out were Defence Secretary Jim Mattis, Treasury Secretary Steve Mnuchin, and Trump’s chief economic advisor Gary Cohn. On the other side, US Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross, and top trade advisor Peter Navarro were strongly arguing against any exemptions.

Their chief concern was creating a situation where Australia would be used as a backdoor by others to sell their steel and aluminium to the US tariff-free.

While making no commitments on volumes, Turnbull did give Trump an undertaking there would be no “trans-shipment” of foreign-made steel or aluminium via Australia.

But after the exemption was granted in 2018, Australian aluminium exports to the US nearly doubled in 2019.

Foreign traders took advantage. Speaking to the ABC’s North America correspondent Carrington Clarke, former deputy ambassador to Washington Paul Myler said Swiss-based trading houses were buying and on-selling Australian aluminium. “We don’t have control, and we don’t have great visibility”, he recalled.

The trade hawks around Trump certainly had visibility. Navarro and co weren’t happy and in mid-2019, the president raised concerns directly with then prime minister Scott Morrison.

Desperate to hang onto the tariff exemption, Australian officials quickly swung into action. They offered a new set of rules, including certification requirements to prove exports were genuinely Australian, as well as unofficial “quotas”.

These voluntary export restraints, which are normally inconsistent with World Trade Organisation rules, were negotiated quietly to protect Australia’s tariff exemption. Little was made public.

At the time, then trade minister Simon Birmingham told Insiders the government was working with companies to ensure “there aren’t surges of Australian exports into the US”.

Monthly customs data was carefully monitored by the US Trade Representative to ensure the export limits weren’t breached.

For a time, aluminium exports returned to more normal levels, before creeping back up again under the Biden administration.

Those close to Trump who never wanted the Australian exemption granted felt vindicated.

“Australia is just killing our aluminium market,” Navarro told CNN yesterday. An over-statement to be sure, but a revealing insight into what Trump is being told by his inner circle, as he gives “consideration” to another tariff exemption for Australia.

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Accidental over-reach or broken promise?

Navarro is now back in the White House as Trump’s senior trade advisor. Indeed, the emboldened Trump 2.0 appears to be surrounded by vocal supporters of his tariff agenda, with little sign of any internal push-back this time around.

Navarro says Australian aluminium exporters “just flood our markets” when, according to the industry, it makes up only 2.5 per cent of total imports to the US. In his mind, promises were broken, and fresh exemptions should not be granted.

Australia was even singled out in the formal tariff proclamation signed by Trump this week. It says: “Australia has disregarded its verbal commitment to voluntarily restrain its aluminium exports to a reasonable level.”

The Coalition hasn’t spoken much about this previously, but yesterday Nationals Leader David Littleproud appeared to confirm Australia had indeed agreed to quotas, which had been breached.

“Under the agreements that we signed there are quotas every year that ask to be respected,” he said. “If there was an overreach of those quotas, it wasn’t a malicious act.”

Perhaps not. But whether it was an accidental “over-reach” or a broken promise, the point is this is what’s fired up the trade hawks around Trump.

None of this justifies new tariffs being applied, but it does explain why Navarro and others around Trump with hardline protectionist views, and long memories, are urging the president on.

There’s no evidence the disparaging remarks of Kevin Rudd or Anthony Albanese about Trump in years gone by have anything to do with it.

Politicians must live with their previous comments, even if they cause diplomatic awkwardness. Labor has no qualms reminding Peter Dutton of his quip about sea levels rising in the Pacific.

But continuing to highlight Labor’s past critique of Trump, at a time when Australian jobs hang in the balance, carries political risk for the Coalition. Not least because it ignores what’s really driving those encouraging Trump to apply tariffs to Australia.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.