The United States, China and Europe under a Trump Administration

Hamburg Summit 2016, China meets Europe, Hamburg Chamber of Commerce, Hamburg, Nothern Germany, Wednesday, November 23, 2016 The Honorable Kevin Rudd, President, Asia Society Policy Institute; Former Prime Minister of Australia Foto: Krafft Angerer

Hamburg Summit 2016, China meets Europe, Hamburg Chamber of Commerce, Hamburg, Nothern Germany, Wednesday, November 23, 2016
The Honorable Kevin Rudd, President, Asia Society Policy Institute; Former Prime Minister of Australia
Foto: Krafft Angerer

An Address to the Hamburg Summit on Europe China Relations
The Hon Kevin Rudd
26th Prime Minister of Australia
President of the Asia Society Policy Institute, New York. 
Hamburg City Hall
23 November 2016

Former Chancellor of Germany, Gerhardt Schroeder.

Mayor Olaf Scholz of the City of Hamburg.

Distinguished guests.

Ladies and gentlemen.

It is good to be back in Germany.

It has been my privilege to have traveled to this great country many times over the last 25 years since my first visit in 1990.

I have been here as a young official, a foreign minister, Prime Minister and now as a simple global citizen.

I remember clearly what it was like back then walking up Unter den Linden in the days just after reunification.

And what the centre of Berlin is like today, one of the great cities of the world.

By any historical measure, German reunification has been a difficult, complex but remarkable achievement.

And you have built a united Germany which remains one of the strongest economies in the world.

It is also good to be here in this great Hanseatic City of Hamburg.

You were a centre of European trade 600 years before anyone ever thought of a European Union.

The Hanseatic League was beginning to write the economic history of early modern Europe while China was enduring its first major foreign invasion under the Mongolians under the Yuan Dynasty

And today, Hamburg’s global trade reaches every corner of the world, and where the China trade in particular is of central importance.

So there can be no better venue to convene this Summit on the future of Europe’s wider economic engagement with China.

It is also good to see so many Chinese friends here today.

I regret to admit to my German friends that my Chinese is much better than my German.

In fact I don’t speak a word of German.

I have lived and worked in China.

I  have traveled there every year since 1984, as a scholar, a diplomat, a state government official, a member of parliament, foreign minister and prime minister, and now as the head of an American Think Tank, the Asia Policy Institute in New York, where I now live and work.

My passports tell me I have now traveled to China 125 times.

It has been my great privilege to witness first hand the transformation of China from an economy the size of Australia’s in the early 1980’s, to become the world’s second largest today, and within the next decade, the largest.

It has not been an easy road.

It has been full of twists and turns, some of them painful.

But China’s strategic determination, shaped deeply by its ancient and recent history, to once again become a global great power, has been a constant

I have just come from China last week where I was addressing a conference convened by the International Department  of the Chinese Communist Party in Yiwu in Zhejiang.

The topic was China’s New Silk Road.

And this brings me to the subject at hand.

Germany’s future with China.

Europe’s future more broadly.

And the changes we all now face with the recent presidential elections in the United States.

New Global Uncertainties

Friends, we now live in deeply uncertain times.

The election of President Trump represents the single biggest disruption to the political and economic consensus in the United States since President Roosevelt.

What we do not know yet is the extent to which this will be reflected in a departure from the US foreign, security and international economic policy consensus that has been central to the global order since 1945.

We would be wrong to over-analyse everything Candidate Trump has said, on the assumption that every one of his campaign pronouncements will be translated into policy reality  under his administration.

But we would be equally wrong not to reflect carefully on his core thematics.

First, his wholesale embrace of the concept of “America First,” and the isolationist sentiment contained within it.

Second, his challenging of the status quo concerning traditional US alliance structures, where he will be more demanding of US alliances in Europe and Asia, not less.

Third, his predisposition to try normalising relations with Russia, with uncertain consequences for Syria, Ukraine and Europe.

Fourth, his full-scale economic attack on China as an unfair trading country, and currency manipulator. Our Chinese friends will have a robust response to this.

Fifth, his apparent abandonment of the US free trade consensus which has characterised each administration since the signing of the General Agreement on Tariffs and Trade in 1944.

Sixth, his repudiation of climate change, calling it a Chinese invention, for which again our Chinese friends will have a robust response.

Seventh, the absolute centrality of his “war on terrorism,” including a deep reappraisal of American engagement with the Muslim world.

The point of this list is not to debate the factual merits of each of these positions.

The point of this list is to emphasise that the election of President Trump is no small event – the election of this President potentially represents fundamental strategic change, and in multiple  policy domains, at the same time.

Sometimes there are long-term trends to be observed in the history of international relations.

And then there is a single catalytic event.

We may be at one such time.

Let me touch on just one of these areas: US-China relations.

President Trump does not see Russia as a long term threat to the US.

He does see China however as constituting such a threat.

He sees China’s growing economic power as having been obtained at the expense of American jobs, American industries and the great American midwest.

What the Americans call the rust belt.

Or the flyover states.

But these are the self-same states which delivered Trump the White House.

Using the colourful language of the Trump campaign: selling out America’s middle class, to create a new middle class in Asia.

My point today is not to debate the factual nature of President Trump’s claims.

Once again, China will have a robust response, which it will articulate thought the relevant national and international fora.

My point is to underline what Trump actually believes as a guide to possible future policy by a Trump Administration.

And my core point is Trump’s domestic political narrative is directly connected to his economic narrative about China.

He therefore will find it politically difficult to walk away from it.

And if he proceeds with it, we do not know where it will end in terms of trade wars, currency wars, the the future impact on the global economy writ large.

The Future of Europe.

Beyond these strategic uncertainties arising from the US presidential elections, there is also the question of the future of Europe.

In this room, we are all familiar with the forces driving nationalism, xenophobia and protectionism.

There is little to be gained from repeating them.

The core question is what is to be done.

The British have decided to leave.

Le Pen, were she to win, is committed to the same.

On that question, our hopes for the European project, rest in large part on Fillon or Jupais.

Which leaves Germany.

Europe, and the world, require urgently a new politics capable of delivering  a powerful counter-narrative to the forces of the extreme left and the extreme right.

We of the global political centre can no longer do “politics as usual.”

We face a deep insurgency against the values, the hard-fought political norms we share, the prosperity we have secured for the many, not just the few, and the common security we share.

This means the polite norms of our customary international debating societies will have little effect for the future.

In fact, Europe is in danger of becoming a giant seminar about itself.

On any assessment of the European political, security, economic and sustainability balance sheet, this is a continent of remarkable assets, and entirely manageable liabilities.

Yet Europe seems to have been overcome with a fashionable pessimism about its future which is in danger of paralysing its ability to act to secure its hard-won achievements from the past.

There seems also, in post-modern Europe, a fading of collective memory of the deeply troubling pasts the peoples of Europe  have come from.

A fading memory of their once assumed common desire not to repeat the lessons of history.

Indeed around the world, we are plagued by a post-modern, post-factual, post-truth culture, where politics has become a shouting match between one set of emotions against another.

Reasonable discourse based on commonly verifiable facts is becoming a thing of the past.

I am not a European

But I choose to be an optimist about Europe’s future.

But to secure that future, the forces of the political extreme must be confronted and defeated.

And no longer ignored.

Where policy adjustments need to be made, to make them, to ensure that our economies and societies remain inclusive of all.

To deny the politics of the extreme easy access to support from those excluded from the benefits of economic growth and open societies.

To deploy a new political narrative which punches through, confident of the past achievements and future prospects that have been delivered by the open markets and open society project of the global political centre.

And to demonstrate that demagogues destroy much, but build nothing.

Germany and China

Finally, let me speak about some good news.

That’s the future of  Germany’s relationship with China.

These are two great trading nations.

Your prosperity has been built on trade.

Your prosperity has been built on strong manufacturing.

And your future prosperity will be built on innovation, technology and the new industries of tomorrow.

What I know about about both your countries is that you both have deep respect for each other’s strengths.

In China, what I know from Chinese leaders, intellectuals and  entrepreneurs is that China admires Germany more than most countries in the world,

They admire how you rebuilt after the war.

They admire reunification and the rebuilding of the East.

They admire the continued strength of German manufacturing, including the continuing reinvention of German manufacturing through world-class innovation.

They also recognise this is a big country.

In Germany there is similar respect for China’s profound economic transformation.

From universal poverty to significant prosperity in the space of a generation.

The most remarkable economic transformation in global history.

So this summit is a meeting between two strong countries, two strong economies, and, in my experience, two strong peoples.

Remember it was the German tribes who first defeated the Roman Empire, and a few centuries later, participated in the significant architectural redesign of Rome!

So this is a meeting of equals.

It is a relationship which has produced great benefit for both countries.

And in any such relationship, there will from time to time also be difficulties.

That is normal.

I know this from my own experience in the Australia China relationship.

It took our two countries ten years to conclude an FTA between our two countries.

Australians and Chinese are about as stubborn as each other.

One of the difficulties that arise is investment in each other’s economies.

In Australia, more than 90% of projects have been approved.

But some  proved to be sensitive.

In handing these sensitivities, it has been important to have clear-cut principles.

We have sought to apply these through the Australian Foreign Investment Review Board which was established back in 1976.

It was not established to deal with Chinese investment.

China was still in the Cultural Revolution back then.

It was established to deal with growing volumes of American, British and Japanese investment at the time.

These critical principles have been:

One, all decisions on investment proposals should be based on clear and transparent national interest considerations.

Second, they are to be made on a totally non-discriminatory basis in terms of the country of investment origin.

Third, they should also be made on the basis of reciprocal access to each other’s economies, mindful of the level of access to Australian investors to economic sectors in that country seeking to invest in Australia.

If that sector is closed in that country, or significantly restricted, this in turn will influence Australian decisions on access to the Australian foreign investment market.

I’m uncertain if these principles have any relevance to the evolving economic relationship between Germany and China.

But the core message is that the principles I have referred to do help in managing difficulties when they inevitable arise in complex investment relationships.

The same principles apply with trade, not just investment.

That is why I am confident that given both your strengths as great manufacturing powers, you will work your way through the challenges and opportunities which will arise from Germany’s Industry 4.0 strategy, and China’s Manufacturing 2030 strategy.

Competition in manufacturing will be good for both countries.

And good for the world.

Conclusion

You will be aware of the legendary Chinese curse: “May you live in interesting times.”

Friends, we are indeed living in interesting times.

Too interesting times.

This is a time for calm heads.

And strong hearts.

And our recommitment to a common global vision based on open societies, open economies, and a global rules-based order, which acts on the great global challenges such as  climate change.

This Hamburg Summit is the right forum to reaffirm these common global interests between these two great countries which will both play a major role in the world of the 21st century.

Brad NewmanThe United States, China and Europe under a Trump Administration