Cowardly Labor wants to bribe Donald Trump over tariffs

What exactly is Labor’s strategy for dealing with Donald Trump? We’re beginning to have a good idea: craven capitulation.

The Financial Review’s Phil Coorey — still the best political journo in the country — earlier this week reported that access to Australia’s bountiful “critical minerals” resources had been in the frame in the Albanese government’s attempt to get a special exemption on Trump’s tariff attack on the rest of the planet.

Today, in a cracking piece that should alarm everyone about Labor’s strategy for dealing with Trump, Coorey revealed a lot more detail about what looks like a remarkable, pre-emptive attempt at appeasement — and the Trump administration’s rejection of it.

The phrase, from a government source, that should set alarm bells ringing is an offer of “an offtake agreement that would guarantee the US a reliable supply, free from sovereign risk and other volatility”.

Labor concluded a critical minerals memorandum of understanding nearly a year ago with the European Union. While that MoU addresses issues like standards, sustainability and investment to develop projects along the critical minerals supply chain, it didn’t commit either party to anything. Indeed, according to the MoU:

The partnership is not intended to and does not create legally binding rights or obligations under international or domestic law. In particular, nothing in this memorandum represents a commitment of financing on the part of either side.

Furthermore, this Memorandum does not intend to represent any commitment from either side to give preferential treatment to the other side in any matter contemplated herein or otherwise.

That document explicitly commits to ” open, fair and competitive markets for critical raw and processed minerals”.

The question is, how far did Labor go beyond the EU MoU in its offer to Trump? Specifically, what is the nature of “a reliable supply, free from sovereign risk and other volatility”? “Other volatility”? Like someone offering higher prices than the US for Australian resources in an open and competitive market?

An offtake agreement is one thing — it can provide investment to develop new projects based on guaranteed revenue — but Australia locking itself in to a commitment to supply the United States no matter what, and at a guaranteed price, is potentially highly damaging. Critical minerals prices have proven highly volatile over the course of Labor’s term, despite the government’s commitment to expanding Australia’s role as both a supplier and processor. But the long-term trend, in a world racing to electrify, is definitely upward.

The offer raises three distinct issues.

First, what benefit-cost analysis informed an offer of volatility-free reliable supply? The total exports affected by aluminium and steel tariffs total just $1 billion a year — a rounding error in Australian trade. Why would the government risk potentially huge upsides on critical mineral exports simply to look after Bluescope, Alcoa and Rio Tinto (Bluescope’s US operations will emerge a winner from the tariffs; Alcoa is a US corporation and Rio Tinto’s steel exports to the US are a tiny drop in its many billions of profits a year). Or is it more a political calculation about the location of steelworks and aluminium smelters around the country and the unions that represent their workers?

Second, at what point was Labor going to share the details of what it had handed to Trump with voters and taxpayers? This was a proffered deal in the great tradition of trade agreements in Australia — negotiated in secret and presented as a fait accompli to Parliament and voters. The benefits of such deals are always wildly overhyped and often prove illusory — and our “free trade” deal with the US has actually been economically harmful. The Productivity Commission has regularly pointed out that as such bilateral agreements multiply, companies with complex supply chains face ever-increasing bureaucratic requirements to prove the source of imports and exports. Compliance costs with trade agreements could run into the billions each year.

To put all this more bluntly, who the hell gave Labor permission to damage the national interest by flogging off some potentially lucrative resources with zero transparency or accountability? Penny Wong admitted that critical minerals were on the table, but said “I’m not going to go through on national media the step-by-steps of negotiations.” Well, why not? It’s only our resources you’re handing to a thug without any serious thought as to the national interest.

The third and maybe biggest concern, is: is this Albanese’s strategy for dealing with Trump? Trying to bribe him with gifts so he won’t beat us up? Does Albanese and his team seriously think that pre-emptively caving in to a bully is going to protect us? As Malcolm Turnbull — a man with far more experience dealing with Trump than anyone in Labor — has often pointed out, all this will get us is more bullying.

Australia holds a number of valuable cards it can play against Trump, particularly on national security. Instead, Labor still wants to hand him the keys to the farm. As Coorey noted, even as we speak, Labor is still trying to get a late tariff exemption by offering a critical minerals deal.

There is something deeply, perhaps terminally, stupid, visionless and craven about this government. It’s perhaps not surprising that a government that has spent much of its first term in fear of Peter Dutton and, it seems, even its own shadow, should lack the guts to follow the lead of our friend and ally Canada and punch back at Trump. Everything we know about Trump suggests its tactic will fail. But by the time that becomes obvious, Labor might already have inflicted substantial damage on our interests.

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