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The U.S.-China trade tensions squeezing the global economy will likely play out for decades to come, Australia’s top bureaucrat said.
Hearkening back to former U.S. Treasury Secretary Hank Paulson’s 2018 warning of a looming “economic Iron Curtain,” Martin Parkinson told the Asia Society Summit in Sydney Thursday that “the curtain has descended further” and the fallout will have a significant impact on Asian economies — including Australia.
“This is not something that is with us for a year or two, it’s with us for decades and decades,” said Parkinson, who heads the Department of Prime Minister and Cabinet.
The over-reliance on supply chains is a particular thorn in the side of the Asian growth model, he said, where the current climate of increasing tariffs will stymie export-led economies. Technological advances also pose a challenge for these nations by wiping out the manufacturing sector, which was instrumental in lifting up the Asian Tigers, Parkinson said.
“Technology may even be one reason why western countries are finding it difficult to lift inflation,” he added. “Nowadays, you simply do not need as much capital to deliver the same output in manufacturing as we’ve been historically used to.”
He advocated for improvement to the international rules-based trading system to reinvigorate confidence and guard against falling foreign direct investments across the region.
“The answer to unacceptable trade practices is more effective rules, not no rules,” he said.
Still, he indicated that better commitment and more stringent rules may be no panacea to the economic outlook.
“Even if the U.S. and China drop all recently imposed tariffs, confidence in the economic, rules-based order has already been damaged,” he said.
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