How Australia’s ditching of French submarine deal threats EU free trade deal

Australia’s ditching of a $90billion French submarine deal could derail a potential free trade agreement with the European Union.

France is outraged at Prime Minister Scott Morrison’s termination of a plan for the Naval Group to build 12 diesel-powered Attack-class submarines by the mid-2030s. 

Australia last week announced a new pact with the US and the UK, known as AUKUS, to produce nuclear-powered submarines within two decades in response to China’s rise in the Pacific. 

The US is sharing its nuclear technology with a new nation for the first time since 1958 when it formed a defence alliance with the UK

European Commission President Ursula von der Leyen has weighed in to express her outrage at Australia terminating a 2016 arrangement for France to build diesel submarines in Adelaide.

‘There are a lot of open questions that have to be answered,’ she told CNN in New York.

‘One of our member states has been treated in a way that is not acceptable.’

France’s Europe minister Clément Beaune said Paris could scuttle further progress on an EU-Australia trade deal.

‘Keeping one’s word is the condition of trust between democracies and between allies,’ he told Politico. 

‘So it is unthinkable to move forward on trade negotiations as if nothing had happened with a country in which we no longer trust.’

Australia has since June 2018 been in negotiations with the EU to devise a free trade deal.

During the 2019-20 financial year, Australia’s two-way trade with the EU was worth $78.7billion, Department of Foreign Affairs and Trade data showed.

But that access could be at risk with US President Joe Biden and UK Prime Minister Boris Johnson on September 16 joining Mr Morrison by video link, only hours after France was told its submarine deal was off. 

European Commission President Ursula von der Leyen (pictured left with French President Emmanuel Macron) has weighed in to express her outrage at Australia terminating a 2016 arrangement for France to build diesel submarines in Adelaide

The nuclear submarine development would see Australia join just six nations in the world to have nuclear-powered submarines, with the development jeopardising relations with France, a key EU member.

French Foreign Minister Jean-Yves Le Drian last week accused Australia of ‘duplicity, a major breach of trust and contempt’ as he recalled back to Paris France’s ambassadors to Australia and the US.

The Brexit era has seen the UK embrace Australia as it loosened trade and defence ties with the EU.

Since Brexit was concluded in January 2020, the UK has begun free trade negotiations with Australia, signalling it would give Australian agricultural producers greater access. 

France is outraged at Prime Minister Scott Morrison’s announcement to terminate a plan for the Naval Group to build 12 diesel-powered Attack-class submarines by the mid-2030s (he is pictured centre with UK PM Boris Johnson and US President Joe Biden)

Australia has bilateral trade deals with the US, China, Japan, Korea, New Zealand, Singapore, Thailand, Chile, Malaysia, Hong Kong, Peru, Indonesia, and members of the Association of Southeast Asian Nations. 

China, Australia’s biggest trading partner, however has imposed sanctions on Australian barley, wine, beef, lamb, lobsters and timber after Mr Morrison last year called for an inquiry into the origins of Covid.

Iron ore, Australia’s biggest export, hit record highs above $US200 a tonne in July thanks to China’s insatiable demand.

But the price of the commodity used to make steel has now dropped to $US100, as China cuts back on steel production to meet climate change targets, demonstrating the need for Australia to diversify its trading base.