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French submarine dispute could torpedo EU-Australia trade talks

France is threatening to block talks on a planned free trade agreement between Europe and Australia after the Australian government ditched a huge deal to buy French submarines.

French submarine dispute could torpedo EU-Australia trade talks

France is threatening to block talks on a planned free trade agreement between Europe and Australia after the Morrison government ditched a huge deal to buy French submarines.

The French government has been seething ever since Australia abandoned its $90 billion deal last week in favour of a new military agreement with the United States and the United Kingdom.

"Keeping one's word is the condition of trust between democracies and between allies," France's European Affairs Secretary Clément Beaune told Politico, in remarks confirmed on Monday by a spokesperson.

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

As part of the security pact, known as AUKUS, Australia will be supplied with the technology to construct a fleet of nuclear-powered submarines, considered to be superior to the conventionally powered vessels Canberra had previously agreed to buy from Paris. 

In response to the move, France recalled its ambassadors to the United States and Australia on Friday.

Negotiations on a free trade agreement between the European Union and Australia were launched in June 2018, and so far 11 rounds of talks have been held, covering areas such as removing barriers to exports and intellectual property rights. The next round is scheduled to take place later this fall.

While the European Commission has the power to conduct trade talks on behalf of the 27-country bloc, it is unlikely to go ahead with the deal if the French are opposed to it.

In an exclusive interview with CNN's Christiane Amanpour, European Commission President Ursula von der Leyen said on Monday that "a lot of questions" must be answered about the collapse of the submarine deal.

"One of our member states has been treated in a way that is not acceptable, so we want to know what happened and why," von der Leyen said, adding that the situation must be clarified "before you keep on going with business as usual."

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The Commission's chief spokesperson Eric Mamer said earlier that the next round of EU-Australia talks had been scheduled for October and that the Commission was currently analysing "the impact that the AUKUS announcement would have on this schedule."

The European Union was Australia's third largest trading partner in 2020, according to the European Commission. 

Goods trade between the two amounted to €36 billion ($58.2 billion) that year while trade in services was worth €26 billion ($42 billion) in 2019.

The deal could add between €1.8 billion and €3.9 billion ($2.9 billion and $6.3 billion) to EU GDP by 2030, according to the European Commission.

The threat to an EU trade deal comes at a time when Australia is looking to develop new export markets after relations with China, its largest trading partner, soured recently.

Australian coal, wine, barley and beef have all already been affected by trade tensions with China, and experts say that AUKUS has antagonised Beijing even further.

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President Joe Biden, listens as he is joined virtually by Australian Prime Minister Scott Morrison and British Prime Minister Boris Johnson, not seen, as he speaks about a national security initiative from the East Room of the White House in Washington.

Meanwhile, China has been looking for a way into Australia's other big trade agreement — the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which is an 11-country free trade pact that came into force in December 2018. China formally applied to join it last week.

France's ambassador to the United States reiterated in an interview on Monday that the breakdown of deal last week came as a surprise to Paris.

Speaking on French radio station RTL, Ambassador Philippe Etienne said French Cabinet ministers were not given any indication the agreement would be cancelled when they met with their Australian counterparts just days before Canberra announced an alternative deal with the US and United Kingdom.

"We absolutely weren't informed of the new course," he said.

Mr Etienne said his departure from Washington was "already a response" by the French government, and one that "marks the gravity of our reaction." 

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He said senior members of the Macron administration were still discussing what to do next.

"As soon as we learned Wednesday morning (of the new deal), I demanded to be seen, I was seen," by the White House, Etienne said. 

"(But) it was a little late."

Australian Prime Minister Scott Morrison defended his decision to cancel the deal with Paris on Sunday, saying Australia had "deep and grave concerns" about the submarines which were being built by France.

Analysts say nuclear-powered submarines can carry more firepower farther from Australian shores for much longer periods than conventionally powered subs. 

That means they can be effective in areas like the South China Sea, where Australia is helping partners including the US push back against Chinese territorial claims, and north to areas around Taiwan and Japan.

"A nuclear attack sub is like no other vessel, giving the ability to project power throughout the region, particularly NE Asia where Australia's interests lie," Drew Thompson, a former US Defence Department official and visiting senior research fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said on Twitter.

https://twitter.com/TangAnZhu/status/1439825321709105153

Mr Morrison said that while he understood France's disappointment, "Australia's national interest comes first."

"It must come first and did come first, and Australia's interests are best served by the trilateral partnership I've been able to form with President (Joe) Biden and Prime Minister (Boris) Johnson," he said at a news conference on Sunday.

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