AUKUS alliance: EU ‘reprisals’ likely a hollow threat

Ambassador Jean-Pierre Thebault outside the French Embassy in Canberra on Saturday after he was recalled over the cancelled submarine contract. Picture: Gary Ramage

There is no doubt the French are furious with Scott Morrison for cancelling the $90bn submarine contract, that the French government is enlisting its EU partners in anger, that there will be a sense of European unity against the Anglosphere’s new AUKUS partnership and that the free-trade agreement is the first target.

There is also no doubt that Australia knew there would be a price to pay – perhaps $2.5bn upfront – and a real prospect of trade and diplomatic retaliation.

There is also no doubt that the Australian government believes it has done the right thing, strategically.

What is in doubt is what that price will be beyond commercial compensation on a business deal.

France’s first target is the EU-Australia free-trade agreement, which is being negotiated after Britain’s exit from the EU and is meant to help limit reliance on China’s trade with Australia.

There is also a sense that the Coalition believes scuttling the EU FTA may be a hollow threat – not that it won’t be tried but that the negotiations have been going for so long that the chance of getting a good result are declining.

During the same period, Canada, led by Prime Minister Justin Trudeau, has been unable to get a finalised agreement with the EU.

The EU FTA has been worked on since 2018 and there is no end in sight; the UK FTA was proposed, began and agreed in principle in just one year, with an estimated benefit of $1.3bn to Australia’s GDP.

Australia is also not without European “friends” of its own in bilateral, leadership and defence agreements.

France will encourage EU nations to act as members of the EU but individual deals will continue, especially in defence.