(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

 

MELBOURNE - Losing a contract worth at least $40 billion will always sting. Having it ripped away from you by friends is galling. Hence French ire at Australia, the United States and the United Kingdom for their new alliance, dubbed AUKUS, which was forged at the expense of French submarines destined for Down Under. What might look like a storm in an admittedly expensive teacup has the potential for wider repercussions.

The first casualty could be a European Union trade agreement with Australia. French President Emmanuel Macron’s government is questioning whether the EU should proceed with a trade agreement with Canberra. The chair of the European Parliament’s trade committee said on Monday the EU-Australia agreement might now be much more complicated and that willingness to compromise on issues like agriculture was likely to be quite limited.

Granted, Australia has coped with much worse: China last year imposed restrictions on goods including wine, cotton and coal after Prime Minister Scott Morrison asked for “weapons grade” inspectors to investigate the origins of Covid-19. But tensions between allies like France, Australia and the United States make it harder to form a united front against China on commerce or to strike compromises on issues like a global tax deal.

Such frictions may also reinforce European wariness of relying on U.S. military might. Macron talked a couple of years ago of the “brain death” of NATO. The way in which President Joe Biden handled the withdrawal of U.S. troops from Afghanistan last month and the snub over the subs are likely to rekindle such thoughts. That might prompt an increase in EU countries’ defence budgets – and even persuade Macron to restrict France’s role in NATO, as was the case before 2009.

Infighting between Western allies might appear to China’s advantage. But Beijing, the major rising power in the Indo-Pacific region, is also unhappy about the AUKUS pact. That will at the very least hinder efforts to thaw Sino-U.S. relations, which has broad implications for everything from dismantling tariffs to joint efforts on climate change. That’s a lot of torpedoes in the water.

 

CONTEXT NEWS

- Australian Trade Minister Dan Tehan said on Sept. 20 that he would seek a meeting with his French counterpart to ease tensions over Canberra's decision to scrap a $40 billion submarine deal.

- France was infuriated and said its relationships with Australia and the United States were in crisis after Australia on Sept. 16 scrapped the contract it signed with France in 2016 for diesel-powered submarines in favour of nuclear-powered vessels based on U.S. and UK technology. It’s part of a new tripartite security agreement between the three countries that has been dubbed AUKUS, for Australia, the UK and the United States.

- France on Sept. 17 recalled its ambassadors from the United States and Australia, stoking fears over Australia's bid for a free trade deal with Europe.

- France has cancelled a meeting that was scheduled to take place in London this week between its Armed Forces Minister Florence Parly and British Defence Secretary Ben Wallace, Reuters reported on Sept. 19, citing two sources.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Swaha Pattanaik, Katrina Hamlin and Karen Kwok) ((For previous columns by the author, Reuters customers can click on CURRIE/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | antony.currie@thomsonreuters.com; Reuters Messaging: antony.currie.thomsonreuters.com@reuters.net))