Trade Cases

Leibowitz on Trade: Submarines for Australia—the U.S. Pivot to Asia

Written by Lewis Leibowitz

By Trade Attorney Lewis Leibowitz

The announcement last week that the U.S. would work to provide secret technology to Australia for that country to build and operate nuclear-powered submarines turned heads in the United States, but blew minds in France. The nuclear sub deal also terminated a $66 billion deal for France to supply diesel-powered submarines to Australia. Thus, on a strategic level, Australia chose the U.S. over France as the best guardian of its future.

If you’ve been following events in Asia and the Pacific, Australia has been in a running trade dispute with China over a variety of issues. Beginning in 2019, China restricted and then banned imports of Australian coal. Until then, Australia was the top supplier of coal to China, a huge consumer of coal for steel production and electric generation. Then in 2020, China imposed antidumping duties on imports of Australian barley (for production of alcohol) and wine.

China hit Australia with import bans on timber, alleging that shipments from Australia contained insect pests. For those who import wood products (or products like steel with wood packaging), the allegation that Australia has pests may seem ironic.

Australia then hit back, banning shipments of live lobsters to China after the announcement of a new inspection for environmental contamination of Australian lobster. And, at the end of 2020, Australia joined other countries in demanding an international investigation of the origins of the coronavirus pandemic.

These are only a few examples of trade tensions. The situation appears headed for rockier days.

Australia now finds itself in a confrontation with China, the world’s second-largest economy, and recognizes that it cannot deal with these problems on its own. If that is the mind-set, would an offer of diesel powered submarines from France or nuclear-powered submarines from the U.S. be a better guarantee of future well-being? A no-brainer, right?

On the U.S. side of the ledger, friends right now are also more important. The withdrawal from Afghanistan was a military, foreign policy and humanitarian disaster, demonstrating that ineptitude can plague even (or especially) the world’s most powerful players. The United States sees an opportunity to beef up the capabilities of a key player in the Asia-Pacific region by sharing secret nuclear technology with Australia, only the second country so favored (France has a few nuclear subs also, but the most secret technology was not delivered by the U.S.

China, as many know, has been enlarging its navy for years, and now has more ships on the water than the United States. It has increasingly been outspoken about its desire to increase its influence in the region and globally. It has made threats against Taiwan and overtures to countries (like Iran and North Korea) that are antagonistic toward America.

Military intelligence sources describe one glaring weakness of China’s navy as antisubmarine warfare. The Australia deal involves nuclear submarines, which are much more difficult to detect than the older diesel models, and which can remain submerged for months at a time. Clearly, if Australia wanted to deploy submarines that would be tougher to detect, the diesel models would not be the choice.

The French, however, have nuclear powered submarines in their fleet. Only one has been built since the early 1990s. Again, if nuclear power is the choice, the French option appears inferior to the American.

Nonetheless, France is outraged by the cancellation of the submarine deal by Australia and its replacement by the British and Americans. Accusations are flying between Paris, Washington and London. Where this ends up is anyone’s guess.

Against this backdrop, the U.S.-UK-Australia strategic partnership makes a lot of sense. What is a bit less sensible is the termination of the $66 billion diesel submarine deal between Australia and France, which France has been quick to blame on the United States, to the point that France has recalled its ambassador to the U.S. for the first time since diplomatic relations between the two countries were established 243 years ago. For a president known for his experience in foreign affairs, this is a surprise. Were the French really blind-sided by this deal, and if so, why?

In the meantime, there are other initiatives that are relevant to this controversy, including several related to international trade. Just to name a few: the negotiations with the European Union to remove, suspend or replace the Section 232 steel and aluminum tariffs; a trade and technology initiative launched this month by the U.S. and EU; and the resurrection of TTIP, the U.S.-EU trade agreement launched during the Obama administration.

In short, we have a number of pieces on the chess board right now. With Britain an economic and strategic player separate from the EU because of Brexit, these issues are becoming a lot more complicated. The chances of any one of them crashing or succeeding, have become a lot more speculative. And Russia and China, along with Iran and North Korea, have more chances to split traditional alliances and disrupt the system even more.

With all this uncertainty, falling back on historic partnerships may look more appealing. That is why the rupture with France, which could have been better handled, is all the more mysterious.

I see all these issues as interrelated—France is wounded by the cancellation of its submarine deal. Will the U.S. reward them by making concessions on TTIP or steel/aluminum tariffs; will new advances against China’s naval and economic expansion further complicate the situation (note that China has now formally applied for admission to the Trans-Pacific Partnership agreement initially supported by the U.S. as a hedge against Chinese expansion); is more bellicosity likely by China against Taiwan; will Russia foster increased dissension among NATO members?

Who knows—but these issues could resonate for years to come.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
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Washington, D.C. 20036
Phone:  (202) 776-1142
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Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

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