The fallout from the surprise announcement of a new security pact between the US, UK and Australia has spilled over into trade.
France, angry at the dumping of a A$90bn contract to build submarines for Australia’s navy, has threatened to derail the final stages of a free trade agreement being thrashed out between Australia and the EU. Meanwhile China, whose growing military might is widely seen to have triggered the security agreement, known as Aukus, has applied to join a sprawling Pacific free trade bloc.
The EU and Australia began talks over a free trade agreement in mid-2018. Total goods trade between the two was €36bn in 2020 and the EU hopes a deal will boost exports to Australia by as much as a third.
But on Sunday (September 19), France’s European affairs minister Clément Beaune told Politico that following Canberra’s decision to axe the French contract in favour of Anglo-American nuclear-powered vessels as part of the Aukus agreement, “it is unthinkable to move forward on trade negotiations as if nothing had happened with a country in which we no longer trust”.
The 12th round of negotiations for the agreement is scheduled to begin on October 12.
France wields significant influence within the EU and will take the rotating presidency of the European Council next year, but the French government has not hinted at any specific steps it could take to delay or jeopardise the trade pact with Australia. The French embassy in Canberra did not respond to a request for comment.
Australia and the EU have often been at odds over agricultural trade policy, and any trade deal that knocks down some of the barriers to Australian farm imports into the EU is likely to rile French farmers and be a political headache for the French government, as the recent UK-Australia free trade accord was to the British.
Australia’s trade minister Dan Tehan, who will travel to Europe for the latest round of FTA talks next month, dismissed the threats from France.
“There’s a strong understanding, from my recent trip to Europe to discuss the EU free trade agreement, [that] this is in the mutual interests of both Australia and of Europe and I see no reason why those discussions won’t continue, why those negotiations won’t take place,” Tehan told public radio on September 20.
“When it comes to free trade agreement negotiations, they’re always tough, they’re always hard fought and they’re always inked,” he said.
China covets Pacific trade pact
A day after the Aukus security pact was announced in the White House, the Chinese ministry of commerce said it had formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-country free trade area that also includes Australia. The UK has also started ascension talks.
China made the application to the government of New Zealand, the treaty’s depository. “The next step in this process is for the CPTPP group as a whole, through Japan as chair, to determine whether to commence an accession process with China,” the New Zealand foreign ministry says in a statement.
Chinese foreign ministry spokesperson Zhao Lijian told reporters last week that the timing of China’s application “has no connection” to the Aukus announcement.
Beijing has sent multiple signals it is interested in joining the CPTPP, which was initially intended to have the US as its lynchpin before then-President Donald Trump withdrew from it.
China had multiple “informal” contacts with member countries in the lead-up to the announcement, Lijian said.
“I want to emphasise that China is a staunch advocate for trade liberalisation and facilitation, and an important participant in cooperation and economic integration in the Asia Pacific,” he added. “China’s official application to join the CPTPP again demonstrates China’s firm resolve in opening up and promoting regional economic cooperation.”
“People can tell that what China works for is economic cooperation and regional integration. What the US and Australia push for is wars and destruction.”
But China’s joining will depend on the favour of governments with which it has frosty relations, such as Australia, Canada and Japan.
Ascension requires individual negotiations with each member state, but the Chinese government has rebuffed all high-level contacts with Canberra since imposing trade sanctions early last year after the Australian government called for an investigation to the origins of the coronavirus and criticised China for human rights violations in Xinjiang province.
“We’ve made sure China understands that we would need to be able to sit down and work through issues with them” in order to enter the agreement, Tehan said.
“Any country which wishes to accede to [the CPTPP] would need to abide by the commitments,” he pointed out. Chinese officials have said the country is prepared to make the deep changes to its domestic policies needed to satisfy the requirements of joining, but doubts persist that the government has the will to do so.
The Chinese government would have to make major reforms to policies in areas such as industrial subsidies, state-owned enterprises and government procurement in order to be eligible for CPTPP membership, according to Jeffrey Wilson, a trade expert at the Perth USAsia Centre at the University of Western Australia.
“The reforms that would be required to meet the standard of the CPTPP would require China to make some fundamental shifts in its domestic economic reform path that would have to be seen to be believed in terms of 30 years of Chinese state capitalism,” he tells GTR.
Pointing to disputes between China and Australia at the World Trade Organization, he says “if China is not WTO-compliant why would you let them into the CPTPP as well”?
In a submission this month to an Australian parliamentary inquiry, the Chinese embassy in Canberra said China respects global trade rules, has trimmed import tariffs, encouraged foreign investment, boosted protection for intellectual property rights and is progressing mixed-ownership reforms for some state-owned enterprises.
The submission, which elicited surprise in Canberra due to China’s trade sanctions on several major Australian exports, said “China will steadfastly expand all-round opening up and explore more efficient ways of connecting domestic and foreign markets and sharing factors of production and resources”.