— This is the script of CNBC's news report for China's CCTV on September 21, 2021, Tuesday.
The EU and Australia started free trade negotiations in June 2018 and have held 11 rounds of talks so far. The next round is scheduled for this fall, and hopefully, the two parties can reach an agreement by the end of this year. But now, the trade deal is in limbo in light of the disputes around the submarine deal.
Several media have reported that France is trying to delay the talks. In an interview with CNN on Monday, European Commission President Ursula von der Leyen supported France, saying the member had been "treated in a way that is not acceptable" by the US, Australia, and the UK, and that "a lot of questions" must be answered about the deal.
According to the official website of the EU, the bloc was Australia's third-largest trading partner in 2020. Total trade in goods reached €36 billion in 2020 and total trade in services was €26 billion in 2019. That means the total trading volume between the EU and Australia is roughly €62 billion a year. That number helps to tell how significant the submarine deal is and explain why France has reacted so strongly to what happened. The submarine deal with Australia was billed in France as the "contract of the century" which would open another 50 years of the France-Australia friendship.
For France, the collapse of the agreement means that the huge income is gone, and many small and medium-sized businesses associated with the deal could no longer benefit from it.
Michael Klare
Hampshire College, Pawss Professor Emeritus
"There's going to be a lot of money to be made out of this arrangement, US companies, not French companies are going to be the beneficiaries of this deal, the French deal was estimated at $60 billion. And the US submarine deal is certainly going to be an equivalent range. So there's a lot of money to be made by this, and I think that those considerations played an important role in the decision making by the administration to try to steer Australia away from France and towards US submarine production."
France will hold an election in April next year. Analysts believe that Macron needs to take a tough stance. At present, the US and Australia are both taking measures to ease the tension. Many hope to keep the trade talks and the submarine deals separated. However, the chief spokesperson of the European Commission Eric Mamer has also stated that it will be necessary to analyze the impact of the agreement reached by the US, Australia, and the UK on the schedule of the next round of trade talks
An EU-Australia trade agreement can benefit for both parties. The EU expects the agreement to help lift exports to Australia by up to one-third. And Australia is also looking for markets to boost its export as it is facing trade frictions with its largest trading partner China.