Australia says trade pact would benefit EU in Indo-Pacific amid submarine deal fallout

French President Emmanuel Macron (second from left) and then Australian Prime Minister Malcolm Turnbull (centre) on the deck of an Australian navy submarine in Sydney on May 2, 2018.
French President Emmanuel Macron (second from left) and then Australian Prime Minister Malcolm Turnbull (centre) on the deck of an Australian navy submarine in Sydney on May 2, 2018.PHOTO: AFP

CANBERRA (REUTERS) - An Australian-European Union trade deal would be mutually beneficial and allow EU members a greater presence in the Indo-Pacific, said Australia's trade minister, as Canberra tries to repair ties with Paris after the scrapping of a US$40 billion (S$54 billion) submarine deal.

Australia last week cancelled a deal with France's Naval Group to build a fleet of conventional submarines and will instead build at least eight nuclear-powered submarines with United States and British technology after striking a trilateral security partnership with those two countries.

The cancellation has angered France, which accused both Australia and the US of stabbing it in the back, and it recalled its ambassadors from both Canberra and Washington.

In solidarity with France, EU lawmakers have publicly questioned whether a trade deal with Australia could be possible.

Australia's Minister for Trade Dan Tehan on Wednesday (Sept 22) urged the EU to progress ahead with a trade deal.

"The Australia-EU FTA is in the best interests of all parties," Mr Tehan said in a speech in Canberra, referring to the free trade agreement.

"The EU will use it as a way to strengthen its engagement with the Indo-Pacific because they realise that the region carries the economic weight of the world."

Australia and the EU are set to hold the next round of talks on a trade deal on Oct 12.

Australia expects those talks to go ahead, though the depth of anger was on stark display in New York at the United Nations when a senior EU lawmaker dispelled with normal pleasantries when speaking to Australia's Prime Minister Scott Morrison on Tuesday.

"For us, transparency and loyalty are fundamental principles in order to build stronger partnerships and stronger alliances," European Council president Charles Michel told Mr Morrison in a bilateral meeting in New York on Tuesday.

Mr Morrison is in America to attend the quadrilateral security dialogue, made up of India, Japan, the US and Australia, that convenes later this week.

He met with US President Joe Biden in New York but Mr Morrison said he would not be able to meet with French President Emmanuel Macron.