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Europe wants Australia’s help in developing rival to China’s Belt and Road

Australians would be forgiven for thinking that their nation’s relationship with Europe is in tatters after the cancellation of the $90 billion French submarine contract.

French President Emmanuel Macron still isn’t over what his government labelled a “stab in the back”, while negotiations over a free trade deal with the European Union were halted amid the submarine announcement fallout.

Personal animosity between Prime Minister Scott Morrison and French President Emmanuel Macron set back the Australia-EU relationship in 2021.
Personal animosity between Prime Minister Scott Morrison and French President Emmanuel Macron set back the Australia-EU relationship in 2021.CREDIT:ALEX ELLINGHAUSEN

Rightly or wrongly, Australia’s decision to cancel the French contract and build nuclear submarines with the United States and Britain sent a signal that it preferred to partner with its traditional Anglo-Saxon allies. Adding to these tensions, Europe last year racheted up its pressure on Australia to do more on climate change.

But there are signs that the relationship between the EU and Canberra could blossom more than ever in 2022. And the biggest driver is China.

Trade Minister Dan Tehan says Australia and India will agree on an interim trade deal by the end of the year.
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Ever since China’s $1.5 trillion Belt and Road Initiative started winning over the support of developing countries all over the world almost a decade ago, the West has been searching for an alternative. While the BRI has been incredibly influential, it has also been criticised for creating bungled projects and debt traps – the most notable being when Sri Lanka was forced to hand over a port to a Chinese firm when it was unable to repay its loan.

To much fanfare, US President Joe Biden last year joined with other G7 nations to announce the Build Back Better World (B3W) initiative, which was widely seen as the West’s answer to the BRI.

Although it received much less attention when it was announced last month, the EU’s $470 billion Global Gateway may prove just as pivotal in providing an alternative to Beijing.

Unveiled as an investment program that will create “links, not dependencies,” the EU has branded it as a modern version of the BRI with a focus on investment in digital sectors, clean energy, health, education and research.

Although it doesn’t mention China by name, the strategy is designed to achieve two main objectives: shore up the security of supply chains and counter Chinese finance and influence.

The EU’s Ambassador to Australia, Michael Pulch, says Europe wants China to have a proper discussion with Australia.
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Europe tells China to have a ‘proper discussion’ with Australia on trade disputes
Senior EU officials Josep Borrell and Jutta Urpilainen tell The Sydney Morning Herald and The Age that the relationship between the EU and Australia is in “good health” and Global Gateway will bring Brussels and Canberra further together.

They say Europe’s calling card to other countries will be no “white elephants” and “debt traps”, with its initiative to instead focus on projects that are “sustainable and serve the needs of local populations”.

In a world where supply lines are shrinking amid escalating tensions between China and the US, Borrell and Urpilainen warn that data flows, energy supplies, rare earths, vaccines and semiconductors are all “instruments of power in today’s world”.

“Which is why we need to ensure that global connectivity and access to these flows is based on rules and international standards,” they say.

“While flows in goods may be ideologically neutral, the rules which govern them are intertwined with political values.

“Europe wants to reduce excessive dependencies and be more autonomous in areas like the production of computer chips. Our autonomy is reinforced if all our partners have alternatives when making their investment decisions.”

Borrell and Urpilainen say Global Gateway has already identified a number of flagship initiatives, including the extension of the BELLA submarine cable between Europe and Latin America and more than $1.5 billion for North Africa to support renewable energy projects.

Trade Minister Dan Tehan says Australia is well placed to be a “reliable and cost-competitive provider” of critical minerals for the EU, including battery minerals and rare earths.

“Australia and the EU share common values and an unwavering commitment to the global rules-based order. The EU’s Global Gateway initiative is welcome and will help identify projects that we could partner together on in the Indo Pacific,” he says.

The semi-hard cheese made from goat and sheep’s milk is produced in numerous countries, including Australia, Britain, Canada, New Zealand and several in the Middle East.
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But there are clearly factors working against Europe, including the fact that China doesn’t see the EU as a single entity, but rather as a series of relationships that can be split (witness Italy signing up to the BRI).

Secondly, Europe is physically remote from the Indo-Pacific, meaning many nations have not deepened their relationships with the EU, despite it accounting for 14 per cent of global trade in goods.

The long-awaited free trade deal between Australia and the EU, which has been in the works since 2018, could be a step to addressing this.

Tehan says he looks forward to the 12th round of negotiations resuming in February.

He says a free trade deal would “create opportunities to grow our two-way investment partnership and strengthen the EU’s economic engagement in the Indo-Pacific, where the economic weight of the world is”.

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