Ever since Australia launched an international search for a company to design and manufacture a replacement submarine for its Collins-class fleet, the project has attracted attention from around the world. The competing bids from Japan, Germany, and France, are complicated by domestic demands for the submarines to be built in South Australian shipyards and by geopolitical factors, including the perception that Australia’s government has already informally promised the contract to Japan.
The Diplomat spoke with Senator Nick Xenophon of South Australia, an outspoken advocate for building the submarines locally, about the various bids and the international and domestic politics surrounding the deal.
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Because we are an island nation with a vast coastline, submarines are an integral and vital part of Australia’s defense. I am not a defense expert, and I am not a strategic expert, but I rely on what the experts say, and there is tremendous unanimity that having a viable, capable submarine fleet is essential for Australia’s defense. Particularly in this era when the Indian and Pacific Oceans are increasing in importance, and knowing historically how important submarines are to an island nation such as Australia, we need to have a capable submarine fleet. Having 12 submarines, with at least six to eight of those being operational at any given time, is vital to cover the oceans that surround us.
How do the German, French and Japanese bidders compare in terms of experience building in Australia?
Clearly, France and Germany have had experience building submarines overseas. Japan has not yet had that experience. I think that it is fair to say that all the countries involved in the bidding process can make high-quality, first-class submarines. But in terms of experience, I think the Japanese understand that they are playing a game of “catch up” with the others, and they are diligently engaging with us.
I am agnostic as to which country we partner with to build the submarines, so long as they build here, which is consistent to the promise made by the Australian government. That, to me, is the key issue. Japan is at a disadvantage relative to Germany and France, but they are making a very genuine effort to “catch up” and that is what their industry delegation to Australia was about. And again, I’m not taking sides, I just want the subs to be built in Australia.
How was your recent trip to Japan, and did you accomplish what you hoped to?
I’m very grateful to Japan’s ambassador to Australia for obtaining meetings, and also Australia’s ambassador to Japan. There were many high-level meetings organized with Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Japanese government officials. So it was a very useful trip.
I made my point very clear: I am here to represent the interests of my home state of South Australia, which is a defense hub, and to make it clear that there was a promise made, that there must be submarines built locally. For the Collins class submarine, the threshold there, the minimum benchmark, was at least 70 percent local content – obviously, it will never be 100 percent local content because of issues related to intellectual property rights and so on – but it went up to as high as 78 percent.
Japan’s submarine building capacity and design capacity is formidable – as is Germany’s and France’s. I made it clear that obviously they are at a disadvantage because they haven’t been involved in exporting their technology to other countries, but this is an opportunity for Japan to build up an export capacity, and Australia in particular would be a perfect partner for that both in strategic and economic terms.
But what I told my Japanese host is that, please, do not get involved in one of the biggest domestic political disputes in this country for many years about where the submarines are to be built. If the submarines are to be built in Japan, they will find themselves embroiled in a domestic political dispute. The way to avoid that is to have that local content built in Australia. Use Australia as a strategic partner to gain experience exporting submarines, because there are other countries in the region, including India, that may want submarines, and Japan has that opportunity to become on par with the Germans and the French when it comes to exporting submarines to their allies.
What sort of political backlash has the Abbott government faced? How do you think your candidates will do in the upcoming Lower House election?
The competitive evaluation process was actually brought about by a leadership battle, a potential challenge to the prime minister. I think the government was hell-bent on building the submarines in Japan on the so-called “handshake deal” between our prime minister and Shinzo Abe. But, now the polls are looking very bad for the government. According to the recent polling carried out in the division of Sturt, held by Christopher Pyne, a veteran politician who is the only South Australian Cabinet minister, Christopher Pyne would lose that seat if I had a candidate running there. That just shows you what a strong, pertinent issue the local build question is.
As to the elections, it’s up to the people. We won’t have the resources of the major parties, but we will give it – to use an Australian expression – a “red hot go.” There is a real hunger for an alternative in the center, in the political center. There is a real appetite for change, and people are disillusioned with the major parties. I have been critical of this government, but I am also critical of the Labor Party opposition because they should have made a decision on the submarines years ago. There was paralysis in the Rudd-Gillard-Rudd government of that period, in terms of making a decision, so a lot of people aren’t happy about that. There should have been a decision made.
Do you sense any sort of U.S. interest in who Australia should work with?
Of course. I mean the U.S. is a key strategic ally, but last time I checked, Germany and France are also allies of the U.S., they’re a part of NATO. They are key strategic partners. And obviously, our relationship with Japan is valuable because of close ties between Japan and the U.S. But we are all allies. We all have common goals in terms of democracy, security, fighting terrorism, and being a bulwark against extremist activity. Geopolitically, the interests of the Germans, the French, and the Japanese aren’t that different from the Americans’. Obviously, there is a closer link in the Pacific between Japan and the U.S., and look, strategic considerations need to be taken into account, but they have to be genuine strategic considerations and the primary issue has to be capability – that we have the best possible sub for our sailors and ones that will do the job. But I think all three bidding countries can do that, and for me, the key issue is, let’s have local content.
How do you think voters will weigh industrial, strategic, and alliance considerations?
Well, I think voters are going to heavily weigh the industrial considerations. My hope is that. South Australia has the highest unemployment rate in the nation – it’s just under 8 percent now, it was 8.2 percent a couple months back. We are looking at a tsunami of job losses by the end of 2017 when the auto industry shuts down. When Ford, General Motors, and Toyota stop car manufacturing in this country, there will be tens of thousands of job losses in my home state and in southern Victoria. It’s going to be a massive issue, and there is no reason why we cannot match strategic and alliance considerations with industrial policy. We should be able to walk and chew gum at the same time – as can our alliance partners.