I`m not often in agreement with Greg Sheridan about matters related to foreign policy, but on this matter I do share his indignation at the manner in which Japan was treated by the entire submarine process. As for who is to blame for this state of affairs, and why Japan lost the bid, there are a myriad of guilty parties and reasons available. Some of the blame can fall on the previous Abbott government, who raised Japan`s expectations for an overseas build for the submarines despite not being entirely in control of the domestic ramifications for such an eventuality. Some of the blame goes to South Australia`s political class, who so politicised the entire submarine selection process that any true objectivity went right out the window once it became clear that Liberal seats were at risk of electoral wipeout. Some of the blame does fall of the Department of Defence, who should have made clear indications to Japan at an early stage if it appeared that its bid was not going to succeed, at least to give the Japanese government time to prepare for the fallout of the decision rather than finding out about it through the press.
Some of the blame must also fall on Japan`s side, particularly in the case of Mitsubishi Heavy Industries. As revealed from an interview held during the week, MHI did not conceive that when Japan altered its three principles for defence exports, that it would suddenly find itself having to immediately bid for a major defence contract for the pinnacle of Japan`s maritime defence technology. MHI had to figuratively be dragged by the Japanese government into the bidding process, a process that MHI would have known would have been beyond its capability to compete for given that both of its rivals had long histories of defence manufacturing in foreign countries. This reluctance became manifest in Japan`s bid and public perceptions of it, which is why the Japanese government, at every opportunity, had to re-double its efforts to try and convince the Australian government of the seriousness of its bid and the benefits that could be accrued from it.
So the bid was lost, and this news was not well received in Japan. One of the main theories that has arisen over the past week is that China so exerted pressure on Australia that the Turnbull government folded up and removed Japan`s bid from the table. From a personal point of view, I don`t think there is any merit to these allegations, which are obviously being driven from a sense of betrayal by Australia, but the fact that Malcolm Turnbull was in China earlier in April, that he has a `China-centric` view of the region and that his office contains a number of China experts has added fuel to the conspiracy theories. Yet Australia is perfectly capable of making its own decisions in its national interest without outside interference (as evidenced by the fact that it went with a French bid contrary to all expectations that Australia to choose Japan based on pressure from the US), hence the implication that Australia would just buckle under pressure from Beijing is without merit if not a little insulting to Australia.
While I do not believe, unlike Greg Sheridan, that disappointment in the bid outcome runs across Japanese society as a whole (indeed there are probably some sections of Japan`s society who are very pleased that PM Abe did not succeed in plan for a major defence export), there is certainly frustration and anger in the defence and foreign affairs community of Japan at how Japan was treated by the CEP and the Turnbull government and whether Australia can ever be trusted to become true member of the trilateral arrangement with the US in the region. Mind you, there are precedents for this type of decision making by Australia. Some might recall that on two occasions over the past five years, South Korean defence industries have suddenly found out that they`ve been eliminated from potential Australian defence contracts at the last minute and often with no prior notification. That this has been allowed to occur in the case of Japan, which is supposedly a major regional strategic partner for Australia, is nothing short of an indictment on Australia`s decision making processes and the complete disregard for regional sensitivities.
So where will Japan-Australian relations go from here? While anger still remains under the surface, Japan will continue to try and further its security relationship with Australia, probably through an increase in joint exercises with the ADF. One way that Australia could make amends would be to push through with the plan for a fast rail network on the east coast and from the very outset make JR the only company to be consulted on design and construction of the enterprise. It would go some way to placating that anger and show that Australia is still a country in which Japan can both invest and rely upon at its word. One aspect of Japan`s failed bid that has still yet to be fully explored is how much investment Australia has missed out on from Japan as a result of going with a European bid. France does not have as much regional business exposure as Japan and its industries are not as profitable in this quarter of the globe as those from Japan, so Australia has chosen to go with a partner whose overall business potential is far less than that of Japan. If the government was looking to boost employment from this enterprise, then this is well and truly a major opportunity lost.
For the time being the relationship will run at a slower pace than in recent years as Japan re-evaluates its ties with Australia. As Australia is about to go into a federal election there will be a drop off in Japanese interest until the outcome of the election is known, after which things may pick up again. At some point over the year PM Abe must make a visit to Australia to fulfil the content of the agreement he made with Tony Abbott two years ago for annual visits by the leaders of both nations, but the visit may be fairly short (maybe no longer than a single day) and with a limited agenda. To offset this, Australia needs to now make a much more pro-active effort to rebuild and reassure Japan of its desire to grow closer to its regional neighbour, for any delay in conveying this sentiment will breed further resentment and end up freezing relations entirely, an outcome for which Beijing would be surely overjoyed.