The Buzz

Japan's Failed Australian Submarine Bid: Is America at Fault?

Reports emerged last week that Japan’s bid to build Australia’s new submarines had been all but eliminated, or was languishing in third place behind the French and German bids, as the Australian government prepared to announce the winner. Subsequently, Prime Minister Malcolm Turnbull announced on Tuesday the successful bidder for the $50 billion contract was the French firm DCNS. Sources cited by the ABC reported technical and engineering problems with Japan’s bid. The widely understood sticking point for the European bids, namely U.S. reluctance to share the details of its AN/BYG-1 Combat Management System with European firms has evaporated. President Obama is reported to have indicated as much to Prime Minister Turnbull, with a “senior source” suggesting that there would be no implications for the alliance, no matter which bidder won. Australia is the only country in the world the United States shares this system with. A frantic eleventh-hour effort to rescue the bid by the Japanese—who appeared to be unaware of the perilous state of their bid until very recently—failed. Losing this massive opportunity was a significant blow for Japan, which was also recently outbid by China to build Indonesia’s fast rail. All this while two JMSDF ships and a submarine were in Australian waters for an eleven-day exercise with the RAN.

Most commentators agree former Prime Minister Tony Abbott jumped way too early and publicly with his overt support of the Japan bid in his eagerness to strengthen ties with Japan. The Competitive Evaluation Process that was subsequently announced was widely perceived as an attempt to regain the veneer of due process, if little more. Notwithstanding this popular perception, the European bidders stayed the course. German firm ThyssenKrupp AG said in March it favoured domestic Australian construction as the best option, a tantalising prospect for the Turnbull government now with an election looming. France’s DCNS, moreover, promised smooth intellectual property flows and extensive local industry engagement. This, in the context of Turnbull’s innovation agenda, may have been the clincher. Political concerns over the Japanese bid had always centred on Japan’s lack of experience in the defence export game, and uncertainty regarding its domestic political landscape. In these contexts of political overtures, election cycles, domestic imperatives, and commercial risks, we might be obliged to take all this at face value. An unpredictable high-stakes game, prone to misperception, bound to defy expectation right up to the last moment.

In the broader regional strategic context, on the other hand, not so obliged. The $50 billion acquisition of Australia’s twelve new submarines is no ordinary business deal. It’s a strategic move of regional import. A successful Japanese bid would have been widely perceived as representing the backbone of a burgeoning quasi-alliance between the two countries. The actual extent of this has been hotly debated recently. Suffice to say the perceptual impact, at least, of a Japan-Australia deal on such a strategic acquisition would have been felt regionally, and the epicentre of that impact would be in Beijing. China’s Minister of Foreign Affairs used the strong imagery of WWII to caution Canberra against a Japanese sub deal in February. The United States, for its part, has been widely understood to favour a deeper Australia-Japan relationship, as a cross-brace to its two most significant regional alliances. The submarine deal would further enable regional U.S. influence in both the military-technical and political domains. In addition, the United States clearly wants both Australia and Japan individually to take on a greater share of the security burden in the Asia-Pacific.