Josh Wilson (Fremantle, Australian Labor Party) Share this | Link to this | Hansard source

I am very glad to have this opportunity to speak on report 169 of the Joint Standing Committee on Treaties. It covers two agreements between Australia and France: an agreement that goes to the Future Submarine program and an agreement that covers classified information exchange, which is also related to the submarine program. These agreements facilitate and guide the further detailed arrangements in contracts that will follow regarding the Future Submarine project.

It is probably not necessary to say just how large in scope and scale, and how important, that project is. It is important strategically. It is important in terms of its potential for industry participation and capacity building, for jobs and skills in this country in sophisticated manufacturing and for marine and maritime industry. It is very complicated. The new submarine following the Collins class submarine will represent the most sophisticated manufacturing undertaking in this nation's history. It is also very costly.

The Future Submarine program will be the largest defence acquisition in our history. It is key to our regional maritime defence strategy as was set out in the 2016 Defence White Paper. It is the centrepiece of the Royal Australian Navy's continuous shipbuilding program. Labor members of the joint standing committee support the strategic value and the potential for industry capacity building that are inherent in this program, but we note that these things will only be delivered by the ongoing, close, stringent, careful and responsive supervision of all aspects of the Future Submarine program, or the FSP.

We recognise that defence strategy, procurement and operations fall within a special and distinctive sphere of policy and administration that occurs in the national interest. But we also recognise the importance of rigorous and discerning analysis and oversight of the FSP and other similar defence procurement projects. That analysis and oversight needs to be free of any tendency to regard such projects or such matters as being above ordinary review or criticism. Defence, in that regard, does occupy a special place in Australian governance and administration, but it cannot be so special that it is not subject to proper scrutiny and rigorous oversight.

Defence strategy, procurement and operations can never be matters that are so arcane and so rarefied as to prevent their full and proper supervision by parliament and government in relation to all relevant aspects of the national interest. Defence acquisitions, like the Future Submarines, should always be necessary, fit for purpose and cost-effective. I make the further point that the consideration of opportunity costs, when we look at defence procurement, should not be limited to foregone opportunities in defence alone. The defence budget is part of the national budget, and every dollar we spend somewhere is a dollar we cannot apply to another aspect of the needs of the Australian people.

In that sense, I want to make a side point. We heard from the Treasurer last night that the defence spending target of reaching two per cent of GDP is going to be achieved three years early, by 2021. That is fair enough. But it is also fair enough to ask what strategic need or imperative is driving that acceleration. That may well be a good thing, but we need to be able to ask in the parliament and in the public domain exactly what drives that acceleration, when of course there will be cuts and delays in other areas of funding.

The Treasurer said last night, 'The first duty of a national government is to keep Australians safe.' That is true, but there are a range of ways in which you can enhance peace, protection and stability. I have made the argument before that there is no better investment in peace and regional security, dollar for dollar, than targeted and well administered foreign assistance, and unfortunately we see a cut in that area. We do need to look at those two things at the same time, if we are serious about security and regional peace and stability.

The JSCOT hearings and the report process focused on a number of key issues in relation to the Future Submarine project. Two of the most important were control over intellectual property and the scope for Australian industry participation. Both of those things together go to ensuring our ability as a nation to maintain sovereign operational and sustainment capability. Australian industry participation should not be regarded as something that is important just in terms of the collateral economic benefits of this project. The benefits and advantages of administering a project like this well, such as jobs and skills and sophisticated manufacturing capacity, are very important, but that participation is actually critical to having the sovereign operational and sustainment capability that we want. We have to remember, when we consider something like a submarine, unlike other manufactured goods, things do not stop after the build. With other manufactured goods you might focus on the design and the build, but with something like a submarine, sustainment across its life is an enormous amount of work. The Collins class has a schedule of once-a-decade maintenance work that, more or less, takes 12 months, and there are other substantial periods when the submarines are out of the water and undergoing really extensive work.

Needless to say, the Future Submarine project is being looked at through the lens of the Collins class project in relation to both intellectual property and Australian industry participation. Many people would remember that, in the course of the Collins class project, there was a protracted dispute with the Swedish company Kockums. At one point, as Kockums asserted its intellectual property rights, Australia was prevented from having cracked propellers fixed. We had cracked propellers that were held in a ship off the coast of the United States and were not able to be seen to because of legal action. There were cases where Kockums employees had to be able to be aboard the Collins class submarines in order to undertake work while they were operational. These are things we would want to avoid through the Future Submarine project.

The point was made in the hearing that, when you talk about maximal Australian industry participation, it has got to be right through the process—in the design, the build and the sustainment. The Australian Manufacturing Workers' Union appeared before the committee and spoke about the importance of being involved in the design phase. They said:

… the multiplier effect of design work is much higher than for building work or maintenance work, and the opportunities for spin-offs and spill overs are much greater in the design phase that they are in other phases. … As we all acknowledge, we want the 12th submarine off the line to be better than the first submarine off the line. That is going to come out of having that concentrated design knowledge, know-how and 'know why,' combined with the feedback we are getting from the submariners who are on them …

Having that involvement is important from the point of view of operational management and that sovereign capacity.

We also heard evidence from Mike Deeks, who is managing director of Forgacs, a shipbuilder now based in my electorate, and also a former Royal Australian Navy Commodore and submariner. Mr Deeks gave us some insights into aspects that were poorly managed in the course of the Collins class project. He said:

The impact this had was poor operational availability and limited sea time and it had an adverse effect on recruiting, retention, training and morale. An ability to conduct underway repairs is equivalent to having more submarines in the force. If a submarine can remain on station operating independently of any shore based support, despite experiencing significant defects, it is like having additional submarines in the inventory.

The opposition members of the committee were glad, with the committee's support, to make some changes to the draft recommendations. The final recommendations included a request that the Department of Defence come back to the committee with further evidence as to how both intellectual property and maximal Australian industry participation will be guaranteed through the detailed contracts. I think that is a good thing and a mark of the committee's good work in this case.

Michael Danby (Melbourne Ports, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

The most important factor about this treaty in the immediate term is an event that has just happened in France: Mr Macron has just been elected rather than Marine Le Pen—'Marine' being an ominous name for this very important defence procurement—whose constituency is in rural and regional France, including Normandy and Cherbourg, where many of these submarines will be built.

I endorse some of the cautions espoused by the member for Fremantle about report 169. This is Australia's largest strategic gambit and biggest Defence procurement ever. The Future Submarine program is, as I said, Australia's largest defence acquisition and it is key to our regional maritime strategy as outlined in the 2016 Defence white paper. Unfortunately, the boats will only be built after 2026—when the French have finished building the earlier version of them, the Barracuda class, for their own navy—and will only be in the water by 2032!

Labor, however, supports the strategic value and potential for industry capacity building that is inherent in this Future Submarine program. Our position is that it should deliver on these important values and have ongoing close, stringent and responsive supervision, as you would expect with a contract of $50 billion. It is not the first time our country has undertaken to build submarines locally, and it is not the first time Australia has been reliant on the intellectual property of another country.

Australia has many lessons to learn from the Collins class submarine issue, including the disputes over intellectual property that were mentioned by the member for Fremantle, that have the potential to diminish Australia's sovereign capacity to maintain and operate these submarines, which, after all, will not be deployed until 2050. Witnesses before our public inquiry noted that Australia continued to be reliant on Kockums personnel for onboard repairs to the Collins class submarines, which reduces operational availability and sea time. Of course, this would have to be something we try and avoid in future circumstances.

There have been many critics of this program, not least Mr Andrew Bolt. He has some serious criticisms of this agreement between the two countries which I am going to note later in my remarks without necessarily agreeing with all of his points. The French majority ownership of DCNS may not persist through the life of the agreement, which is expected to last several decades. Article 8(3) requires that France shall continue to ensure its obligations under the agreement are met in the event of a change in control of DCNS, but it is not clear how this would occur in some circumstances—for example, if DCNS was to be controlled by a third country entity.

The agreement cannot be considered a matter principally confined between Australia and France. The Future Submarines integrated combat system will be provided by Lockheed Martin. Witnesses before the inquiry made the point that appropriate trilateral arrangements will be necessary if the objectives of the agreement under consideration are to be achieved in areas like intellectual property, security of supply, security of information, sovereign capability and Australian industry participation. Achieving the objective of maximising Australian industry participation—article 3(1)(h)—will not be easy or straightforward.

We support recommendation 1 of the committee's report, which calls for the Department of Defence to report back in the 2018 winter sittings of parliament about the acquisition of necessary intellectual property and its ongoing maintenance. At the suggestion of Labor members, this report will also provide more detail in relation to the contractual and other arrangements that will secure maximal opportunities for Australian industry involvement.

Of course, submarines are built of steel. The French have a great deal of experience in building submarines. Steel is produced in Europe, and steel is produced here in Australia. Arguments for the fighting efficiency of this submarine may take the form of the French and European suppliers of steel arguing that only they produce steel that is hard enough and suitable for the submarine's hull at the great depths that we know submarines have to operate in. But, certainly, there is no reason why the steel for the interior of these submarines cannot be provided by Australia. I see that Adani is offering to build all of its railways with Australian steel. I am sure the contractors for this would have considered the same.

Labor members of the committee strongly supported recommendation 2, and we are grateful that the government members did as well. Recommendation 2 says:

… the Committee recommends the Government seeks to ensure that the further detailed agreements and arrangements have the effect of allowing Australian companies to bid for work in all phases—

of the treaty—

on a preferred basis, all … things being equal.

I think that is a very important thing. It ensures not only that Australians can bid on it but also, all things being equal, that Australian companies will be considered on a preferred basis.

Of course, there are people who think it is a very big gamble to spend so much money over such an extended period of time on such an important strategic asset with a country so far away. We have really good relations with France. I personally know very well the French Ambassador to Australia, Stephane Romatet, who was chief of staff to Prime Minister Manuel Valls. I see him, speak to him and correspond with him regularly. I hope Mr Valls takes a leading role in the Macron government.

But France does have its own foreign policy. Recently, France quite commendably decided to cancel supplying the two aircraft carriers that it had sold to the Russians. This was probably a good thing given that Mr Putin unilaterally invaded Crimea and seized part of Ukraine despite the fact that the international community, including Russia, had agreed to guarantee Ukraine's sovereignty in return for Ukraine giving up nuclear weapons. Giving up nuclear weapons is something that no other country has ever done. You can imagine that many Ukrainians think the Russians would not have been so bold if Ukraine still had nuclear weapons. It is probably a factor encouraging Kim Jong-un and the Iranians to acquire nuclear weapons.

My point is that, whether we agree with the French policy of strategic shift or not, there is a concern about this. Mr Bolt, for instance, says that not building at least the first few submarines in France will mean the company 'delivers submarines to the Royal Australian Navy more slowly and at a higher overall cost'. Moreover, Bolt argues that this project 'will not deliver the last submarine for at least 35 years, and we do not even know whether we will need such technology then; and that, perhaps more dangerously, it gives a historically unreliable ally and supplier the power to model one of our major armaments if we fight in a war it does not like'. Now that appears far-fetched; I would even say it is anti-French. It is a view I do not share. But I am not the Oracle of Delphi—I cannot see 50 years into the future.

And Mr Bolt has a point. This is why we are going to have to supervise this arrangement with France very carefully, continuously. All members of this parliament—even those who are not concerned with Defence procurement and strategic issues—should concern themselves with this because, as the member for Fremantle said, it means we are going to spend $50 billion of Australian taxpayers' money on this and not on other things, including other Defence procurement. I know that the member for Solomon has very strong and very wise views on Defence procurement. We all, as an opposition, support the government on this general attitude towards the important acquisition of strategic defence for Australia—the submarines—but we have to be very, very mindful of how it operates over the next few decades.

Debate adjourned.

Sitting s uspended from 12:43 to 16:01