The Australian federal government is bracing itself for the possibility that EU trade talks could be disrupted, as France fumes at Australia and the United States over the decision to scrap an $A90 billion submarine contract.

Photo: AFP

In a rare and dramatic diplomatic move, France's Ambassador in Canberra was recalled yesterday for urgent talks in Paris.

As he departed for home, Jean-Pierre Thebault delivered a blunt assessment of the Morrison Government's recent actions, calling them "clumsy, inadequate and unAustralian".

Meanwhile, senior figures in France had already begun to hint at possible economic repercussions.

"We're having trade negotiations with Australia," European Affairs Minister Clement Beaune told broadcaster France 24.

"I don't see how we can trust our Australian partners."

US President Joe Biden participates is a virtual press conference on national security with British Prime Minister Boris Johnson (R) and Australian Prime Minister Scott Morrison in the East Room of the White House in Washington, DC, on September 15, 2021. Photo: AFP

The threat is being taken seriously in Canberra, given France is a key part of the 27-nation EU bloc.

It is known for being deeply protective of its agricultural industries, an area that was always likely to be the biggest hurdle in sealing a deal.

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There is an expectation the recall of the ambassador could be just the first in a series of diplomatic protests, which might also include the cancellation or postponement of scheduled meetings.

"There has been duplicity, contempt and lies," French Foreign Minister Jean-Yves Le Drian declared on France 2 television, adding relations with Australia and the United States were in "crisis".

"You can't play that way in an alliance."

Talks with the European Commission on a massive trade pact started in 2018 and a 12th round of talks is scheduled for October.

Given there are several other countries with an interest in reaching an agreement with Australia, it is unclear how much France would be willing to disrupt discussions.

In recent days, senior EU diplomats have tried to play down the possibility, describing trade and military cooperation as completely different things.

But some Australian ministers think domestic considerations in Paris are likely to make the relationship very rocky for many months.

French President Emmanuel Macron.

Need to overcome 'substantial disappointment'

The French Presidential election is in April next year.

The scrapping of the submarine deal is a major economic blow for the state-owned Naval Group and a political setback for French President Emmanuel Macron, who will likely have his foreign policy credentials closely scrutinised in the lead-up to voting day.

"There is obviously substantial disappointment at the moment," Trade Minister Dan Tehan told the ABC.

"But we want to work with them to overcome it."

Tehan will travel to France in the next fortnight where he will try to start repairing the relationship.

Speaking to the ABC, he invoked Australia's bloodshed on the western front more than a century ago as evidence of the ties between the two nations and said this spat could eventually be overcome.

"We need to remember the depth of the relationship with France, which dates back to World War I," he said.

"We will continue to negotiate in deep faith."

File photo. Photo: AFP / Royal Australian Navy

Opposition says PM must repair relationship

Despite the French anger, the Morrison Government is convinced scrapping the agreement and taking steps towards acquiring a nuclear-powered submarine fleet in the coming decades is the right thing for the nation.

The fleet is one of the first goals of the newly formed AUKUS alliance between Australia, the UK and the United States.

"Australia understands France's deep disappointment with our decision, which was taken in accordance with our clear and communicated national security interests," a spokesman for Foreign Affairs Minister Marise Payne said.

She added that Australia regretted the recall of Thebault.

"Australia values its relationship with France, which is an important partner and a vital contributor to stability, particularly in the Indo-Pacific. This will not change."

China has criticised the AUKUS alliance and nuclear submarine plan, claiming it could intensify a regional arms race.

But behind the scenes, senior members of the Morrison Government said the deal, in large part, came about due to Beijing's recent actions, particularly in the South China Sea.

The Federal Opposition does not oppose the new AUKUS alliance and submarine project, but it does now want the Prime Minister to do more to fix the relationship with France.

"This isn't the first time Mr Morrison has blindsided an international partner, or failed to do the diplomatic leg work before an announcement," Shadow Foreign Minister Penny Wong said.

"The Morrison-Joyce Government must outline what steps it is taking to repair this important relationship."

- ABC