Buying Australia's new submarines from an experienced European supplier wouldn't be easy but it would be less fraught than buying from Japan, a new study says.
The Australian Strategic Policy Institute paper says concerns that buying Japanese subs would harm relations with China or potentially drag Australia into a Sino-Japanese conflict had been over-stated.
But concerns that buying Japanese would reduce Australian industry opportunities were probably justified.
The government is now evaluating submarines from Japan, Germany and France for what will be Australia's most expensive ever defence procurement.
Unlike Labor, the government hasn't specified that the new subs be built in Australia.
ASPI said the government, through its process of competitive evaluation of competing designs rather than proceeding to a tender, was explicitly keeping open the option of buying Japanese, referred to as "Option J".
In an examination of pros and cons of Option J, the paper authors ASPI analysts Andrew Davies and Benjamin Schreer said Australia has a clear interest in maintaining a close strategic relationship with Japan.
Option J would signal a further deepening of the relationship at a time of shifting major power relationships in the Asia-Pacific.
However, Japan has no experience exporting any sensitive defence equipment, let alone submarines, and is still trying to work out how to do so.
One of the three contenders, German firm TKMS says it has the long experience and expertise to build 12 subs in Adelaide.
"Working on a commercial basis with a European supplier with experience in exporting submarines and submarine-building would probably be less fraught (it's unlikely to be easy, regardless) than establishing a robust through-life relationship with Japan more or less from scratch," the paper says.
ASPI said some commentators had suggested that China would react negatively to an Australia-Japan sub deal and could seek to punish Australia, perhaps through trade.
"We're not convinced by the arguments put forward to date. In particular, the negative implications for Australia's trade, security and relationship with China have been overstated, as has China's ability to punish Australia should it be inclined to do so," it said.
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