Aussie bid to veto state deals with foreign govts may hurt China ties

Proposed law follows Canberra's criticism of Victoria state's involvement in Beijing's BRI

Australian Prime Minister Scott Morrison wants to enable the federal government to cancel state and university deals with foreign governments in a move that appears to be aimed at China and is set to further inflame tensions with Beijing.

The federal government revealed last Thursday that a proposed new law would apply to at least 135 existing agreements with 30 countries that could be reviewed and potentially vetoed.

Despite its insistence that the legislation is not aimed at China, the main motivation appears to be concern that states and universities have been making deals with Chinese entities which Canberra believes pose security risks.

The government has been critical of Victoria state's decision to join China's Belt and Road Initiative (BRI) and has raised concerns about universities collaborating with Chinese academics on sensitive technology.

Mr Morrison said last Thursday that the federal government was responsible for setting Australia's foreign policy and should ensure that other Australian authorities cannot undermine Canberra's efforts to pursue the national interest. But he insisted that the laws were not specifically aimed at China.

"It is vital that when it comes to Australia's dealings with the rest of the world, we speak with one voice and work to one plan," he told reporters.

"What (is) important in that relationship (with China) is that we're all very clear about what our interests are and that we're consistent about it."

Australia's ties with China, its largest trading partner, have deteriorated in recent years, particularly as Canberra introduced laws to prevent foreign interference and banned Chinese firm Huawei from participating in its 5G roll-out.

Relations further declined this year when Mr Morrison called for an inquiry into the origins of the Covid-19 pandemic - a move that appeared to be targeted at Beijing.

Yet trade between the countries continues to soar. Official data released this month showed China now accounts for a record 49 per cent of Australian exports, fuelled by surging iron-ore exports.

Canberra has welcomed the growing trade while simultaneously imposing limits on the relationship, especially by preventing Chinese investment in sensitive infrastructure.

The federal government revealed last Thursday that a proposed new law would apply to at least 135 existing agreements with 30 countries that could be reviewed and potentially vetoed. Despite its insistence that the legislation is not aimed at China, the main motivation appears to be concern that states and universities have been making deals with Chinese entities which Canberra believes pose security risks.

 
 
 
 

Earlier last week, for instance, the government confirmed it had blocked a A$600 million (S$600 million) deal to sell a dairy business, Lion Dairy and Drinks, to Chinese firm China Mengniu Dairy, saying the sale was "contrary to the national interest".

Mr Morrison would not say last Thursday whether he planned to ban Victoria's agreement last October with Beijing to cooperate on BRI projects.

But he said: "Where any foreign government seeks to undermine the sovereignty of Australia's foreign policy by seeking to do deals with subnational governments, Australia needs to protect itself."

Mr Peter Jennings, executive director of the Australian Strategic Policy Institute think-tank, said he supported the new legislation, and that Victoria had pursued the BRI deal despite Canberra's opposition.

He said the law could also enable the government to review a controversial lease of the port of Darwin to a Chinese firm - a deal that has angered Washington. The port is close to a base where United States Marines are stationed.

But Professor James Laurenceson, director of University of Technology Sydney's Australia-China Relations Institute, said the legislation appeared to be "an overreaction", noting that Victoria's BRI deal had not prevented Canberra from taking a tough approach on China.

"China will see it (the law) as another measure that is targeted at China," he told ABC News.

Mr Colin Barnett, a former premier of Western Australia state, said the law was "appalling" and would damage ties with Beijing. He said it could lead to the cancellation of a deal made by the state with China in 2011 to boost trade and investment.

The Labor opposition party indicated support for the new law, which makes it likely to pass.

The law allows Australian Foreign Minister Marise Payne to examine all existing and future deals with foreign governments and to abolish or cancel them.

All deals will be included in a public register.

The law excludes companies but covers local councils which enter into sister-city arrangements with foreign entities.

Within six months of the law coming into effect, states, territories, councils and universities will have to notify the federal government of all arrangements with foreign governments.

A version of this article appeared in the print edition of The Sunday Times on August 30, 2020, with the headline 'Aussie bid to veto state deals with foreign govts may hurt China ties'. Print Edition | Subscribe