Australian move to veto deals with foreign states set to risk damaging China ties

Australian PM Scott Morrison insisted the laws were not specifically aimed at China.
Australian PM Scott Morrison insisted the laws were not specifically aimed at China.PHOTO: EPA-EFE

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

The federal government revealed on Thursday (Aug 27) that the law would apply to at least 135 existing agreements with 30 countries that could be reviewed and potentially vetoed.

Despite the government's insistence that the legislation is not aimed at China, the main motivation appears to be concerns that states and universities have been doing deals with Chinese entities that Canberra believes pose security risks. The government has been critical of the state of Victoria's decision to join China's Belt and Road Initiative and has raised concerns about universities which collaborate with Chinese academics on sensitive technology.

Mr Morrison said on Thursday 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 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 rollout. 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.

Earlier this week, for instance, the Government confirmed it had blocked an A$600 million (S$596 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 on 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."


The executive director of the Australian Strategic Policy Institute think-tank, Mr Peter Jennings, said he supported the new legislation, and 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 at which US Marines are stationed.

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

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

Former Western Australia premier Colin Barnett 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 the Foreign Minister, Ms 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 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.