Victoria’s Belt and Road deal with China torn up
China’s foreign mission reacted swiftly on Wednesday night, warning the decision would put any recovery in the relationship between Australia and its largest trading partner in jeopardy.
“This is another unreasonable and provocative move taken by the Australian side against China,” said a spokesperson for the Chinese embassy.
“It further shows that the Australian government has no sincerity in improving China-Australia relations. It is bound to bring further damage to bilateral relations, and will only end up hurting itself.”
Foreign Minister Marise Payne announced on Wednesday night that the Belt and Road Initiative deal – which tied the state to Chinese President Xi Jinping’s signature initiative to bankroll infrastructure projects around the world – has been cancelled under the Commonwealth’s new foreign veto laws.
The federal government also announced it was cancelling two Victorian government education agreements – one struck with Iran in 2004 and another with Syria in 1999. They have been ruled unlawful under the laws passed late last year.
Senator Payne said she considered the agreements to be “inconsistent with Australia’s foreign policy or adverse to our foreign relations”.
Victorian Premier Daniel Andrews has been locked in an ongoing feud with the Morrison government over its decision to sign on to the $1.5 trillion global infrastructure initiative, which would have allowed for Chinese investment in Victoria and for Victorian companies to participate in Chinese government projects overseas under the BRI banner. Mr Andrews has always defended the deal on the basis it would provide more jobs and economic opportunities for the state.
The Chinese government has maintained the BRI is an economic co-operation initiative, which “upholds the spirit of openness, inclusiveness and transparency”.
“It has brought tangible benefits to the participating parties,” the Chinese embassy spokesperson said. “The BRI co-operation between China and the Victoria state is conducive to deepening economic and trade relations between the two sides, and will promote economic growth and the well-being of the people of Victoria.”
No financial commitments had been made under the arrangement, which was largely seen as symbolic, but it had driven foreign policy disputes between Victoria and the federal government after more than a year of tension with Beijing. Diplomatic sources in Canberra, who spoke on the condition of anonymity because they were not authorised to speak publicly, said the scrapping of the deal could set a precedent for other countries attempting to balance the economic firepower of China with its international ambition.
State governments had until last month to provide a list of all of their agreements with foreign governments and Victoria listed its two BRI deals with the Chinese government as potentially falling within the new regime.
The Commonwealth ruled that both agreements contradicted Australia’s foreign policy, which has been reworked to compete with China’s infrastructure spending blitz in the region.
The new foreign veto scheme requires the Foreign Minister to cancel agreements that states, territories, local governments and universities enter into with an overseas government if they contradict Australia’s national interest.
Announcing the new laws last year, Prime Minister Scott Morrison said it was “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.
“Australians rightly expect the federal government they elect to set foreign policy. While many agreements and partnerships are of a routine nature … Where any of these agreements undermine how the federal government is protecting and promoting our national interests they can be cancelled.”
The Age and The Sydney Morning Herald revealed last year that Victoria did not consult the Department of Foreign Affairs and Trade before signing a key “framework agreement” with the Chinese government for the BRI on October 23, 2019.
While Victoria briefly consulted DFAT on an earlier memorandum of understanding with Beijing in 2018, and made some changes based on its advice, the Andrews government decided not to show the draft version of the more substantial framework agreement to the Commonwealth a year later before signing it. Both agreements have now been ruled invalid.
A spokesperson for the Victorian government said the Foreign Relations Act was “entirely a matter for the Commonwealth Government”.
“The Victorian Government will continue to work hard to deliver jobs, trade and economic opportunities for our state,” the spokesperson said.
Previously Mr Andrews had repeatedly defended the deal, saying last year that it was all about Victorian employment and that Australia’s relationship with China might improve if the Commonwealth focused on jobs.
“The agreement, like all agreements that Victoria enters into, and I expect the Commonwealth and other states are no different – it’s all about making sure that more Victorian product is sent to our biggest and smallest customers,” the Premier said in December.
“Whether it’s to China or any other part of the world, it’s all about jobs.
“We would be probably better off in our relationship if all of us focused on the fact, and I think the Prime Minister and all of us … are all about having the best economic partnerships with customers, large and small, in every part of the world because that means jobs and prosperity and profitability for families back home.”