China Belt and Road plans for Australia face veto under new law

Prime Minister Scott Morrison is seeking new powers to veto or scrap agreements that state governments reach with foreign powers, in a move aimed at weakening China’s ability to gain influence in the nation through its Belt and Road Initiative.

The legislation will be introduced next week by Morrison’s conservative government, which is in the midst of a deepening diplomatic spat with China. It will cover a broad range of sectors, including infrastructure, trade cooperation, tourism, cultural collaboration, science, health and education, including university research partnerships.

It comes after the Victoria state government signed an agreement last year to join President Xi Jinping’s signature infrastructure-building BRI. The federal government may seek to use the new law, which is expected to pass this year, to override the plan, Deputy Prime Minister Michael McCormack said Thursday.

“There’s been discussions between the prime minister and Victoria” regarding the law’s impact on the BRI deal, McCormack said. “We want to make sure that if there are arrangements being put in place that they are done in the national interest.”

While China remains Australia’s largest trading partner, relations have markedly deteriorated since the government in Canberra banned Huawei Technologies Co. from participating in its 5G network and passed a law to stem foreign interference.

In April, ties nosedived after Morrison’s government called for an independent probe into the origins of the coronavirus. On Tuesday, a top Chinese diplomat told reporters in Canberra that China felt unfairly “singled out” by Australia’s push for the inquiry. In the briefing, deputy head of mission to Australia, Wang Xining, provided no clear answers to questions on whether Beijing’s subsequent trade sanctions on beef and barley exports were reprisals.

Morrison said in a statement the new law would ensure that all levels of government would act consistently to safeguard Australia’s national interest.

He declined to say whether he would seek to overturn Victoria’s agreement, but told reporters “it’s never been our government’s policy, under myself or the previous prime minister, that we signed up to or endorsed the BRI.”

Victoria Premier Daniel Andrews told reporters on Thursday that his attention was focused not on the new law but on combating his state’s recent coronavirus outbreak, which has sent his largest city Melbourne back into lockdown.

“If the prime minister has got time to do these things, then that’s fine for him—I don’t, I’m exclusively focused on fighting this virus,” Andrews said, adding he expected Morrison to soon announce a list of other markets in which Victoria could export its products.

Intelligence Concerns

The law will give the foreign minister the power to stop new and previously signed agreements between overseas governments and Australia’s eight states and territories, and bodies such as local authorities and universities.

There is mounting concern in intelligence circles about China’s influence in universities, and a program under which academics sign over intellectual property rights to their work in return for research grants, the Australian newspaper reported this week.

Beyond the BRI deal signed by Victoria, which aims to increase Chinese participation in new infrastructure projects, the law may allow the federal government to review and overturn memorandums of understanding between Beijing and the governments of Western Australia, South Australia and Tasmania in sectors ranging from investment, science cooperation and access to the Antarctic.

The states and territories have at least 130 agreements across 30 nations that could be affected by the new law, Morrison said.

Under the law, Morrison won’t be able to scrap deals between state governments and commercial companies or state-owned enterprises. That means the lease of a strategic port in Darwin, used by the U.S. military, to a Chinese company by the Northern Territory government in 2015 could not be overturned.

The law will establish a public register to provide transparency to the foreign minister’s decisions and states and territories will be given six months to deliver a stock-take of their existing agreements. The main opposition Labor party has indicated it will support the law, meaning it should pass parliament.

It’s the latest move by the government to safeguard national interests. Morrison also plans to toughen foreign investment screening, regardless of the size of the deal, for sectors such as telecommunications, energy, technology and defense-manufacturing.