When the federal government torpedoed Victoria’s controversial Belt and Road agreements with China
When the federal government torpedoed Victoria’s controversial Belt and Road agreements with China, the state government didn’t respond with fury.
It was more of a resigned shrug.
There were no angry statements or protests, and not a peep from the Acting Premier.
But more than a few people in the state were muttering, “I hope the Feds know what they are doing”, fearing yet another economic strike from China.
The Commonwealth does not have a shred of doubt about what it has done.
It’s convinced it has successfully neutralised a crude attempt to wedge Australia over the Belt and Road Initiative (BRI) and made it crystal clear that foreign policy will be run by Canberra alone.
But it’s a high-stakes game.
The BRI has enormous symbolic importance for China’s leadership, and Beijing will frame the decision not as an assertion of Australian sovereignty, but as a deliberate provocation.
The question is how it will retaliate, and whether it will hit Australia with a fresh round of punitive trade sanctions and tariffs.
Some analysts suspect Beijing might have punched itself out.
So far, China’s trade war has not inflicted major damage on Australian exporters who have — with some exceptions — managed to find new markets.
Nor has Australia crumbled. The tactic hasn’t worked.
Yesterday, Foreign Minister Marise Payne suggested she didn’t believe that China would seek to punish Australia with further economic coercion.
She might yet be proven right. But the reality is that no-one can give that guarantee right now, particularly given that the major political institutions in Beijing are increasingly nationalistic hothouses.
The calculations here are fraught and complex. That’s one of the reasons why the federal government was so keen to shove Victoria out of its lane.
Victoria’s language has changed
Premier Daniel Andrews has always spruiked the Belt and Road deal as a job creator — a mantra he uses for many projects and policies — but questions about international diplomacy and the geopolitical implications have largely gone unanswered.
Questions about China’s tarnished human rights record were always difficult questions for Australia’s most progressive premier — but he was adamant this deal was about boosting the state’s economy.
As the relationship between Canberra and Beijing deteriorated last year, the level of anger at the Victorian state government rose.
The federal government’s intervention is the climax of an icy period between the Commonwealth and Daniel Andrews’s Victoria.
Perhaps not coincidentally, it came the same day that the state government trumpeted brand new plans to build a mRNA vaccine factory, which highlighted the snail’s pace of the vaccine rollout.
But while tearing up the agreement might set back the Andrews government’s plans to build its own commercial and institutional ties with China, it also removes a potential political pain.
You can see it in the way the state government’s language has changed.
Last year the Premier declared that ripping up the BRI agreements would not reset Australia’s relationship with China, and could hurt Victoria’s economy.
“I think it might make a very challenging set of circumstances for farmers, for workers, for businesses, for every Victorian much, much harder,” he said in December.
But the state government barely gave a whimper yesterday in the wake of Senator Payne’s announcement, suggesting that it may know that fighting publicly for the deal was becoming politically untenable.
The COVID-19 pandemic has exacerbated suspicion of China in some corners of the community, and the BRI deal — while not a major vote changer — had the potential to be a nasty distraction for Mr Andrews in the 2022 election year.
That issue is now neutralised, depriving the federal government and a desperate state opposition of an avenue of attack.
Political opportunities for the Victorian ALP
China’s willingness to bully Australia with trade sanctions, as well as the COVID pandemic, has also triggered a new wave of economic nationalism.
Politicians of all stripes, and voters across the country, want Australia to be more self-sufficient.
And if Beijing does decide to inflict further punishment on Australia in retaliation for tearing up the BRI deals, it will only reinforce that sentiment.
Stepping back also opens up some political opportunities for the Victorian ALP.
If China does retaliate with more trade punishments, damaging Australian and Victorian businesses, then the state government will be quick to heap the blame on the shoulders of Canberra.
“It’s a decision taken I’m sure very consciously and cognisant of any impacts, so perhaps best to talk to the federal government about that,” Minister Jaala Pulford said pointedly on Thursday.
You get the sense that Victoria has not so much quit the field as much as it’s stepped back to wait and see what happens next.
Mr Andrews has made no secret he believes the federal government needs to wear much of the blame for the sharp deterioration of Australia-China ties.
“There’s no getting around it — whether you like it or not, [China] is our biggest customer,” the Premier said last year.
But it’s a difficult and complex customer, and one used to getting its own way.