Victoria’s signing breaks away from the federal government

Recently, the Victorian state government declared that the BRI “will create opportunities for Victorian businesses and local jobs – opportunities that will be more important than ever as we rebuild from this crisis”.

More than ever, a pragmatic and nuanced discussion is necessary as the Victorian state government should work hand-in-hand with the federal government to deliver economic outcomes that work in the best interest of all Victorians. 

Without consulting Canberra, Victoria is the only Australian state to formally sign onto the Framework on the BRI agreed with the National Development and Reform Commission of the PRC, contradicting the position of the federal government to not join the BRI as it raised geostrategic concerns. Such reservations are broadly shared within spheres of Australian academic, business, policy analysis and political circles. The BRI Framework Agreement places Victoria in an awkward position as Australia has formally signed onto the ‘Blue Dot Network’ with the United States to assist in developing infrastructure in the Indo-Pacific region to counter the BRI.

Understanding the key elements, concerns and challenges of the agreement

While the BRI Framework Agreement intends to promote the “connectivity” of infrastructure, innovation, aging, trade development and market access, it is written in generalities, lacking in detail around the BRI’s governance, project transparency, specifically on how to mediate disputes as “both sides will settle differences in the interpretation, application or implementation of [the BRI Framework Agreement] through friendly consultations”. 

When the federal government deliberated on the BRI back in October 2017, the benefits of signing up were not directly straightforward. Former Prime Minister Malcolm Turnbull contended that “we obviously welcome Chinese investment that meets our foreign investment guidelines but we’d prefer to focus on specific projects and investments rather than engaging in generalities”. 

The BRI is not as yet rules-based in practice despite the Framework Agreement outlining it will “comply with international rules…with highlighting the importance of procedure open, transparent, and non-discriminatory”. 

Australia is accustomed to operating in a multilateral environment as a middle power which places Victoria in an indeterminate position as the BRI is primarily designed as a unilateral mechanism to expand China’s regional and global influence and cater for its domestic industrial overcapacity. 

Another key challenge for Victoria is that it does not have access to federal agencies that provide key insights and counsel in matters pertaining to foreign investment and security. This is apparent when Chinese communications, control and collection technologies are employed within the BRI’s infrastructure build. 

The BRI Framework Agreement is limited in its context of materialising local participation for Victoria. The prospective imbalance of market access between Victorian and Chinese companies and their workers engaged to build Victoria’s infrastructure programs is a major concern. 

Under the agreed areas of cooperation, both sides adhered to the principle of “infrastructure with the shared objective of increasing the participation of Chinese infrastructure companies in Victoria’s infrastructure construction program”. Preferential treatment and access for China over Australia is probable given its past precedents of practical cooperation engagements with other BRI signatory countries. It is a query that the Victorian state government has not been able to respond to at the present time. If a significant disparity arises, Victorians will consequently be impacted through the loss of business and job opportunities not being available to them.  

Senator Sarah Henderson asserts that “as the Prime Minister [Scott Morrison] has reiterated, our economic sovereignty has never been more important. China’s BRI is the wrong road for Victoria”, arguing that the Victorian state government “must cancel the deal” as he has failed to explain the value proposition of signing up “in any detail”. 

A considered geoeconomic approach necessary

Through the BRI, Victoria is predominantly leveraging China’s capital and resources to support the state’s major projects approach as it has no other economic avenue to fund its massive $107 billion infrastructure program as it heads towards a significant budgetary deficit. 

Victoria’s trade and investment relationship with China needs to be considered in balance. While it is important to trade and access investment from China to boost the Victorian economy, the BRI does not presently provide a way forward to assess infrastructure projects in an open and transparent manner to ensure it is a partnership of mutual benefit with equitable outcomes. 

The uncertainties played out during the COVID-19 pandemic highlight a greater need for federal and state governments to collectively align in reinvigorating economic prosperity for all parties. Preferably, Victoria should reassess its position with the BRI as the road to recovery is a pragmatic and measured geoeconomic relationship with China in close collaboration with the federal government. 

Alternatively, if the Victorian state government continues its solitary path towards the BRI without undertaking thorough due diligence of the megaproject nor fully assess the geopolitical and geoeconomic implications, it will be beset with immense challenges, issues and risks that will have significant implications for the people of Victoria in the long-term. 

An earlier version of the article was first published by Australian Outlook on May 13, 2020.

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In the eyes of some commentators, the former highlights a change towards the international order that is already coming as President Xi Jinping has declared that he intends to restore China’s historical position of supremacy in Asia and as a global hegemon. A move toward a China-centric international order replacing the US international order is observed as likely in the foreseeable future.
Before COVID-19, US President Donald Trump focused inward on domestic issues and operated with transactional unilateralism, which enhanced the prospect of accelerating a Sino-centric order in the Indo-Pacific region. However, the COVID-19 pandemic has shifted and reversed the US-China engagement strategy under former US President Barrack Obama. With bipartisan support from the Republicans and Democrats, the US is leading a wide-ranging strategic confrontation against China on all fronts, including technological, economic, and defence to deter a Sino-centric international order.

On the second school of thought, I anticipate that in the post COVID-19 world it does not necessarily preclude China’s continued ascent to power within the Indo-Pacific region, but it will exacerbate the current state challenges with greater intensity. It raises immediate questions on whether China is attempting to challenge the US as a regional hegemon, or evolve into a multipolar region working alongside Australia, India, Indonesia, Japan and the US. COVID-19 demonstrates that competition and tensions between China and the US will further deepen in the Indo-Pacific region, spilling onto Australia.

Two key milestones are coming up for China which will see its strategic objectives unchanged: first, the Chinese Communist Party’s (CCP) 100th year anniversary will take place in 2021 to celebrate longevity and stability, and second, Xi Jinping is likely to continue as China’s leader for another five-year term in 2022. Through this lens, the CCP will remain unwavering. Continuity on how China approaches the international order is likely as the central tenets of domestic and foreign policies that drive the CCP have not altered and it is improbable they will amend them in the short to medium term.

China will endeavour to find tactical advantages in how they manoeuvre their foreign policy objectives in the Indo-Pacific region as it appears to emerge from COVID-19 in a stronger geoeconomic position compared to the US and its allies. For Sino-Australia relations, China will maintain a strong interest to access Australia’s strategic mineral and agricultural resources, political influence in the South Pacific, the US via the ANZUS Treaty, and as a member of the Five Eyes intelligence network, and as an influential middle power in the international order, particularly in the Asia-Pacific region where China has intentions to control. China will correspondingly continue to counteract the Royal Australian Navy’s operational engagement in the South China Sea, Australia’s banning of Huawei to enter the 5G network, the enactment of foreign interference legislation and the transparency and disclosure official register within the Attorney General’s Department, and Australia’s entry into the trilateral Blue Dot Network to help develop infrastructure in the Indo-Pacific region in opposition to the Belt and Road Initiative.

In Australia’s neighbourhood, the Pacific is an important region for Australia-China contestation. China’s engagement in the Pacific Islands has seen it send medical supplies in response to COVID-19 to support Vanuatu and French Polynesia. At this time, Australia has an opportunity to offer the Pacific Island countries both practical assistance and regional leadership to avert a prospective outbreak, ensuring it is well placed post COVID-19 to secure its regional strategic interest and to neutralise an increase of Chinese influence in the area.

Sino-Australia relations will be further tested by the Australian Foreign Minister Marise Payne’s call for a global COVID-19 review into the origins of the virus, how it was permitted to spread, and China’s handling of the initial outbreak in Wuhan. Senator Payne outlined that “my trust in China is predicated in the long-term there. My concern is at a high point. My concern is around transparency and ensuring that we are able to engage openly.” Peter Hartcher argues that between Australia and China, “any trust has to be forced and verified.” When considering all of the aforementioned issues, concerns, and reading between the lines, there is currently minimal trust between Australia and China. As former Australian Foreign Minister, Julie Bishop points out, “Australia’s relationship with China is under constant review…which requires a great deal of nurturing, management and a building of trust.”

The geopolitical struggle post COVID-19 with Australia and China has vast implications for the Indo-Pacific region and will persist to test both countries’ alliances, defence and security, economies and political values. The Sino-Australian relationship is one of Australia’s greatest foreign policy challenges and finding a way forward that achieves an appropriate balance of maximising opportunities whilst acknowledging the risks, issues, and concerns when dealing with China will remain difficult.

This article was first published by AIIA on April 24, 2020.

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