Australia’s refusal to reverse its latest move in a long-running, tit-for-tat diplomatic falling out with China the veto of two controversial Belt and Road Initiative deals the state of Victoria made has been met by Beijing’s harshest response yet. High-level economic dialogue has been “indefinitely suspended”, putting an end to bilateral talks to facilitate greater cooperation, particularly on trade.
An even tougher line may be expected if Canberra tears up the lease of the port of Darwin to a Chinese company, which is now under review. But so far, the rhetoric is generally more strident than the reality, economically if not politically.
Except for specific industries such as Australian wine and lobster exports, neither side has been too badly hurt by their dispute, compounded last year when an Australian call for an independent inquiry into the origins of the coronavirus angered Beijing. China has sanctioned Australian commodity exports that it can obtain elsewhere at relatively little extra cost, from coal and copper and wine to barley and beef.
Australian exporters have been largely successful in finding other markets, albeit at the cost of disruption and lower profit margins. That leaves untouched Australian iron ore for China’s thirsty steel mills, now fetching near-record prices, and liquefied natural gas.
As a result, Australia’s economy has emerged in better shape than feared. But, as one Australian media commentator has observed, that does not mean Canberra can go on poking China in the eye without paying a price. Australia passed a law last December allowing Canberra to cancel international agreements made by publicly funded institutions if they had a negative impact on foreign policy. China’s embassy in Canberra has warned the vetos will worsen chilly bilateral relations.
But the moves have bipartisan political support. Foreign Minister Marise Payne said the deals were either not consistent with Australia’s foreign policy or adverse to foreign relations. They were non-binding. In any case, an agreement between a foreign government and an Australian regional government that does not have Canberra’s informed consent is problematic.
That said, there is on the face of it no reason why Victoria cannot continue to nurture relations with China – in consultation with the federal government. If Canberra is genuine in wanting to improve relations it should make that clear. Canberra still needs to address and reconcile internal conflicts over relations with China, and to improve mutual understanding with Beijing.
It is less than six months since both countries flagged common interests by signing up for the Regional Comprehensive Economic Partnership free-trade deal. Hopefully, that offers two great trading nations a path ahead for more constructive relations.