Canberra clueless to China’s flexible diplomacy

What a shemozzle, from start to finish, with lots of blame to go around.

No, I am not talking about the short life of the now extinguished Super League of the world’s top football clubs, but the much longer brawl over Victoria and its dealings with China.

The federal government’s decision to cancel Victoria’s two agreements with Beijing on the Belt & Road Initiative was greeted with the cascade of political praise and tabloid tubthumping that invariably comes with any tough-on-China decision these days.

Even the Victorian Labor government, with Premier Daniel Andrews - the deal’s architect, absent on medical leave - accepted the decision meekly.

There can be little argument that Victoria should not have entered into these agreements. But that doesn’t mean they should have been unwound in the frontal manner in which they were.

To re-cap, the BRI started life as Xi Jinping’s signature policy initiative in 2013, a geoeconomics behemoth to bring Chinese infrastructure and industrial standards to its hinterland, the Middle East and south-east Asia.

The BRI soon strayed from its geographical roots to become an all-purpose brand stamped on any Chinese initiative, be it in South America, Africa and Oceania.

Victoria jumped on the BRI bandwagon with two agreements in 2018 and 2019, the latter the more important one, signed with Beijing’s chief planning ministry, to co-operate on infrastructure and trade.

All along, the federal government resisted signing up to the BRI, while at the same time publicly toying with different ideas about how to engage with it for the benefit of Australian companies.

Canberra turned a second-order piece of internal housekeeping into a totemic issue of sovereign degradation.

Victoria’s deals weren’t a big issue until May last year, when Tim Pallas, the state Treasurer, crassly criticised the Morrison government’s China policy and tied it to Beijing’s trade sanctions.

Once the BRI had been dipped into the cauldron of domestic politics, and the toxic, COVID-19-era relationship between Labor in Victoria and the conservatives in Canberra, there was no looking back.

The case against Victoria signing the deals is clear enough, on the grounds of reciprocity, if nothing else.

If a Chinese provincial leader signed on to an Australian initiative without approval from Beijing, then he or she probably wouldn’t sleep in their own bed that night, such would be the centre’s fury.

Second, the deals were all but meaningless. Any Chinese investment into Victoria would have been made anyway, with BRI holy water sprinkled over them later for effect.

In that respect, the deals were simply political wins for Beijing, which Victoria had no business giving away.

Once BRI was a domestic political football, though, along with the collapse in bilateral relations, the deals took on an altogether more sinister dimension.

Tim Smith, the Liberal party’s chief head-kicker in Victoria, called them “traitorous” and said they would turn the state into a “debt slave”. Some Labor seats were letter-boxed with similar claims.

Even in a political system given to hyperbole, that is quite something for an initiative that the Coalition in Canberra was only recently thinking of engaging with itself.

It is also much of a piece for how any Australian institution that engages with China is depicted these days, as helpless, out of their depth, somehow disloyal and completely unable to turn any deal to their advantage.

When Beijing began its campaign of trade coercion against Australia, the Morrison government decided to vet all bilateral agreements between foreign entities and state and local governments and universities, with the power to cancel them if they were judged not to be in the “national interest”.

And so we get to last’s week news that the Victorian deals would be “torn up” in the media shorthand, and the inevitable promise from Beijing that there would be a price to pay.

How else might we have handled it?

The radical option would have been for the Commonwealth to negotiate for something on behalf of the country, which would have given local companies a platform to work with Chinese enterprises on projects in the region.

The Japanese have done precisely that, striking a deal to work with China in third countries on infrastructure, without committing to use the BRI branding along the way.

That would have been creative but, given the state of bilateral ties, also doubtless impossible in the current environment.

Alternatively, the federal government could have taken what we might call the “Asian way” and persuaded Victoria to allow the agreements to die a natural death, without fanfare.

But, no, the Australian way seems to be to detonate the deals for maximum effect.

In the process, Canberra turned a second-order piece of internal housekeeping into a totemic issue of sovereign degradation, to be flailed pinata-like until it lay dead at our feet.

It isn’t entirely clear why, aside from the obvious fact that China is unpopular in Canberra, and running against Beijing polls well.

The argument in favour of Canberra’s approach is that it provides clarity about national policy and prevents Beijing from creating divisions between national and sub-national governments.

But does anyone seriously suggest that such clarity is lacking in China policy at the moment?

If nothing else, the BRI episode is a reminder of how Beijing is a master of grey-zone operations, which gives them multiple options in any policy setting.

Australia, by contrast, is determined to deal in black and white, which leaves us no room for statecraft at all.