The call never came: Victoria’s China deal was done through Premier Daniel Andrews’ office

When Premier Daniel Andrews suggested he wanted to pursue a Belt and Road agreement with the Chinese government, senior officials in Victoria’s jobs department waited to be called upon. That was five years ago. The call never came.

The Department of Economic Development, Jobs, Transport and Resources would ordinarily be the area to go to negotiate such an agreement with a foreign government. It had the trade expertise, the Global Victoria offices in China and the links into the Commonwealth’s Department of Foreign Affairs and Trade to make it happen and ensure it was done correctly.

Victorian Premier Daniel Andrews’ signing of a BRI agreement with China angered the Morrison government. Mr Andrews is pictured in Beijing in 2015.Credit:

Instead, Andrews ran the show out of his own office and department. The deal was kept a closely guarded affair, with Andrews and then-secretary of Department of Premier and Cabinet, Chris Eccles, intimately involved in the process. The jobs department, along with the then-trade minister Philip Dalidakis, were sidelined.

A government spokeswoman on Thursday confirmed the process was led by the Premier’s department but insisted the jobs department was kept in the loop.

With fanfare, the Victorian government signed a Memorandum of Understanding with the Chinese government on October 8, 2018, and a later “framework” agreement on October 23, 2019. While DFAT was consulted on the first agreement, it never saw the second deal until it was announced in the media. The deals signed Victoria onto China’s $1.5 trillion global infrastructure initiative, allowing for Chinese investment in Victoria and for Victorian companies to participate in Chinese government projects overseas under the Belt and Road Initiative banner. Neither deal was ever approved by Andrews’ cabinet.

This week, all that work came crashing down. The federal government announced on Wednesday night it had cancelled the two Victorian deals made under Chinese President Xi Jinping’s signature foreign policy, on the grounds that they contradicted Australia’s national interest.

With Andrews still on leave recovering from a spinal injury, not a single member of the state government would defend the deal on Thursday. Employment and Small Business Minister Jaala Pulford said cancelling the BRI agreement would not have an adverse effect on the state’s pipeline of infrastructure projects, adding it was “a matter for the Commonwealth government”.

National security experts were left wondering: How did we get here? Why did the state government press ahead with two agreements that signed up to another country’s foreign policy effectively against the wishes of Canberra? Why wasn’t it stopped sooner?

Had Andrews consulted his own trade and foreign policy experts in the jobs department, they might have told him that Canberra was just waking up to the growing threat of the BRI in the region. The federal government was growing increasingly concerned about China’s “debt-trap diplomacy” under the scheme, whereby developing countries are loaded with unsustainable debts with the intention of extracting economic or political concessions. Canberra had already begun countering China’s growing assertiveness in the Pacific with its own infrastructure packages for the region.

Had Andrews consulted his own federal Labor colleagues, they might have told him that while the opposition didn’t rule out supporting individual BRI projects, it was its policy not to sign up to the program as a whole. Had he consulted either then-prime minister Malcolm Turnbull or his successor, Scott Morrison, they might have told him that the politics on China was rapidly changing.

Along the way, many theories emerged about why Andrews was so close to China, with seemingly no economic benefit when compared to other states. The links of some of his staffers were put under intense scrutiny.

Andrews’s adviser Marty Mei was named a “special consultant” to the Shenzhen Association of Australia, part of a network of groups run by the Chinese Communist Party’s United Front Work Department. His electorate officer, Nancy Yang, once undertook a CCP propaganda training course and last year posted a series of articles and videos on social media suggesting the coronavirus was created by the United States and transported to China by the US Army. Andrews repeatedly defended both of his staffers.

Andrews visited China six times as Premier and at least once as opposition leader. He also made all of his ministers visit the country at least once.

It also must be said that Andrews’s penchant for centralising decision-making wasn’t confined to the BRI deals; from the Suburban Rail Loop to the handling of the COVID-19 pandemic, the Victorian Premier has always been criticised for avoiding internal stakeholders that may object or have a different point of view.

The Premier always defended the BRI deals on the basis that they would create more jobs and economic opportunities for his state. But he has never been able to name a single job or project that was created because of his decision to sign up to the BRI.

Given Andrews’ lack of consultation, it was easy to see how Victoria failed to read the tea leaves. After all, a year before Victoria signed the MOU, the federal government reached its own BRI agreement with the Chinese government. While this deal only applied to the participation of Australian firms in third party countries, it remains an embarrassment within senior ranks of the federal government and DFAT. It is the deal that dare not be mentioned.

And back in 2017, the federal government was sending out mixed messages on BRI. In May of that year, then-trade minister Steven Ciobo, prior to attending the first Belt and Road Forum in Beijing, said: “Australia supports the aims of initiatives such as the Belt and Road that improve infrastructure development and increased opportunities in the Asia-Pacific region.” It also allowed a 99-year lease of the Port of Darwin to a Chinese-owned company in 2015 – a move that would be unthinkable today.

The federal government was, itself, slow to wake up to the existential threat posed by China’s growing assertiveness. In 2017, it was forced to back down on a controversial extradition treaty with Beijing amid opposition from Labor and its own backbench.

Later that year, the eyes of the senior ranks of the then-Turnbull government finally opened to what former ASIO director-general Duncan Lewis described as the Chinese Communist Party’s intention to “take over” Australia’s political system. In 2018, the Turnbull government passed world-leading legislation targeting foreign interference in politics and other domestic affairs.

While 2017 doesn’t seem that long ago, the centre of gravity on the question of China’s rise has completely shifted. This has been sparked by Beijing’s militarisation of the South China Sea, the democratic crackdown in Hong Kong, the detention of more than 1 million Uighurs in Xinjiang’s forced labour camps, and China’s economic coercion against countries that stand up to it, including Australia.

Andrews wasn’t ignorant of these issues. Last year, fending off criticism about a Chinese company building a fleet of trains for Victoria being linked to China’s mass internment of Uighurs, Andrews said he did not “agree with everything that is done in every country”.

Victorian Liberal MP Tim Wilson, one of the first federal MPs to call for a more assertive foreign policy towards the CCP, says Australia’s journey on rebalancing its relationship with Beijing and reasserting its sovereignty and interests has “been rapid and welcome”.

“In 2016 the prevailing view in Canberra was to see the relationship solely through economic opportunity and blinkered to some risks, whereas now a realism has now been normalised,” he says.

Labor senator Kimberley Kitching, chair of Federal Parliament’s Foreign Affairs, Defence and Trade References Committee, says it was part of the CCP’s strategy to bypass federal governments and create a “wedge” within a country.

“The CCP used the Victorian deals as a propaganda tool to spruik the BRI to our neighbours,” she says. “We need to speak with one voice here, because if we don’t, we’re allowing a foreign regime to subvert our national interest.”

In 2020, as criticism of the Victorian government’s approach to China escalated, the Morrison government announced new foreign agreement veto laws. The legislation, passed in December, required Foreign Minister Marise Payne to cancel agreements that states, territories, local governments and universities enter into with an overseas government if they contradict Australia’s national interest.

Along with the two BRI deals, Payne also announced this week she was cancelling two Victorian government education agreements – one struck with Iran in 2004 and another with Syria in 1999. She warned other agreements could be announced in the coming months.

Michael Shoebridge, director of the Australian Strategic Policy Institute’s defence program, says it is now impossible to separate security and diplomatic policy from trade and economics.

“Any decision that misses that point leads to really bad decisions like Victoria’s two BRI agreements,” he says.

In Canberra, the merging of security and economic policy was occurring as far back as 2017. Andrews just had to look beyond his own department to see it was happening.