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International relations

China freeze on Australia dialogue cuts deeper into practical ties

Beijing's move called 'worrying' but still short of 'nuclear option' on FTA

China's suspension of an economic dialogue pact with Australia casts doubt on the notion that while ties have deteriorated, day-to-day relations are still intact, according to one expert.   © EPA/Jiji

SYDNEY -- China's announcement on Thursday that it is "indefinitely" suspending an economic dialogue mechanism with Australia is another worrying but calculated development in already corroding ties, analysts say, as the countries trade barbs over human rights and Taiwan.

Beijing's National Development and Reform Commission said it was halting the China-Australia Strategic Economic Dialogue, established in 2014, after a series of Australian measures "to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination."

The decision comes after the Australian government canceled a memorandum of understanding and an agreement between the Chinese commission and the Australian state of Victoria to participate in Beijing's Belt and Road Initiative.

"It's effectively one MoU being torn up with another one being put on ice," James Laurenceson, director and professor at the Australia-China Relations Institute in Sydney, told Nikkei Asia.

"In terms of the implications, it's worrying, because it indicates that dialogue between Australia is now being disrupted, not just at the ministerial and leader level, which it already had been," he said. "Now it's moving more toward the practical working level."

This, Laurenceson suggested, calls into question some common wisdom within Australia.

"Up to this point, we've been able to comfort ourselves with the conclusion that all the high-level meetings, the glossy leaders' meetings, are not going ahead, but the day-to-day stuff is continuing as normal," he said. "That's a bit more in doubt now."

Back when it was created, the dialogue mechanism was hailed as a means to expand the relationship. A 2014 statement from Canberra regarding the first meeting in Beijing said it would provide "an opportunity for Australia and China to explore opportunities for closer economic ties and to discuss issues within the global economic environment."

But relations have steadily deteriorated in recent years. Australia grew concerned about alleged Chinese political influence, banned China's Huawei Technologies from its 5G network and, last year, called for an impartial investigation into the origins of COVID-19.

Laurenceson noted that the China-Australia Strategic Economic Dialogue was not the first economic arrangement to be put on ice.

"Under the China-Australia Free Trade Agreement, there were meant to be a series of consultations, with a view to upgrading the agreement. No meetings have taken place since the end of 2017," he explained. Still, since those talks were to be about upgrades and the economic dialogue is an existing mechanism, he said Thursday's move marks "a new turn."

At the same time, he cautioned that China could have opted for a "far more nuclear option" if it had wanted to: It could have notified "the Australian government that it was tearing up the China Australia Free Trade Agreement. This is a long way from that ... it still looks like a pretty calibrated move to me."

For Bryce Wakefield, national executive director of the Australian Institute of International Affairs, the suspension of activity suggests that China's blockade of Australian exports such as wine, lobsters, barley and coal has not succeeded in curbing Canberra's outspokenness as much as it hoped.

Australia's new defense minister, Peter Dutton, has adopted an even tougher line on China of late. Dutton made waves by saying a conflict over Taiwan "should not be discounted." Thursday's suspension of the bilateral dialogue also follows news of Dutton seeking advice on possibly revoking the 99-year lease on a port in Darwin, Northern Australia, to Chinese developer Landbridge.

"What [the dialogue suspension] says to me is that the Chinese have realized that the Australian economy is fairly resilient and targeting particular products won't hurt the overall trade with Australia," Wakefield said.

"Effectively its sanctions on barley, wine and lobsters have hurt particular sectors of the Australian economy but not the Australian economy overall," he continued. "So, what the Chinese are looking for is a way to really damage the relationship outside of the narrow framework of trade itself."

Wakefield said it would be difficult to guess how Australia may respond, noting how difficult relations between Australia and China were already.

Australian Trade Minister Dan Tehan issued a statement on Thursday calling the suspension "disappointing" and saying Canberra remains "open to holding the dialogue and engaging at the ministerial level."

Wakefield said China's decision "removes an important forum where trade relations and relations in general could be repaired." But he added, "One wonders how significant it is, given that the Chinese have tried and failed to damage the overall Australian economy and split Australian opinion on China."

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