Universities used a Senate inquiry into the underpinning bill on Tuesday to ask for an exemption from the retrospective laws.

They allow the foreign minister to assess arrangements between governments or public universities and foreign governments, to determine whether they are inconsistent with Australia's foreign policy.

The laws were sparked by concerns over the transparency of a number of state and territory deals including Victoria's Belt and Road Initiative agreement with China.

But university representatives argue the bill is too broad.

Queensland University of Technology vice-chancellor Margaret Shiel, who is on the advisory board of the Australian Space Agency, says groups like US-based National Science Foundation and NASA want sovereign certainty.

"They want to have the certainty that comes with either institutional or government agreements," Professor Sheil said.

"Some of these agencies will walk away, and they will walk away for a long time.

"There's a whole range of things that could be caught up in this net that will damage our long-term international collaborations. We need to be very cognisant of that as we seek to address what I see are short-term political issues."

The federal government is concerned there is no requirement to consult with the Commonwealth when entering into arrangements with foreign governments and some deals could undermine Australia's foreign policy objectives.

But it thinks most arrangements - which range from investment deals to cultural or education exchanges - are useful, productive and non-controversial.

The retrospective laws allow decisions to be enforced through court injunctions, give the foreign minister broad rule-making powers and set up a public register of foreign arrangements.

Questioning at the Senate inquiry focused on China, with government senator Eric Abetz raising concerns about the Hong Kong police force using a handful of university websites to advertise roles.

"I'm not sure this bill is going to capture the issues you are raising," Group of Eight chief executive Vicki Thomson said.

"It's not the China relations bill, it's the foreign relations bill."

She warned the laws would damage the potential for future technology, manufacturing and jobs.

UNSW deputy vice-chancellor George Williams said the bill should not be retrospective as it would expose universities to high levels of legal risk, including the possibility of being forced to compensate foreign entities, and delay or deter valuable research.

The Department of Foreign Affairs and Trade said in its submission it was important for universities to be covered by the laws.

"Only arrangements with a foreign government or a foreign university that lacks institutional autonomy will be in scope."

Australian Associated Press