A $200 million contract between Western Australia's Public Transport Authority (PTA) and Chinese technology giant Huawei has collapsed, due to trade restrictions imposed by the United States.

Key points: The $200 million contract to upgrade train radios was struck in July 2018

The $200 million contract to upgrade train radios was struck in July 2018 The Government says US trade restrictions on Chinese led to the contract collapse

The Government says US trade restrictions on Chinese led to the contract collapse The PTA is calling for a "fresh approach" to the radio network upgrades

The consortium of Huawei Australia and UGL (HUGL) won the tender in July 2018 to upgrade the radio communications system for Perth's urban rail network.

The plan had involved building about 80 radio masts and base stations throughout the metropolitan network and replacing radio devices in trains, security vehicles and handheld radios.

But both parties have now mutually agreed not to continue the current arrangement.

In a statement, WA's Transport Minister Rita Saffioti said the HUGL consortium had earlier provided the State Government assurances that it could deliver the project in light of trade restrictions imposed by the US Government.

WA Transport Minister Rita Saffioti said it was disappointing the deal could not continue. ( ABC News: Robbie Koenig Luck )

However, further restrictions imposed in August 2019 had led to a "force majeure" event which both companies could not overcome.

The State Government said the measures required to overcome the situation would result in unacceptable uncertainty around the total cost of the project and completion time, while there was no guarantee the solution would be effective.

"It is extremely unfortunate that the State Government's project — which is limited to a radio network for train drivers and transit guards — has been caught up in the ongoing trade dispute between the US and China," Ms Saffioti said.

"The PTA will continue its plans to deliver a new digital radio system for our expanding public transport system."

Ms Saffioti said the decision was made before taking into account the impact of the COVID-19 pandemic.

Contract had been reviewed over security concerns

The contract had been reviewed by the WA Government in March 2019 after allegations by the US had led to greater scrutiny of how the company conducted its business.

WA Premier Mark McGowan at the time assured parliament that security advice had been followed when awarding the contract.

The contract would have upgraded radios throughout Perth's suburban train network. ( ABC News )

"We sought advice from the Federal Government, from essentially federal security agencies on two separate occasions about whether or not there was any security issue whatsoever," he said in July 2018.

"And the Federal Government advice is there was no security issue whatsoever involved in this decision."

'Fresh approach' sought for new plan

Ms Saffioti said the PTA was working with the HUGL Consortium on new arrangements to deliver the project without breaching US trade restrictions, including what subcontract arrangements could be preserved.

"In all the circumstances, the PTA has recommended a fresh approach for the Radio Systems Replacement project," she said.

"We'll continue to work towards the delivery of a high quality radio system at the best possible price for taxpayers."

The PTA had originally been required to leave the analogue radio spectrum by May 2020, however that has since been extended to beyond 2021.