This chapter describes the re-emergence of great-power competition between the United States and China, discusses how it reshaped the external environment and strategic space for Australia’s foreign policy, and examines how Canberra responded to it between 2016 and 2020.

At the start of 2006, two schools of thought contended over the future of Australia’s defence and strategic policy. On one side stood those who believed that Australia’s principal strategic risks and challenges over the following decades would come from instability on the margins of the international order – from weak and failing states, and from non-state actors, especially terrorists. On the other side stood those who believed that bigger and more important strategic concerns arose from the possibility that the core of the international order would be disrupted by the stresses flowing from changing economic relativities. This was especially true in Asia, as China and other Asian states’ economies grew.

In March 2008, newly elected Prime Minister Kevin Rudd announced plans for a two-day national summit to be held in Canberra. The Australia 2020 Summit brought together 1000 of Australia’s ‘best and brightest brains’ to develop long-term strategic policies for Australia. Of these participants, 100 were given the task of presenting a strategic vision and recommendations on ‘Australia’s future security and prosperity in a rapidly changing region and world’. The 2020 Summit seemed to be one of the defining images of Prime Minister Rudd’s term of office from 2007 to 2010. It certainly marked a new development in the formation of Australian foreign policy. The summit was supplemented by school summits, a Youth Summit, various community summits, regional town hall forums and an open submission system that allowed all Australians directly to submit their policy ideas and recommendations. The inclusion of the broader public in a dialogue about Australia’s future role in the world was a notable departure from traditional foreign policy-making.

Compared with its relations with Asia, Australian engagement with the countries of the African continent was not extensive, and was defined even in the government’s view by a ’period of neglect’ by all sectors of government, including diplomacy, trade, aid and defence. That said, increased communication and involvement occurred in the period under reiew in this volume, as African immigration continued and as the Australian government sought African support in its bid for a United Nations Security Council seat for 2013–14. Formal government ties between Australia and the nations of Africa continued, however, to be limited. In this sense, there was little significant change in the period 2006–10 from previous periods.

When the Australia Labor Party (led at the time by Kevin Rudd) was elected to federal office in November 2007, almost two years into the period under review, many commentators anticipated a substantial and substantive change in Australia’s foreign environmental policy. The change in rhetoric before and after November 2007 was, indeed, pronounced. These were governments with apparently very different world views: Labor articulating an internationalist and multilateralist model of international relations and global governance, and the Coalition eschewing ‘ideology’ and idealism in favour of what it saw as a hard-headed realism and a willingness to walk away from multilateral opportunities that did not deliver the outcomes they wanted.

The period 2006 to 2010 witnessed a renewed Australian interest in and engagement with Europe following decades of relative neglect. Australia’s close trade, foreign and security policy relationships with Asia and the United States, coupled with a European Union (EU) agricultural policy inimical to Australia’s trade interests, were major determinants of Australia’s neglect of Europe from the 1970s to the early years of the twenty-first century. A vision of Europe as protectionist, unfriendly to trade, inwardlooking and bureaucratic developed in Australia throughout the closing decades of the twentieth century. This in turn fostered a certain lack of interest in and attention to the European integration process and its increasing global importance. Within the EU Commission, Australia was regarded for much of the past 40 years as interested only in agriculture. For the greater part of this period also, the close traditional, cultural, trade and foreign and security policy ties with the United Kingdom remained Australia’s sole broadly based and close link with Europe.

In its annual poll for 2010, the Lowy Institute for International Policy included public opinion data under the heading of the ‘Rudd government’s foreign policy report card’. Asked about its performance across a range of issues, those polled gave their highest mark for the Rudd government’s management of the alliance with the United States (7/10), but only 6/10 for the government’s response to the global economic crisis, a mere 5/10 for combating climate change, and a lowly 4/10 for dealing with Japanese whaling. It must have been slightly unnerving for the government that these issues were precisely those that Kevin Rudd had identified as clear-cut successes in the area of foreign policy. More broadly, the increasingly widespread perception that the Rudd government’s management of foreign policy was indifferent at best posed problems, because it was the one policy area in which Rudd himself could claim particular professional expertise. If the government was unable to point to a record of unequivocal successes in the Prime Minister’s own specialist domain, it raised questions about its capacity to deliver on other fronts as well.

Australia’s relationship with China in the period 2006–10 developed in a paradoxical manner. While the relationship grew deeper, became more broadly based and assumed unprecedented prominence for both countries, it also became exceedingly complicated, controversial and difficult to manage. During this period, China’s vital importance to Australia’s economy was further affirmed. China displaced Japan to become Australia’s largest trading partner and its biggest export market, a position that had been held by Japan for almost 40 years. Burgeoning trade ties with China not only shielded Australia from the global financial crisis that afflicted most of the Western economies from 2007 but also continued to underwrite Australia’s resources boom. During the years 2006 to 2007, the Coalition government led by John Howard continued its successful China diplomacy and strengthened the bilateral relationship, attaining a level and scope unmatched in any other period.

With the electoral defeat of the Howard government in November 2007, the incoming Rudd government attempted to revive active middle power diplomacy and extend Labor foreign policy traditions of global and regional multilateralism. The centrepiece of the latter was Prime Minister Kevin Rudd’s Asia–Pacific Community (APC), initially proposed as an ambitious European Union-style body additional to existing regional structures, none of which were considered adequate to a comprehensive and coordinated address of strategic dynamics. China’s rising economic and geopolitical significance and the growing importance of transnational security and environmental challenges were the chief items offered as the rationale for the APC.

Between 2006 and 2010, the bilateral relationship between Australia and Japan blossomed in new and important directions. Most significantly, Australia and Japan mobilised bilateralism into regional and global spheres, representing a balancing of relations in the areas of politics and security to complement the hitherto robust history of trade and investment. In an era of new security challenges and shifting geopolitical circumstances in the Asia–Pacific region and beyond, Australia and Japan included each other in their evolving regional diplomatic strategies. At the same time, political leaders in both countries dealt with the vexed issue of Japanese whaling in the Southern Ocean by playing to the charged emotions prevalent in their respective domestic constituencies, while simultaneously sending a ‘business as usual’ message between officials. The disconnect between policy-makers’ pragmatism concerning the political situation in the partner nation, on the one hand, and popular outrage stoked by media reports and official statements, on the other, undermined the momentum achieved in the broader bilateral relationship.

As Australian prime minister from 1996 to 2007, John Howard faced 11 tumultuous years of foreign, defence and domestic security policy challenges. As a political leader interested primarily in domestic economic issues, he faced a steep and sometimes rocky learning curve. Not surprisingly, his foreign policy legacy was mixed: partly durable and desirable, partly dubious and potentially damaging to Australia’s longterm interests. In this legacy, he is little different from his predecessors. Howard strengthened ties with the United States, adroitly avoided tensions with China, and gradually repaired relations with important Southeast Asian neighbours, including Indonesia, after periods of strain. He was also defined by his willingness to dispatch troops to foreign trouble spots, to enact far-reaching anti-terrorism legislation at home, and to substantially expand military spending on advanced new weaponry. Yet Howard largely quarantined international trade and economic interests from controversy – at least until the Australian Wheat Board Iraq bribery scandal exposed Australia’s trade policy duplicity late in the life of his government.

Australia devotes more diplomatic energy to its relations with the South Pacific states and Timor-Leste than their modest populations might seem to justify. Only Papua New Guinea (PNG) (6.6 million) and Timor-Leste (1.1 million) have populations of more than one million, followed by Fiji (840 000) and Solomon Islands (518 000), with the rest easily qualifying as microstates. The total population of the South Pacific region and Timor-Leste (fewer than ten million) is dwarfed by that of their regional neighbour Indonesia (240 million). Australia became more closely involved with this region and expended more diplomatic resources on it between 2005 and 2010 than at any time since the Pacific Island states first became independent. Australian troops were in continuous deployment to Timor-Leste and Solomon Islands, and were briefly sent to Tonga. A coup in Fiji, the fourth in 20 years, created a nagging diplomatic problem for the Howard, Rudd and Gillard governments, which could not condone a Pacific dictatorship and yet sought to avoid a total breakdown in relations with a country of regional importance.

The five years covered by this volume were the first such period since the first half of the 1970s in which three governments held office: those of John Howard (until November 1997), Kevin Rudd (until June 2010), and Julia Gillard. The transition from a Liberal–National Party Coalition to Labor governments during this period offered observers an unusual opportunity to see the extent to which partisanship made a difference in Australian foreign policy (although the relatively small part of the period covered by this volume in which the Gillard government was in office rendered it risky to draw any firm conclusions about the direction of foreign policy under Australia’s first female prime minister).

The closeness of the John Howard and George W Bush administrations is a commonplace of commentary on that era; one uncritical account even describes the relationship between the two countries and leaders as a ‘partnership’, although Howard only appeared three times in the former president’s memoirs, published in 2010. Prime Minister Howard’s invocation of the ANZUS (Australia New Zealand United States) Treaty in 2001, his determination to participate in the Iraq invasion and occupation, and his scepticism on anthropogenic climate change were all of a piece with the mood that prevailed in Washington. In February 2007, US Vice-President Dick Cheney visited Australia expressly to record Washington’s gratitude for Australia’s consistent role in the ‘global war on terror’. So close was Howard’s identification with Bush that his judgment of what bounds should be observed in commentary on domestic US politics was compromised. Thus in February 2007 he took the unprecedented step of criticising presidential candidate Barack Obama’s strategy on Iraq by claiming it served the interests of al Qaeda.

The machinery of Australia’s foreign policy-making was transformed during the first decade of the twenty-first century, perhaps more profoundly than at any stage since the creation of an independent Department of External Affairs in November 1935. Until that time, the foreign affairs function of the Commonwealth government had been administered from within the Prime Minister’s Department. From its modest beginnings in 1935 in a clutch of rooms on the ground floor of Canberra’s West Block administrative building, the Department of External Affairs, then Foreign Affairs, then Foreign Affairs and Trade (DFAT) grew steadily in size and confidence. When DFAT moved into its imposing new headquarters on the edge of State Circle in 1996, it symbolised a coming of age of a powerful, confident bureau of state with full and independent stewardship of the nation’s foreign affairs. While prime ministers from Sir Robert Menzies to Paul Keating may have felt strongly about particular international causes, few questioned that DFAT and its ministers played the central role in initiating and implementing policy across the full suite of Australia’s international interests.

In the early 1990s, scholars talked about Australia’s neglect of South Asia, in particular Australia’s failure to understand the rising importance of India. We spoke of indifference, blind spots, missed opportunities, general indifference and even ideological differences between the two countries that began with Jawaharlal Nehru and Sir Robert Menzies. During the last ten years, Australia’s engagement with South Asia has changed dramatically – Australia has been involved in a counterinsurgency war against the Taliban in Afghanistan intermittently since 2002, and India has emerged as Australia’s fourth largest export market. The paradox that this chapter addresses is the way in which Australia’s strategic engagement with South Asia was dominated by Afghanistan while Australian commercial national interests lay with India. These two relationships have overwhelmingly defined Australia’s connection with South Asia. The focus is on Kevin Rudd’s period as prime minister of Australia (2007–10) and his subsequent role as foreign minister (from 2010), because the Rudd years capture the essence of Australia’s new relationship with this part of the world where some two billion people live.

An extraordinary development occurred in the Australian economy in the last quarter of 2008: for the first time since the first half of 1991, gross domestic product (GDP) declined. But even more extraordinarily – and despite the then Prime Minister Kevin Rudd’s assertion that ‘the worst global economic recession in 75 years means it is inevitable that Australia too will be dragged into recession’ – data for the first quarter of 2009 showed that the economy had resumed growth. Among the countries of the Organisation for Economic Co-operation and Development, Australia alone avoided recession as conventionally defined (two consecutive quarters of negative growth in GDP).