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C O N F I D E N T I A L CANBERRA 000696 
 
SIPDIS 
NOFORN 
 
FOR THE SECRETARY FROM CHARGE DANIEL A. CLUNE 
 
E.O. 12958: DECL: 07/08/2018 
TAGS: OVIP RICE CONDOLEEZZA OTRA PREL AS
SUBJECT: SCENESETTER FOR YOUR VISIT TO AUSTRALIA 
 
Classified By: CDA Daniel A. Clune. Reasons: 1.4(b),(d) 
 
SUMMARY: 
------- 
¶1. (C/NF) Kevin Rudd, who was sworn in on December 3, 2007 as 
Australia's first Labor Party prime minister in nearly 12 
years, has moved quickly to implement domestic reforms and to 
give substance to a three-pronged foreign policy based on the 
primacy of the treaty alliance with the United States, 
greater commitment to multilateral organizations, and deeper 
engagement with Asia.  Eight months into his administration, 
Rudd's government continues to ride a wave of popularity from 
the Australian Labor Party's (ALP) resounding November 2007 
election victory over the conservative Liberal/National 
Coalition government of John Howard.  Rudd has delivered on 
campaign promises to roll back the previous government's 
controversial industrial relations legislation, sign the 
Kyoto Protocol and withdraw Australian combat troops from 
Iraq, while maintaining Australia's combat commitment to 
Afghanistan "for the long haul."  He issued a historic 
apology to Australian Aborigines on the first day of the new 
Parliament, announced a new development pact with the Pacific 
Islands, and swiftly dispatched troops to Timor-Leste in 
February after the attempted assassination of President Ramos 
Horta.  Domestically, while the economy continues into its 
17th straight year of growth, Rudd is grappling with the twin 
challenges of a prolonged drought and the need to address 
climate change by imposition of a costly and politically 
difficult emissions trading system as early as 2010. 
 
¶2. (C/NF) Despite his background as a former diplomat and 
Shadow foreign minister, Rudd made some early missteps with 
India and Japan, and his failure to consult with 
international stakeholders, including the United States, 
before announcing major foreign policy initiatives on 
regional architecture and nonproliferation/disarment 
generated additional criticism.  He signalled a determination 
during the election campaign to be a more critical partner of 
the United States than his predecessor, tapping into 
widespread unease over the extent of U.S. influence on 
Australia's foreign policy, particularly over Iraq.  An 
advocate of "middle power diplomacy," Rudd can be expected to 
continue to challenge the United States to do more on climate 
change, arms control and disarmament.  Policy differences 
aside, however, Rudd is strongly committed to Australia's 
alliance with the United States, and his endorsement of 
ongoing collaboration with the United States across the great 
breadth of shared interests highlights Australia's 
determination to be a reliable partner. 
END SUMMARY 
 
 
U.S. ALLIANCE 
------------- 
¶3. (SBU) The Australian Labor Party (ALP) takes credit for 
establishing the alliance with the United States during World 
War II, which ultimately led to the 1951 Australia-New 
Zealand-United States (ANZUS) Treaty.  Support for the U.S. 
alliance is one of the three pillars of Rudd's foreign policy 
(along with cooperative engagement with multilateral 
organizations such as the UN and engagement with Asia).  Rudd 
has made clear Australia's commitment to the alliance, and 
was quick to reach out to the United States in his election 
victory speech - the only foreign country he mentioned.  One 
Qvictory speech - the only foreign country he mentioned.  One 
of Rudd's first visits abroad was to the United States and in 
March, he and the President reaffirmed that the relationship 
endured, regardless of the government in power in either 
country. 
 
¶4. (C/NF) Rudd stressed in his election campaign that he 
would be more independent from the United States than his 
predecessor John Howard, perceived by the Australian public 
to have been in lockstep with President Bush, who is 
unpopular here.  Issues such as the Iraq War, the five-year 
confinement without trial in Guantanamo of Australian citizen 
David Hicks, and  had soured the Australian public on the 
Bush Administration.  Australian combat troops withdrew from 
Iraq in June 2008.  Hicks returned to Australia from 
Guantanamo in May 2007, after a guilty plea to providing 
material support for terrorists, and was released from a 
local prison in December 2007.  One area where the Rudd 
government's policy diverges somewhat from ours is climate 
change, a topic that resonates strongly in Australia where 
many see a direct causal link with a series of recent, very 
severe droughts.  PM Rudd ratified the Kyoto Protocol within 
hours of being sworn in, is committed to implementing an 
emissions cap and trade system as early as 2010.  Another 
area in which there is an emerging change of emphasis is in 
arms control and disarmament.  Building on the 1995 Canberra 
Commission on Disarmament 
 
THE RUDD GOVERNMENT 
------------------- 
¶5. (SBU) Rudd's extended political honeymoon with the public 
shows signs of fading as his government confronts some of the 
more contentious political and economic realities.  The 
dramatic increase in petrol prices in May and June has 
created a political backlash here as it has in many other 
countries.  Rudd's response -- a scheme to monitor prices -- 
was seen as inadequate by many voters and it has allowed the 
Opposition to right itself after the election defeat and a 
disastrous start by new Opposition Leader and former Defense 
Minister Brendan Nelson.  Nelson's approval ratings, which 
were in single digits until oil prices shot up, have now 
improved but Rudd still holds a commanding lead as preferred 
prime minister. 
 
ECONOMY 
------- 
¶6. (SBU) Rudd's principal economic challenge is rising 
inflation, attributed mainly to capacity constraints, 
particularly labor, as Australia, thanks to a commodities 
boom fueled by China and India, continues its 17th 
consecutive year of growth.  The Reserve Bank of Australia 
raised interest rates for the fourth time in eight months at 
the beginning of March.  Unemployment is at a 33-year low, 
labor participation is at all-time highs, and all signs point 
to significant increases in resource prices that will ripple 
through the Australian economy. 
 
¶7. (SBU) The United States and Australia enjoy very close 
economic relations.  The centerpiece is the U.S.-Australia 
Free Trade Agreement, which went into effect in January 2005. 
 The U.S. enjoys a $10 billion trade surplus with Australia, 
our third-largest in the world.  We are Australia's third 
largest trading partner (after China and Japan), and by far 
the largest foreign investor in Australia.  Australia is our 
14th-largest trading partner, and the bulk of Australian 
overseas investment flows to the United States.  We recently 
concluded an Open Skies civil aviation agreement with 
Australia, which was signed in late March during Prime 
Minister Rudd's visit to Washington. 
 
MISSTEPS ON FOREIGN POLICY 
-------------------------- 
¶8. (C/NF) While Rudd served as a diplomat early in his career 
and is the only world leader outside China who is fluent in 
Mandarin, his government has made some misjudgments in the 
foreign affairs area.  Foreign Minister Smith angered India 
with his public announcement, standing next to his Chinese 
counterpart, that Australia would no longer support a 
Quadrilateral Strategic Dialogue with India -- a short-lived 
offshoot of the Trilateral Strategic Dialogue 
(U.S.-Japan-Australia) -- in deference to China's 
sensitivities.  Rudd irritated Japan with his government's 
threats to take legal action against Japanese whaling, 
coupled with release of GOA photographs of Japan's whaling 
Qcoupled with release of GOA photographs of Japan's whaling 
activities, and his failure to include Japan, a major 
security and trade partner, on his first major overseas trip. 
 Moreover, Rudd encountered criticism and raised eyebrows for 
the hasty manner in which he rolled out two major foreign 
policy initiatives in June.  His vision for a European 
Union-style Asia Pacific Community by 2020 unveiled on June 
4, and his June 9 announcement that Australia would establish 
an International Commission on Nuclear Nonproliferation and 
Disarmament and host an international conference to shape the 
outcome of the 2010 Nuclear Nonproliferation Treaty Review 
Conference, were both launched without internal vetting or 
consultation with the international stakeholder countries 
whose support would be needed for the success of these 
undertakings.  Senior officials have ascribed the lapse to 
Rudd's rush to fulfill foreign policy promises made during 
the election campaign and the "talismanic" importance of 
nuclear disarmament to the Australian Labor Party, but Rudd's 
inclination to rely on his small inner circle of advisors 
rather than on his bureaucracy, and his evident need to 
dominate the headlines may also explain his actions. 
 
COMMITMENT TO MULTILATERAL ORGANIZATIONS 
---------------------------------------- 
¶9. (C) To further the GOA's engagement with multilateral 
organizations, PM Rudd visited the UN on his first 
international trip, where he announced Australia would seek a 
seat on the UN Security Council for the 2013-2014 term, and 
then proceeded to Europe to reinvigorate Australia's ties 
with the European Union.  While in opposition, the ALP 
supported international military action to overthrow the 
Taliban in Afghanistan in 2002 but opposed the invasion of 
Iraq, partly because the latter action lacked a UN mandate. 
Rudd's proposal for an Asia-Pacific Community builds on his 
multilateral commitment. 
 
ARMS CONTROL, DISARMAMENT AND NONPROLIFERATION 
--------------------------------------------- - 
¶10. (U) Australia historically has had a strong record on 
arms control and disarmament, and has signed and ratified all 
the major regimes, including the Nuclear Nonproliferation 
Treaty (NPT); the Comprehensive Test Ban Treaty (CTBT); the 
Chemical Weapons Convention (CWC); the Biological Weapons 
Convention (BWC); the Ottawa Convention on landmines; and the 
Convention on Certain Conventional Weapons (CCW). It was a 
founder of the IAEA, and is member of its Board of Governors, 
and has been a close partner with the U.S. on export 
controls, particularly MANPADS.  Australia is a member of the 
Zangger Committee, the Nuclear Suppliers Group (NSG), the 
Australia Group, the Proliferation Security Initiative (PSI), 
and the Missile Technology Control Regime (MTCR).  Australia 
will be the 2008-2009 MTCR Chair and will host the 2008 MTCR 
Plenary in Canberra in November. 
 
¶11. (C/NF) FM Smith may raise with you PM Rudd initiative to 
establish an International Commission on Nuclear 
Nonproliferation and Disarmament, which would report to an 
Australian-hosted international conference of experts in 
¶2009.  The Commission, to be headed by Gareth Evens, a former 
foreign minister who now heads the Brussels-based 
International Crisis Group, is intended to address the 
deterioration of the NPT regime, in light of the number of 
non-NPT states that have developed nuclear weapons, and to 
shape a successful outcome at the 2010 NPT Review Conference. 
 In particular, the Rudd identified three areas of study for 
the Commission, including: 
 
-- strengthening compliance with the NPT by requiring all NPT 
signatories to adopt IAEA-designed monitoring provisions 
(i.e., Additional Protocols); 
-- developing an international system to manage the nuclear 
fuel cycle; and 
-- adopting a process to bring the Comprehensive Nuclear Test 
Ban Treaty (CTBT) into force 
(Note: On May 12, Foreign Minister Smith publicly called for 
the nine countries that have not ratified the CTBT, including 
the United States, to do so to bring the Treaty into force.) 
 
FM Smith may invite you to nominate a U.S. representative to 
sit on the Commission.  A related objective of the Rudd 
government - progress on a Fissile Material Cutoff Treaty - 
may also surface for discussion during your visit. 
 
DEFENSE COOPERATION 
------------------- 
¶12. (C) The Rudd government has ordered a comprehensive 
Q12. (C) The Rudd government has ordered a comprehensive 
review of defense policy, including review of some major 
defense acquisitions from the United States, slowing or 
postponing bilateral cooperation in some areas, such as 
missile defense.  While the review will not be completed 
until the first quarter of 2009, we have been assured 
privately not to expect surprises in the overall strategic 
assessment, and we expect defense cooperation to proceed with 
little interruption.  We can expect Australia's continued 
contributions to military operations targeting the Taliban 
and al-Qaeda in Afghanistan, and a continued non-combat role 
in Iraq.  The small size of its military - 52,000 personnel - 
and demands of deployments elsewhere, most recently in 
response to the attempted coup in East Timor, mean Australia 
will be hard pressed to increase substantially the level of 
its deployments for some time to come.    Despite this, we 
are confident Australia will remain one of our closest allies 
and most reliable security partners for the foreseeable 
future. 
 
¶13. (SBU) Australia is a large consumer of U.S. defense 
hardware and technology, consistent with its objective of 
interoperability.  Foreign Military Sales (FMS) in 2007 were 
$3 billion.  Australia has selected the Aegis Combat Control 
System for its three air warfare destroyers that will come 
into service in 2014, 2016, and 2017, respectively.  The 
F/A-18 aircraft is the principal combat aircraft of the Royal 
Australian Air Force (RAAF), backed by the U.S.-built F-111 
strike aircraft.  Pending review by the Rudd government, 
Australia will acquire 24 Boeing F/A-18F Super Hornet 
fighters to maintain an interim strike capability between the 
phase-out of the F-111s by 2010, and the projected 
acquisition of up to 100 F-35 Joint Strike Fighter aircraft 
during 2013-2020.  If approved in the review, deliveries of 
the Super Hornet would commence in 2010.  The RAAF has 
received three of four C-17 strategic airlift aircraft 
purchased, and is acquiring Boeing's Airborne Early Warning 
and Control system (referred to as Wedgetail).  Recent sales 
to the Royal Australian Army include the M1A1 tank, as well 
as Hellfire and JAVELIN missiles.  Negotiations were held in 
January on the U.S.-Australia Defense Cooperation Treaty's 
Implementing Arrangements, although the parallel U.K. 
agreement leads any progress on the Australian document. 
Australian industry hopes implementation will streamline and 
increase defense technology exchange and trade.  The 
Australian Defence Materiel Organisation estimates a 50 
percent reduction in export licenses required following 
treaty implementation.  Australia is purchasing a Wideband 
Global SATCOM (WGS) satellite that will be incorporated into 
the U.S. DOD's WGS five-satellite constellation. 
 
¶14. (S/REL AUS)  As discussed with the Howard government 
during your visit to Australia with President Bush in 
September 2007, and as reconfirmed during the 2008 AUSMIN 
meeting by the Rudd government, our two governments have 
agreed to strengthen combined capabilities and U.S. military 
access to Australia, referred to as Enhanced Defense 
Cooperation.  Both sides subsequently agreed to focus on 
three areas:  enhancing the Joint Combined Training 
Capability; prepositioning equipment for Humanitarian 
Assistance and disaster relief (HA/DR) operations in the 
region; and strengthening Intelligence, Surveillance and 
Reconnaissance (ISR) access and cooperation. 
 
 
CT COOPERATION 
-------------- 
¶15. (C/NF) Australia continues to be a CT leader in the 
region.  Regionally, Australia has worked with partner 
nations to develop and draft counterterrorism legislation. 
Much of that work has been in the Philippines.  Australia's 
involvement in the Jakarta Center for Law Enforcement 
Cooperation (JCLEC) has helped turn a syllabus that was once 
meager into one that now encompasses over a 100 courses. 
Approximately 3000 law enforcement and civilian personnel 
have trained at JCLEC.  Australia also continues to be the 
driving force behind maritime security capabilities in 
Southeast Asia. 
 
¶16. (C/NF) On the domestic front, two ongoing trials in 
Sydney and Melbourne are likely to test its 2006 CT 
legislation and establish precedents for the future. 
Qlegislation and establish precedents for the future. 
Attorney General Robert McClelland told us that he is 
concerned that prosecutors and investigators are being 
"precious" with their areas of responsibilities.  When 
investigators complete their work, for example, they stop 
serving as active participants in the legal case.  McClelland 
hoped to see a change to this and has reached out to U.S. law 
enforcement organizations (such as the NYPD) to help train 
Australian prosecutors and investigators.  Australia has 
enacted new anti-money laundering and counterterrorism 
financing (AML/CTF) legislation in late 2006 that would make 
the Australian Transaction Reports Analysis Centre (AUSTRAC), 
which monitors financial transactions, the national AML/CTF 
regulator with supervisory, monitoring, and enforcement 
functions over a diverse range of industry sectors. 
 
IRAQ 
---- 
¶17. (C/NF) The approximately 515 Australian combat troops 
comprising the Overwatch Battle Group in southern Iraq, plus 
the 100-strong Australian Army Training Team, were withdrawn 
in June, leaving in place approximately 1,000 defense 
personnel, including a 100-man security detachment for its 
diplomatic mission in Baghdad, and naval and air patrol 
assets based in neighboring countries that support operations 
in both Iraq and Afghanistan.  Beyond the redeployment of the 
combat element, the Australians plan to remain engaged in 
Iraq in reconstruction and other non-combat roles, and the 
Cabinet will soon consider proposals for additional training 
and technical assistance.  We have asked Australia to 
contribute specialists to serve in U.S. PRTs. 
 
AFGHANISTAN 
----------- 
¶18. (C/NF) Unlike Iraq, there has been bipartisan support in 
Australia up to now for its troop commitment in Afghanistan, 
and the Rudd government has reaffirmed that it plans to 
remain in Afghanistan for the "long haul."  Support for 
Australia's combat role in Afghanistan is linked in part to 
the presence of al-Qaeda and the Taliban, who trained bombers 
that killed 202 civilians, including 88 Australians, in Bali 
in 2002, as well as to the impact of the Afghan drug trade on 
Australia.  The Australian government is considering 
deploying an Operational Mentoring and Liaison Team (OMLT) to 
help train the Afghan National Army and additional civilian 
development assistance, but is not currently contemplating 
increasing its combat forces.  Three Australian soldiers have 
been killed in Afghanistan in recent months; Australian 
public opinion may begin to turn against a military role in 
Afghanistan if casualties increase, especially if NATO 
countries continue to show reluctance to fight in south 
Afghanistan. 
 
U.S.-INDIA CIVIL NUCLEAR DEAL 
----------------------------- 
¶19. (C/NF) Rudd has declared Australia will not export 
uranium to India because it has not signed the Nuclear 
Nonproliferation Treaty.  He has signalled, however, that 
Australia likly will support an exception for the U.S.-India 
civil nuclear agreement in the Nuclear Suppliers Group and 
IAEA, an assurance that FM Smith privately gave his Indian 
counterpart in June. 
 
CHINA 
----- 
¶20. (C/NF) An important dynamic in the U.S. relationship with 
a new Labor government is China.  Rudd shares our position 
that China needs to be encouraged to be a responsible 
stakeholder in the international system, and he has 
previously expressed support for the U.S. in any conflict 
over Taiwan.  China is now Australia's largest trading 
partner and Rudd views the Chinese export market as a 
critical component of Australia's growth now and well into 
the future.  PM Rudd's background as a Mandarin-speaking 
former diplomat who served in Beijing have led some to 
believe that he might be overly sensitive towards China, but 
he has assured the Ambassador that he does not view China 
through "rose-colored glasses," and he has made clear that 
the international community needs to be prepared for the 
possibility that China's rise might take a "malign" turn. 
Early signs are that the Rudd government will be tough or 
tougher than its predecessor on China's military 
modernization, transparency, and human rights, including in 
QTibet, judging by Rudd's statements and the inaugural 
Strategic Dialogue with China on February 4-5. 
 
 
CLUNE