SCENESETTER FOR YOUR VISIT TO AUSTRALIA

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:
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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
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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
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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