Australia, the Southwest Pacific, and United States Interests

CRS Report for Congress
Australia, the Southwest Pacific,
and United States Interests
January 7, 2004
Thomas Lum and Bruce Vaughn
Analysts in Asian Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Australia, the Southwest Pacific, and United States
The major U.S. interests in the Southwest Pacific are preventing the rise of
terrorist threats, working with and maintaining the region’s U.S. territories,
commonwealths, and military bases (American Samoa, Guam, the Northern Mariana
Islands, and the Reagan Missile Test Site on Kwajalein Atoll in the Marshall Islands),
and enhancing U.S.-Australian cooperation in pursuing mutual political, economic,
and strategic objectives in the area. The United States and Australia share common
interests in countering transnational crime and preventing the infiltration of terrorist
organizations in the Southwest Pacific, hedging against the growing influence of
China, and promoting political stability and economic development. The United
States has supported Australia’s increasingly proactive stance and troop deployment
in Pacific Island nations torn by political and civil strife such as East Timor, Papua
New Guinea, and the Solomon Islands. Australia may play a greater strategic role in
the region as the United States seeks to redeploy its Asia-Pacific force structure. This
report will be updated as needed.

U.S. Interests in the Southwest Pacific.................................1
The Evolving U.S.-Australian Strategic Relationship......................2
Australia’s Role in the Region........................................5
China’s Growing Regional Influence...................................6
List of Figures
Figure 1. Map of the Southwest Pacific................................7

Australia, the Southwest Pacific, and United
States Interests
U.S. Interests in the Southwest Pacific
The major U.S. interests in the Southwest Pacific are preventing the rise of
terrorist threats, working with and maintaining the region’s U.S. territories,
commonwealths, and military bases (American Samoa, Guam, the Northern Mariana
Islands, and the Reagan Missile Test Site on Kwajalein Atoll in the Marshall Islands),
and enhancing U.S.-Australian cooperation in pursuing mutual political, economic,1
and strategic objectives in the area. In a hearing before the Subcommittee on East
Asia and the Pacific of the House Committee on International Relations (July 23,
2002), several key issues were raised regarding U.S. interests in the Southwest
Pacific. These include the vulnerability of small Pacific Island nations and “failed
states” to transnational crime, including money laundering and drug trafficking; the
threat of infiltration by terrorist groups or individuals; and environmental problems.
Many analysts have posited a link between political instability and poverty in many
Pacific Island nations and their attraction to organized crime and terrorists.2
Since the end of World War II, the United States has commanded unimpeded
military access to the Southwest Pacific, although its involvement in the region, with
the exception of its military bases on Guam and Kwajalein Atoll (Marshall Islands),
has been low key. The United States diplomatic presence and foreign aid fell during
the 1990s, except for its economic assistance to the Freely Associated States of the
Marshall Islands, Micronesia, and Palau. The United States has increasingly relied
upon Australia to promote shared strategic interests as well as political and economic
stability in the region. Until recently, Australia was careful not to intervene directly
in domestic political upheavals.3 Instead, it pursued a strategy of greater cooperation
and regional assistance through participating in Pacific Island organizations such as

1 For a description of the Kwajalein Missile Base, see CRS Report RL31737, The Marshall
Islands and Micronesia: Amendments to the Compact of Free Association with the United
States, by Thomas Lum.
2 The Pacific Island nation of Nauru is on the OECD list of money-laundering states. “Tiny
Pacific Island’s Passport Sales is a ‘Big Worry’ for U.S. Officials,” PACNEWS, May 19,


3 Tony Parkinson, et. al., “Pacific’s Worsening Crisis: Pacific Islands Flashpoints,” The
Press (Christchurch), June 9, 2000.

the South Pacific Forum, extending bilateral assistance, and promoting public and
private sector reforms.4
The Australian government under Prime Minister John Howard has been a
forceful advocate of a more interventionist strategy in a region where political and
economic conditions have deteriorated, especially after the Bali terrorist bombing of
September 2002. As part of its effort to promote regional stability and prevent
Pacific island nations from becoming havens for transnational crime and terrorism,
Australia, along with New Zealand and other Pacific Island nations, has deployed
troops in East Timor, Papua New Guinea, and the Solomon Islands. Other initiatives
include heading the Pacific Islands Forum Secretariat through an Australian
diplomat, Greg Urwin; financing a police training center in Fiji that would train
officers from the Pacific Islands for domestic and regional operations;5 conditioning
bilateral assistance on improved governance; and promoting the creation of a
federation of small Pacific Island nations that would pool national resources and
share governmental responsibilities and services in order to make them viable states.6
For the most part, Pacific Island nations reportedly have accepted Australia’s
leadership as necessary and agreed to the focus on security adopted by Australia and
the United States. The mutual emphasis on security was reflected in the Nasonini
Declaration on Regional Security adopted by the Pacific Islands Forum in August
2002, in which members agreed that law enforcement cooperation should remain an
important focus for the region.7 In October 2003, leaders from 13 Pacific Island
nations and Hawaii gathered at the East-West Center in Honolulu to discuss regional
security issues and meet with President Bush. President Bush told regional leaders
that the United States would share intelligence to help them meet their security
The Evolving U.S.-Australian Strategic Relationship
In recent years, Australia has been reorienting its foreign and defense policies,
reemphasizing the importance of the United States to Australia. Australia’s external
orientation has shifted from an emphasis on Asian engagement, under the leadership
of former Labor Prime Minister Paul Keating and his Foreign Minister Gareth Evans,

4 “Australia’s Renewed Commitment to the South Pacific,” Alexander Downer, Minister for
Foreign Affairs, to the Center for South Pacific Studies, University of South Wales, July


5 Virginia Marsh, “Australia to Seek Wider Involvement in Papua New Guinea,” Financial
Times, October 6, 2003; “Australian Forces Must Expand Focus in Solomons, Consult with
Islanders,” East-West Wire, July 22, 2003.
6 Janaki Kremmer, “A proposal for European-style regional cooperation includes
peacekeeping in Solomon Islands and Economic Integration,” Christian Science Monitor,
August 1,2003.
7 “The Unpacific Pacific,” The Economist, August 23, 2003.
8 “Bush Listens Closely, Strengthens Relations with Pacific Island Nations,” East-West
Wire, October 24, 2003.

to renewed emphasis on the United States alliance under current Liberal Prime
Minister John Howard who has been in office since 1996. Prime Minster Howard
has taken the position that Australia does not have to choose between its history and
its geography, meaning that it can have close ties with Europe and America while
also enjoying productive relationships with Asian states. This shift in relative
emphasis came about for a number of reasons, including the reluctance of the
Australian people to see themselves as Asian; a reluctance of Asian states, such as
Malaysia, to think of Australia as part of Asia; diminished potential rewards of Asian
engagement in the wake of the Asian financial crisis of 1997; and renewed
importance to Australia of the strategic relationship with the United States as a result
of the war against terror.
The Howard Government’s support of the United States in the war against terror
has brought the United States and Australia closer together as Australia invoked the
ANZUS alliance in the wake of the 9/11 attacks to help the United States. Australia
maintained its tradition of fighting alongside the United States, as it did in WWI,
WWII, Korea, Vietnam and the first Gulf War, by committing troops to recent United
States operations in Afghanistan and Iraq. By doing so, in an international
environment that was largely unwilling to supply combat troops in support of the
United States in Iraq, Australia, along with Britain, drew attention to itself as a loyal
ally. This policy of support for the United States was continued by the Howard
Government despite significant opposition to the war in Australia. The Bush
Administration recognized Australia’s value to the United States and the Asia Pacific
region in the following statement:
Australia has long been a steadfast ally and partner, and recent events have only
magnified the value of our alliance with it. The key role that Australia’s brave
forces played in Iraq and Afghanistan, and its commitment to a leading role in9
regional security, only demonstrate Australia’s growing importance.
To complement its strong political and strategic ties with the United States, Australia
is seeking a free trade agreement (FTA) with the United States.10 A fifth round of
FTA negotiations were held in December of 2003.
While Australia has hosted joint early warning, communications and
intelligence facilities for decades, it may play an increasingly important strategic role
as the United States seeks to redeploy its Asia-Pacific force structure. This would be
part of the Department of Defense plans reportedly to effect “the greatest change in11
the U.S. overseas military posture in 50 years.” Positioning of American forces in
Australia has been discussed in the past. In 1996, then Commandant of the United

9 Peter Rodman, Assistant Secretary of Defense, “Prepared Statement for the House
International Relations Committee - Subcommittee on Asia and the Pacific,” June 26, 2003.
10 For background and more detailed discussion of security and trade issues see CRS Report
RS21358, Australia: Background and U.S. Relations, by Bruce Vaughn; CRS Report
RS21459, Australia-U.S. Economic Relations by William Cooper and Wayne Morrison; and
CRS Report RL21476, U.S.-Australian FTA Negotiations, by William Cooper.
11 Kurt Campbell & Celeste Johnson Ward, “New Battle Stations?” Foreign Affairs,
September/October, 2003.

States Marine Corp, General Krulak advocated expanding joint training and the pre-
positioning of military supplies in Australia.12 More recently, Australia has been
discussed as a potential site for an expanded American military presence to be better
situated to fight the war on terror.13 The Department of Defense is reportedly
developing a new “overseas basing strategy to support current and future U.S.
defense requirements.”14 Australian Prime Minister Howard reportedly has stated
that he would consider allowing an additional American military presence in
Australia. In June 2003, Australian Defense Minister Hill stated that Australia was
ready to expand joint exercises, allow the United States unilaterally to conduct
training in Australia, and enhance facilities for United States naval crews to rotate
through Australia.15 The opposition Labor Party views these measures as
unnecessary. 16
The United States and Australia conduct many joint military exercises and
Australia purchases much of its military equipment from the United States. U.S.
Pacific Commander Adm. Fargo has pointed to the importance of maintaining
interoperability with Australia across “the full spectrum of contingency operations”
while describing Australia as the “southern anchor of our security architecture in the
region.”17 The Australian government has also supported American plans to develop
a missile defense system though this view is not necessarily shared by the Labor
Party opposition.18 To meet its expanding military commitments, which are in part
driven by alliance considerations, Australia announced in May 2003 that defense
spending would increase over the next several years. Government officials projected
defense spending to rise from AS$13.3 billion in 2001/2002 to AS$15 billion in
2003/2004.19 Furthermore, the recent appreciation of the Australian dollar relative
to the United States dollar will increase the buying capacity of the government budget
for procurement.

12 Barbara Opall, “Krulak Pursues Base Alternative,” Defense News, June 10, 1996.
13 J. Kremmer, “U.S. Said to Eye Troops Deployment,” The Washington Times, May 26,


14 Senator Akaka, Senate Armed Services Committee Hearing, “Helping to Win the War on
Terror,” September 9, 2003.
15 “Australia’s Growing Importance to United States Military Plans,” Stratfor, June 4, 2003.
16 “Australia Would Consider Hosting U.S. Military Bases,” Channelnewsasia, August 5,


17 Admiral Thomas Fargo, “U.S. Security Policy in Asia,” Testimony Before the House
International Relations Committee - Subcommittee on Asia and the Pacific, June 26, 2003.
18 Anthony Smith, “Still Great Mates: Australia and the United States,” Asian Affairs,
Summer, 2003.
19 Robert Wall, Defense Boost Australia Plans Modest Increase in Defense Spending,”
Aviation Week and Space Technology, May 19, 2003; Hon. Peter Costello, Treasurer of the
Commonwealth of Australia, “Budget Speech — 2003-04,” May 13, 2003.

Australia’s Role in the Region
Australia took the lead in addressing the humanitarian crisis in East Timor that
followed the 1999 referendum for independence from Indonesia. After the
referendum, local militias, which favored continued association with Indonesia,
attacked pro-independence East Timorese. By leading an international peacekeeping
coalition to East Timor, Australia lessened pressure on the United States to become
more extensively involved. Australia’s subsequent involvement in East Timor has
helped East Timor develop into an independent, viable state, though negotiations
continue for a full agreement on how to divide the oil and gas resources that lie
beneath the Timor Sea. Conocco Phillips, an American corporation, stated in June
2003 that it was moving forward with a $1.5 billion liquefied-natural-gas
development in the Bayu-Undan area of the Timor Sea that separates East Timor20
from Australia.
Australia, along with New Zealand, continues to play a constructive role in the
cease fire and peace process on Bougainville, where the two nations have helped
restore order and improve the prospects for a lasting agreement between the people
of Bougainville and Papua New Guinea. Australia became involved in the Peace
Monitoring Group in 1997, that was intended to support the implementation of the
Burnham Peace process negotiated in New Zealand by the Bougainville21
independence movement and the Papua New Guinea government.
Recent events in the Solomon Islands point to a renewed commitment by
Australia to promote stability in its region that is inspired by the need to prevent
failed states in the age of terrorism. Inter-communal strife in the Solomon Islands
reduced it to a virtual failed state by 2003. In response, Australia, along with New
Zealand, Fiji, Papua New Guinea and Tonga, dispatched a force of 2,300 troops to
reinstate the rule of law and good governance as part of the Regional Assistance
Mission. This was done largely to reduce the prospect that the Solomons would
become an ungoverned area from which transnational crime, and potentially22
terrorists, could operate or draw support. Australia has also proposed the
establishment of a region-wide police force to more effectively police the region.
Australia’s renewed activism in the Pacific is not universally accepted. Some in
Australia and the region are concerned that it could mark a return to neo-colonial23

activity by Australia in the area.
20 Andrew Trounson, “ConocoPhillips Agrees to Timor Sea Project,” Asian Wall Street
Journal, June 16, 2003.
21 Derek McDougall, “Australia’s Peacekeeping Role in the Post-Cold War Era,”
Contemporary Southeast Asia, December, 2002.
22 “Pacific Islands Potential Terrorist Staging Points,” Sydney Morning Herald, November

24, 2003. See also Tarcisius Tara Kabutaulaka, “Australian Intervention in Solomons: Pre-

emptive Strike Against Terrorism,” East West Wire, July 14, 2003.
23 Janaki Kremmer, “Australia Shed Colonial Worries, Moves to Boost South Pacific Role,”
The Christian Science Monitor, August 1, 2003.

China’s Growing Regional Influence
China has become increasingly active — diplomatically and economically —
in the Southwest Pacific. Some analysts suggest that its current involvement could
result in strategic benefits for China in the long term. While the United States does
not maintain an embassy in several Pacific Island countries, the People’s Republic
of China (PRC) has opened embassies in all countries with which it has diplomatic
relations and has provided bilateral assistance and high-profile visits — with little
criticism of their internal policies. The PRC has provided funding, materials, labor,
and technical assistance for infrastructure projects (roads, airports, sports stadiums,
government complexes, hotels, mining operations) and financed the Pacific Trade
Office in Beijing to promote trade and investment between China and Pacific Island
states. Over 3,000 Chinese state and private companies reportedly have invested24
$800 million in the Southwest Pacific. Although China is still not a major bilateral
aid donor in the region, it has become the second largest aid donor to Papua New
Guinea, the most populous Pacific Island nation.
According to some foreign affairs analysts, China’s aims have been two-fold.
First, China has attempted to thwart Taiwanese diplomatic efforts in the region.
Taiwan has actively courted the region, establishing diplomatic relations with four
Pacific Island states at China’s expense — Palau, the Solomon Islands, Tuvalu, and
the Marshall Islands. Taiwan has offered these and other Pacific Island countries
economic and development assistance — helping to build or provide hospitals,
airports, copra processing equipment, ships, grants and loans. So eager are some
states for assistance that they often switch allegiances without warning or threaten to
change sides. Nauru, for example, which recognized China over Taiwan in July

2002, reportedly threatened to renew ties with Taiwan a year later — until China25

agreed to extend more loans to the island nation. In November 2003, Kiribati
established ties with Taiwan, despite having diplomatic relations with China since26

1980 and renting land to the PRC for a space tracking station.

Second, some experts argue, China has hoped to raise its diplomatic and,
ultimately, strategic influence in the region and its shipping lanes. The PRC
reportedly has occasionally applied diplomatic or economic pressure on Pacific
Island countries to oppose actions of Taiwan or Australia in the region or to influence
voting in the United Nations. According to one account, for example, the Vanuatu
government publicly expressed reservations about the Australian-led peacekeeping27
mission in the Solomon Islands following a visit by its prime minister to Beijing.
Although China does not possess a “blue water” navy capable of challenging the U.S.
in the region, some experts assert that it plans to develop one. China reportedly has

24 John Henderson, et. al., “Dragon in Paradise: China’s Rising Star in Oceania,” The
National Interest, Summer 2003.
25 Frank Ching, “Unfaithful Friends,” South China Morning Post, November 13, 2003.
26 China is reportedly dismantling the station in response to Kiribati’s recognition of
Taiwan. Philip Pan, “Tiny Republic Embraces Taiwan,” Washington Post, November 27,
27 “China, Vanuatu Team Up in the Solomon Islands,” Stratfor, July 1, 2003.

provided “modest” military support — training and non-combat defense supplies
rather than weapons — to Pacific Island countries that possess military forces — Fiji,
Papua New Guinea, Vanuatu, and Tonga. Since 1997, China has operated a satellite
space-tracking station on Tarawa Atoll in the Republic of Kiribati. Some analysts
argue that the base could be used for monitoring U.S. missile defense tests at
Kwajalein Atoll in the Marshall Islands.
While not opposing the U.S. and Australian presence in the region, many Pacific
Islands countries have been attracted to China as an “anti-colonial” power, welcomed
the aid and attention from China and Taiwan, and appreciated China’s relative
support on some issues such as the global warming treaty (Kyoto Protocol) to reduce
greenhouse emissions. Some regional analysts, Members of Congress, and leaders
of Australia have advocated stronger roles for the United States, Australia, and Japan
in the Southwest Pacific as counterweights to growing Chinese influence.28

Figure 1. Map of the Southwest Pacific
28 “Neither Isolated nor Isolationist: The Legacy of Australia’s Close Engagement with
Asia,” Alexander Downer, Murdoch University Asia Research Center, August 11, 2000.