 I'm joined this morning by Professor Nicholas Burns, the Sultan of Amman, Professor of International Relations at the Kennedy School at Harvard University. Nick holds a range of positions. He's director of the Aspen Strategy Group, and he's on the board of a whole variety of eminent organizations. He was a career diplomat serving 27 years with the State Department and served as Under Secretary of State for Political Affairs under George W. Bush from 2005 to 2008. Nick, delighted to have you join us. Let's dive into the meat of your paper. You start out by noting that the pivot, or if you like, the rebalancing of U.S. strategic posture represents an important turning point in the evolution of the U.S.-Australia alliance. In what ways do you think this turning point might affect the nature of the alliance, the dynamics of the alliance, if you like? Well, Andrew, thank you very much. It's a pleasure to be with you. I only regret that I can't be with all of you in Canberra in person, but I hope to do that in the future and visit the University of Sydney and ANU. I would just say this, Andrew. I do think that this pivot, or the rebalancing now, as the Obama administration likes to put it, is perhaps the most important change that Barack Obama has made to American foreign policy in his first three years as President. And I think it will have a rather dramatic impact on the U.S.-Australia alliance, because as I reflect on that alliance, at least over the last 10 years, or 11 since 9-11, the U.S. has asked Australia to play really a global role with it in Afghanistan, certainly, in Iraq, and in many other ways in the battle against terrorist groups globally by rebalancing American attention to the Asia-Pacific region. I think the United States will begin to see Australia more in its true form as an Asia-Pacific country and begin to understand the role, perhaps more than we have in the past, that Australia plays in the Pacific, certainly, and in relation to China, given the very close economic relationship Australia has with China, as well as with some of the democratic countries in the region, like India and Singapore, where the U.S. as well as Australia is trying to augment its own security relationship. So I think there will be more of an Asian-Pacific character to our alliance and a focus on that part of the work we do together than perhaps we have seen at least in the last decade or so since 9-11. That will be a big change. I did say in my paper, and I thought I should add here, Andrew, that there is really no controversy in our country to speak of over this rebalancing. There is a very broad agreement, I think, in both of our political parties in the academic world where I currently am in the think tank world, in our non-profit institutions, that China is going to be the big relationship and the most complex relationship and difficult for us, and that our equities will be found more in the Asia-Pacific region than, say, in Europe, where the United States has had perhaps the majority of its equities at stake in the last 100 years or even 200 years, most of our history. And so I think that we'll get to a rebalancing, and you'll see the United States focusing more on the Asia-Pacific region, but not quite yet because, as I said in my paper, I won't belabor this point. There are a whole host of issues that at least for the next 5 or 10 years I think will keep us fundamentally engaged, unfortunately for many negative reasons, in the Middle East. Beginning with Iran, which I think is, without any question right now, the most serious vexing, difficult foreign policy concern that we have, it's a big, it's suddenly become a campaign issue. The Romney campaign has made it an issue in the last week or so. It'll be the biggest question that Obama or Romney as president have to face after November, and it's a big consequential decision. Are we going to go to war with Iran, and perhaps become entangled in a third land war in the Middle East since 9-11, or are we going to focus more on trying to negotiate our way out of this impasse with Iran? And if you add to that the real uncertainty about the future of Iraq, if you add to that the Israeli-Palestinian issue, and the problems between India and Pakistan and the unfinished business of how do we get out of Afghanistan, the Middle East and South Asia is going to occupy us. So the rebalancing and pivot to Asia makes sense. We may not see its fullest expression for another decade or so, unfortunately. Nick, thanks. As I read you, your core message is that we need to engage but hedge. Let's start with the engage element. What in your view should Australia and the United States be doing to deepen our collective engagement with China? Or to use the nice phrase that you've got in your paper, build habits of cooperation and trust that might over time create a more stable relationship? Yeah, I think that nice phrase comes from my time when I was following the Soviet Union and a newly liberated Russia from the end of the Soviet Union, and that's how we framed the issue back then at the end of the 80s and the early 90s. How do we develop a different quality, habits of cooperation, the trust that was clearly lacking in the Cold War with Russia? And I think we do face the same problem with China. And the reason I wanted to frame the issue in my paper of engage but hedge is that was the major take away I had from a conference I was at in Sydney in June 2011 sponsored by the University of Sydney. I was really struck by the argument in very live argument in Australia over whether or not the continued preeminence of our alliance was the right way to deal with China. Whether or not we should trim our sales and perhaps diminish the martial aspect of the alliance in an attempt to convince the Chinese that we were not to contain them. And this is a very tricky balance. Let's start with engagement as you said. I do think there's a lot more that we can do. And I'm speaking really from an American point of view. My guess is, my sense is that Australia in a way may have a deeper dialogue with the Chinese. And China, of course, doesn't see Australia perhaps quite in the same way it sees us as a future possible adversary. And Australia, of course, has a deeply engaged economic relationship with China. So what I'm struck by in the way that both President Obama and President Bush have dealt and Clinton too have dealt with the Chinese is that our rhetoric is good. We want friendship, partnership, some administrations have said strategic partnership with China, but our actions don't really correspond and fit with the rhetoric. So, for instance, I point out in my paper, an elementary step we could take would be to decide to spend more time with the Chinese leadership. It may not resolve the problems, it surely won't between us, but the patterns of cooperation, the habits of meeting, the continual conversations that a president can have to another president or a foreign minister to another foreign minister or a chairman of the joint chiefs to the top Chinese general in the PLA. You can't substitute for that. And right now we have an erratic pattern of high level contacts, dialogue with the Chinese leadership. Huzhun, Tao and Barack Obama might see each other a couple of times a year and they might spend a few hours together per year, one on one. That's simply not good enough given the stake we have in a better relationship with China and given China's role in the world. And correspondingly, you know, we still are stuck back in another age where American presidents spend a lot more time in Europe than they do in Asia and the Pacific region. So, you know, President Obama is going to see a lot of Angela Merkel this year and I'm sure they have a lot to talk about the Eurodeck crisis, right, the future of NATO. But we need to shift in how we prioritize our resources and our time and make a much more serious attempt to actually engage the leadership of China than we have in the past. That's an elementary thing. The second thing would be below the leadership, below President, Prime Minister, Foreign Minister, Minister of Defense. You know, you've got two big governments and particularly the military side. We did profit very much in the 80s and 90s from vastly increased military to military talks, junior officer training and exercises between the Soviet and then Russian military staff and the American military staff. And Australia participated in some of this. And you see the benefits 20 years later when senior officers actually had experiences as junior officers with their Soviet or Russian counterparts don't have that pattern of cooperation with China. It's very dangerous not to have it. At a time when our military, you know, the American military, as you well know, is forward deployed in Japan and South Korea. We're going to be forward deployed in Darwin. We're building up Anderson Air Force base. We're going to come into contact with Chinese military and hopefully we'll do it in a sophisticated way where we have some understanding of who they are and how they operate. And a lot of that comes from just going to staff columns together and having rudimentary naval exercises together or air exercises of the type that adversaries never had. But, you know, countries like us have to have in this kind of world. So that's another rudimentary suggestion and easy fix. I'm really suggesting that we take China more seriously than we have. And we have actually a strategic ambition to give this kind of diplomacy a chance of on the margins at least establishing a better atmosphere environment and framework for the way we have to deal with each other. That's part of the engagement that I'm talking about. Nick, let's shift from engagement to hedging. You underscore the importance of the U.S. and its democratic allies striving to retain preeminence in military power. Let's focus first on the U.S. itself. What in your view does the U.S. need to be doing on that score? Well, the first thing we have to do is pay attention to our economic issues at home. Because I think it's a truism that has been widely discussed here that our most important foreign policy challenge is our economy. And then if we're not able to rebalance our economy and dig out of the hole we've created for ourselves and make some decisions in Washington across the partisan divide, if we can't get our tax and budgetary policies in balance, we're not going to have the resources to be forward deployed in the way that we have been over the last 60 to 70 years since the close of the Second World War. And that is a big, big problem for us is what the election is being fought over. And it'll be the real test of our two-party system after the elections when we face this fiscal cliff. But I'd start there. If we're going to have a hedging strategy that means anything, if we're going to be able to sustain American power in the Pacific and in Asia, we're going to have to have a more healthy economy. Now, Leon Panetta, in a recent trip to Vietnam, did say very specifically, as President Obama had in his Canberra speech, the looming cuts, there will be quite substantial cuts in our military budget, at least half a trillion dollars over 10 years, but maybe more, maybe a trillion, if sequestration takes place. Obama and Panetta have both said none of the cuts will come out of our forces in the Pacific. And as you know, we're now going to alter the historic post-1945 ratio, balance of our air-enabled forces, Atlantic Pacific, to favor the Pacific. 60% of our forces in the Pacific, 40% in the Atlantic. But I wonder if we can sustain that pledge, because let's say we can't cope with our budgetary problems. If we go into sequestration, if we begin to slashing the budget, really in not a very rational way, but that could happen, that's what the sequestration law would have us do, then I think it might be hard to resist the kind of budget cuts in the Pacific that would really make it difficult for us to sustain the kind of power that we've had in the past. And that's really part and parcel of our alliance with you, with Australia. So I really worry about that set of issues first in terms of our ability to hedge. The second factor that I worry about, having been a practicing diplomat for a long time, is will we have the sophistication and the attentiveness in the way that we meet this very careful balance between engaging China and remaining part of this big alliance, Democratic alliance in Asia? Will we have the ability to actually hedge in a way that doesn't become a self-fulfilling prophecy, i.e. drive China into believing that we're really out to get them and contain them and at some point defeat them? And so I worry about our ability from one administration to another, say from a more conservative to a more liberal, from an experienced president to an inexperienced president to get to keep that balance right. And there, and I mean this in the most sincere way, having allies that speak truth to us and that remind us of what it takes to balance and hedge appropriately in Japan and South Korea and Australia in particular is going to be very important. So an alliance of equals where we remind each other of when to be aggressive and when to pull back. That hedging is going to be extremely difficult at a time when the Chinese are feeling certainly expressing a more muscular sense of Chinese foreign policy in the South China Sea for instance and not rising to every provocation is going to be important. And third Andrew, and forgive the rather long winter, but the third factor that I put in the paper is can we then create the types of institutions or use existing institutions to diminish conflict and to resolve and compromise in crises in a way that does not lead to war but leads to some kind of practical resolution. And I made the comparison because I served for a long time as a diplomat in Europe and on European issues. We were very fortunate in the Cold War and the post-Cold War era to have these overlapping and overlapping labyrinth of institutions in Europe and we could turn to any number of institutions and throw problems at them and have them resolve issues quite serious ones with the Soviets or Russians. We don't really have that overlapping set of institutions in Asia yet. We need to create them and that would be a common project with the Chinese. That's a nice segue to the next set of issues I wanted to explore. Again pursuing the theme of hedging but shifting the spotlight to Australia if you like. What do you think Australia from where you sit needs to be doing to support the hedging side of the equation? Both on its own terms unilaterally and in alliance with Washington. What would you have Australia do? I guess I'd say two things Andrew. The first is quite obvious. Having Australia sustain its own military capacity, particularly its expeditionary capacity. Both to take the lead as Australia has done in East Timor in the past, in Fiji and places where the US maybe is not in a position to do so. That's enormously beneficial to an alliance. Secondly to be the kind of first rate naval and air power that it is. Keeping that capacity will require continued political will. It will require quite difficult national conversation. I was part of it for a few days in Sydney last year. It was really struck by the passion on both sides of that argument in Australia. One would hope from an American perspective, if you agree with an engaged but hedged strategy, that the Australians would stay focused on that mission with us and having the capacity to do so. And second, as I said before, the kind of dialogue and honest conversation with the Americans that allows Australian Prime Ministers and Foreign Ministers to be able to say to give frank advice and to, since you do live in the region permanently in the way that we do not really, to give us a sense of what's manageable and what's not, what's possible and what's not, when to pull back, when to be aggressive. I think that what we've managed in the US-Australia alliance, as I've participated in government, we've managed to be frank with each other. Michael Estrange, I thought, put it very well. We had this brief meeting at the hotel. You remember, after the conference in January at the Australian Ambassador's residence, and Michael said, we're not going to have an identical worldview. We're going to have a complementarity of views. I think it was the way he put it. It was what I wrote down in my notes. And it's sometimes important for the Americans to realize, in an alliance situation, that it has to be an alliance of equals and the door has to be open to disagreement on tactics and strategy. We don't manage that as well with some of the others in Asia. I think we manage it pretty well with you and I think Americans are open to frank advice when we're not succeeding or not making the right calls. And I think that's really an important quality to the US-Australia alliance that I would never want to see disappear. Nick, I'm watching the clock, but let me broaden the conversation a little to one of, I think, the most interesting themes in your paper. And that is the need for both the United States and Australia to be building strategic and military cooperation with other democracies around the region. Can I draw you out on that a little? Sure. And this comes out of my own experience in the Bush administration when we had a discussion and Michael participated in it. I remember this. He and I were partners in it. Trying to figure out what is the architecture, formal and informal, for how democratic countries coalesce on military and security terms. Some of us are allies, so we have treaty commitments to each other, like Australia and the US, so that's easier. It's more difficult when it comes to India, Singapore, Malaysia, Indonesia, Vietnam. All of those countries are seeking a more pronounced security relationship with the US and Australia. And yet they have to be careful and perhaps limited in what we can do because they don't want to stoke opposition by China. They live next door to China, some of them. And then it was difficult for us when I served in government to get some of the architecture right. Well, do you have formal meetings? We debated whether we should have a quadrilateral group, Japan, Australia, India and the United States. We went back and forth. As the years changed in Tokyo, Delhi and Washington, we had different views as to whether we could meet formally or informally or declare that we were meeting or not meeting. And I think getting that pattern of cooperation among the democracies right in a way that satisfies the national needs of all of us is tricky but not impossible. And as I do point out in the paper, I think the India equation is more difficult because India, if you go into Delhi, I visit several times a year, and you ask Indian officials or academics what do you worry about the most? To a person, they say China, the nuclear weapons modernization, the military buildup of the PLA, the lack of transparency in the PLA, the fact that China seems to be constructing a web of relationships in the Indian Ocean that are designed to ham in India. So the Indians are quite concerned strategically. In fact, I've noticed in Delhi these days, China is issue one, two, and three, and Pakistan is issue four and five, which is a big reversal from, say, 10 years ago or 20 years ago. But the Indians very much want much more enhanced naval and air cooperation, particularly with Australia, Japan, Singapore, the U.S. but they don't want any kind of formality to it. And they don't want to be part of a league. And they don't want to be part of an association much less a treaty because, first of all, they have their own relationship with China to think about. They've got their non-blind status, which is still very much a part of how India sees its role in the world. In fact, there's a renewed debate called India 2.0 about modernizing the concept of non-alignment. I thought non-alignment was dead after the end of the Cold War, but it's not. And so I think a tricky part of this diplomatically for Australia and the United States is actually having better cooperation among the democracies, but in a way it's sensitive to the political concerns of all those countries. One last question, Nick. One of your closing messages is that a positive articulation of China's role in the region and China's role in the world will be an important part of what we all need to do. I'd like to draw you out on that. As part of that, get your take on the Obama speech in Canberra. How would you characterize that speech in that context? Right, and I read that speech closely, as I'm sure you did. My sense is that President Obama has been a very careful, sensitive articulator of this balance that we need to have in how we talk about China. I mentioned this in the paper because I'm concerned about the American domestic discussion about China. It is increasingly shrill. It is increasingly friend and foe. Excuse me, not friend. It is increasingly China as foe. It is increasingly focusing on the areas where China is delinquent in its international responsibilities. And there's a lot one can criticize about modern China and its policies. But we've got to get the narrative right over the long term in how we Americans talk about China and how they talk about us. So, for instance, President Clinton said something very important. I can't remember the exact quote. Others perhaps will around the table. But President Clinton said, in effect, our strategic problem is going to be with a weak China, not a strong China. And given the degree of interdependence between us, which is very different from the Cold War with Mao's China or Stalin's Soviet Union, we better hope that China succeeds economically. And therefore, I think this really is incumbent upon the Americans first and foremost, we have to establish a narrative of our own about China that treats China with a certain degree of respect and that speaks about the importance of China's role in the world. And here I give credit to John Eikenberry, and I really admire the way he thinks about this. And in his most recent book published last year, Eikenberry says essentially, you know, China is not a rebel in the international system the way that Mao was, Stalin was. China is actually a fully paid up member of the international system. We can quibble about whether it's the kind of stakeholder, as Bob Zellick put it, that we would wish it to be. We would ask China to do more to manage the international system, but it's part of the system. It's not rebelling against it. And it's an extraordinary economic rise that has come within the system that we have built together, Australia, the US, Britain, Germany, Japan, South Korea. And keeping China as a member of that system and giving it leadership roles in the system is extraordinarily important, as opposed to the rhetoric that one might see in political campaigns that China is the enemy or the reincarnation of the Soviet threat. I mean, that is not the mainstream American view and I'm not sure it's not in Australia either, but you do hear that. And the majority of our public leadership dialogue about China focuses on the problems. We very rarely focus on what we might be able to achieve together if we are able to maintain a peace with China and encourage a more responsible Chinese government, say in the South China Sea. So I do think getting that narrative right is going to be important. There will be some limits, obviously, domestic political limits on you and us and how we phrase, how we articulate our relationship with China. There will be times when we have to be quite, have to disagree and be quite tough. But there's got to be a positive element of how we, of that narrative is what the point I was trying to make at the end of the paper. If we fail to do that, then how do you establish common ground with the Chinese leadership in such a way that secures a peace and helps us keep the economies of the world growing and helps us work out very difficult problems like the South China Sea problem that's at the forefront today?