Originally published 30 March 2016.

The US presence in the Indo–Asia–Pacific is transforming, and Australia has a major interest in how it unfolds. That transformation is driven in large part by China’s rise, and has several important features.

First, US alliances with Australia, Japan, the Philippines and South Korea are being updated according to each ally’s changing strategic outlook. The US is helping to build up allied maritime, cyber and space resilience capability.

Second, the US is moving beyond the hub-and-spoke alliance framework, and encouraging spoke-to-spoke linkages and allied interoperability ^[1]. Australia–Japan maritime security and defence/technology cooperation is growing, for example, and Japan is providing maritime security assistance to the Philippines.

Third, the US is strengthening ties with Southeast and South Asian partners and supporting linkages between US allies and those new partners. An extraordinary array of strategic relationships ^[2] have been forged or enhanced over the last few years, including India–Vietnam and Singapore–Vietnam defence agreements, Vietnam–Philippine, Singapore–India, and Australia–Singapore strategic partnerships, and minilateral frameworks such as the US–Japan–Australia trilateral strategic dialogue and an India–Japan–Australia trilateral dialogue.

Classic balancing against a rising China has accelerated further in 2016, as Chinese assertiveness in the South China Sea and concerns about energy/trade route access have hardened the strategic calculus ^[3] in Washington and many Asian capitals. The resulting intraregional strategic flurry is creating a new web of relationships in the Indo–Asia–Pacific.

Beijing views that regional transformation ^[4] with suspicion. Chinese officials have criticised US alliances as ‘Cold War relics’, and argued that some US-led minilaterals—such as the 2007 US–Japan–India–Australia quadrilateral—amount to containment. But despite some angst, China has largely acquiesced ^[5] to the trilateral arrangements. China has also participated in some of the region’s interconnectedness, such as South Korea–Japan–China trilateral discussions and the US-hosted Rim of the Pacific (RIMPAC). Beijing’s response has therefore been a mix of rising power assertiveness, counter-balancing and order building.

The US Asian alliance network retains its important deterrent function amidst South China Sea and Korean peninsula tensions. The network also has an order-building dimension—providing some predictability and a framework for managing common challenges ^[6]—and restraining allies from destabilising postures. Balancing those threat and order building dimensions is a particular challenge during strategic transitions such as in Asia today, as alliances adapt to changing strategic outlooks. The US and regional partners need to maximise the order-building dimensions of those relationships—for instance, by including a practical cooperation capability to address challenges such as natural disasters, and where possible fostering linkages which draw in China.

This shifting regional setting has increased the importance of the Australia–US Alliance for both countries. For the US, Australia is a reliable partner with valuable capability, diplomatic perspectives and regional expertise. For Australia, ANZUS remains the most cost effective way to safeguard Australia’s vital interests ^[7] as regional military modernisation erodes Australia’s capability edge.

ANZUS remains robust, and the Defence White Paper maintains a strong Alliance focus. However, the changing regional landscape is making ANZUS’ fault lines more pronounced. Australians tend to view the Alliance as a standalone bilateral ^[8], which is separate from the US Asian alliance network and regional dynamics. Washington values Canberra’s reliability, but has sometimes taken it for granted as reflexive support.

Australian and American interests and outlooks aren’t identical, and there’s a risk that Australia and the US might reach different conclusions ^[9] about a tolerable strategic order. The divergence of Australia’s own economic and strategic interests—with China Australia’s main trade and economic partner, and the US its primary security partner—can lead to tensions in the bilateral relationship, as the Darwin Port lease decision demonstrated. And in a contested Asia, an increasing number of issues have both economic and strategic components.

There’s also a risk of US retrenchment from Asia, which would leave Australia significantly exposed. While retrenchment is highly unlikely under a President Hillary Clinton, all bets are off for Asia policy if an alliance-skeptical Donald Trump becomes president.

The following policy guidelines would help address ANZUS’ fault lines and increase its stabilizing role during this regional transformation:

First, ANZUS should be embedded further in the emerging regional web. Canberra should articulate to Washington and regional partners how ANZUS fits into and often complements Australia’s regional engagement.

Second, Canberra should contribute more to Washington’s deliberations on responding to China’s rise, including finding pathways for China into the existing regional order, such as architectural reform ^[10]. Canberra should also take a greater lead in establishing functional cooperation networks ^[11] to tackle common challenges, incorporating China where possible. But Australia should hold firm on important norms such as freedom of navigation. This includes continuing Operation Gateway patrols and being prepared to take a stand against further unilateral activities by China, such as any declaration of a South China Sea Air Defence Identification Zone.

Third, an economic dimension should be added to ANZUS. Expanding the foreign and defence ministerial dialogue AUSMIN to include the Australian Treasurer and US Treasury Secretary would enable a comprehensive exchange of views on strategic and economic perspectives, and build on existing bilateral talks on business and trade.

No doubt logistics would be difficult, but this would support Australia’s economic diversification by promoting the expansion ^[12] of Australia–US trade and investment and business-to-business linkages. It would also line ANZUS up with regional economic connectivity, and could even in time become part of a formal bilateral commitment on mutual and regional prosperity, similar to the US–Japan alliance framework.

The Australia–US alliance is ultimately a tool to safeguard Australia’s interests. Updating ANZUS along those lines would make it more effective at doing so in a transforming region.