Tag Archive for: Britain

In national security, governments still struggle to work with startups

AUKUS governments began 25 years ago trying to draw in a greater range of possible defence suppliers beyond the traditional big contractors. It is an important objective, and some progress has been made, but governments still lack key processes for getting technologies from disparate new suppliers into service.

This is leaving security gaps. Even if they are building economical dual-use products that should be easily adapted for national security purposes, many companies find it hard to work with the government.

For example, an intelligence service may be better able to detect a hostile state threat if it could use an investigative tool already sold to banks for monitoring financial transactions. But if working for the government takes too long, the vendor will simply stick with its financial customers.

The issues are complex, but the ball is in governments’ court. If governments want to benefit from vendor diversification in defence and security, they’ll have to be more open on the problems they are trying to solve, quicker to contract with startups and more willing to learn through rapid iteration.

Governments can seek to solve their hardest security-technology challenges in a few ways. They have traditionally tried to build the solution in house or have paid a large defence prime to do it. This century they’ve slowly realised that their hard problems are not always unique and that solutions already exist in the marketplace—just not within their traditional supplier base.

In 1999, the CIA set up In-Q-Tel and in 2004 US Grand Challenges were established; these were competitions open to many entrants, often newcomers. Britain has published technology challenges since 2008 and recently set up a Co-Creation Centre. Australia joined In-Q-Tel International in 2018 and has similar programs to engage the startup community.

That’s a lot of effort in the right direction. Yet governments still find it hard to engage with non-traditional suppliers. One reason stands out: officials trying to pull-through new capabilities have to fight against the system to take a risk on a novel supplier.

Venture capitalists, on the other hand, are prepared to take risks early, backing a company with millions of dollars based on potential sales. Many Silicon Valley investors actually discourage startups from trying to sell to governments, even if the products are directly relevant to national security or defence. Government sales are too sporadic and slow for them.

Unfortunately, the best choice for many companies is often to stick with making products for commercial customers and just being ready for government customers to turn up if they want to. The attitude is: ‘build it and (maybe) they will come.’

Governments would ideally be able to exploit a product for defence and security operational advantage before it reaches the open market. They now regretfully acknowledge that game-changing products are being sold before they can be exploited in secret.

The best approach to solving this is countercultural to organisations who want to keep everything under wraps secret and built in-house. The answer is to be more open, less secretive and to accept more risk.

Governments openly talk about what technologies they care about in the longer term (such as quantum or synthetic biology) and how they are improving what’s called ‘pull-through’—the gap between technology demonstration and deployment. The mechanisms include grand challenges, grants, co-investments and quick contracting.

But governments are not good at explaining why some technologies are important and where they will be deployed operationally, often because of a preference for secrecy. If a government takes years to build a technology platform in secret, the result is likely to be secure but will be quickly overtaken by commercial technology.

The conflict in Ukraine means military technology is being conceived, developed, tested and deployed at eye-watering speeds in front of social media and the public. Governments are only now being more open about the operational context in which the technology will be deployed, share specific requirements and constraints openly and upfront (that is, explain the why); meaning the right solution can be developed more quickly.

Britain is leading the way. For instance, the Ministry of Defence has publicly tendered for one way attack drones and autonomous maritime weapons for Ukraine.

Sharing of why and where technology will be deployed results in quicker operationalisation. New and better versions can be created with user feedback; the first version can be discarded and replaced with a new one, which itself might not last long as iterations appear. In this paradigm, the rapidity of pull-through becomes a source of operational security, because the adversary is forever trying to catch up on what you’re doing.

With more global competition and the West’s diminishing technological superiority demands government embrace proper processes to harness dual-use commercial technology—of the speed and scale that nimble companies normally focused on private customers can deliver. We must make it work.

Britain’s cut to foreign aid undermines threat prevention

Britain’s decision to cut foreign aid to fund defence spending overlooks the preventive role of foreign aid. It follows the pause and review of USAID activities and is an approach to foreign aid that Australia cannot afford to consider.

In late February, Britain said it would cut foreign aid. Prime Minister Keir Starmer said the decision was extremely difficult and painful. Foreign Secretary David Lammy described it as a hard choice. Both said it was necessary to keep Britain safe.

But foreign aid does help keep Britain safe.

Threats come in many forms. This means there are hard-headed security arguments for foreign assistance.

If another, poor country’s health system can’t deliver vaccinations or cope with a disease outbreak, your country can end up with a pandemic. If a nearby country suffers government collapse, military coup or state failure, this will affect your country economically and politically. If people affected by climate change are not assisted, you could end up dealing with a migration crisis.

Development funding is worthwhile investment. Dealing with a full-blown security crisis is far more expensive than the small amounts that help prevent it from happening.

People often assume that overseas development assistance gets a much larger slice of the budget pie than it does. For example, the 2018 Lowy Institute Poll showed that people thought that Australia spent $14 from every $100 in the budget on foreign aid when, in reality, it was about 80 cents. Now it is 68 cents.

Considering current threats, it makes perfect sense for Britain to increase defence spending. Lammy has said ‘Putin’s Russia is a threat not only to Ukraine and its neighbours, but to all of Europe, including the UK.’

But increased defence spending should not be at the expense of foreign aid: the preventive spending that guards against future threats. It is like taking money from preventive health care to fund emergency units. Britain is following the United States in a path that makes the world less safe.

This is something that Australia should not even consider.

The context is strikingly different. In the US, the target was the standalone aid agency USAID. Australia has already amalgamated AusAID into the Department of Foreign Affairs and Trade, meaning development programs are integrated across the entire department. Minister for International Development Pat Conroy has described it as an egg that can’t be unscrambled.

Unlike Britain, Australia’s development spending has already endured huge cuts during the Abbott years, and the vacuum this created for other actors in the Pacific is a salutary lesson not to follow Britain and cut further.

For those concerned about what aid money is being spent on, the government has a transparency portal that tells them. It lists conflict and security development projects including early warning reports, mediation services, reducing illicit arms flows, monitoring landmine and cluster munition use, strengthening cyber and critical tech resilience and reducing the threat of violent extremism.

And unlike the US and Britain, Australia simply can’t afford to vacate the field. Australia is surrounded by developing countries, and if it wants to have friends and partners in the region it must support them in the things that matter to them. The damage to Australia’s long-term interests would be incalculable. That’s what’s at stake. An adequate development budget is non-negotiable if Australia wants to have influence in its region.

Cutting aid might feel like a quick budget fix, but it will cost more in the long term as the world’s problems become expensive crises. In the British parliament, the chair of the International Development Select Committee made this point: ‘Cutting the aid budget to fund defence spending is a false economy that will only make the world less safe.’ She said she was ‘bitterly disappointed’ with a decision she sees as ‘endangering our long-term security’.

Humanitarian organisations have described the move as short-sighted, reckless and a betrayal of Britain’s national interest. Importantly, they have called out the decision as a political choice, noting that other options were possible.

Cutting aid is not a hard choice; it’s a weak choice—and a counterproductive one. People who care about Australia’s defence and security should be making this point.

What Donald Trump can learn from allies on foreign aid

There are smarter and more effective ways to streamline and re-strategise US foreign aid.

The Trump administration is not the first Western government to envision a stronger, safer, and more prosperous country by integrating foreign aid with strategic objectives. The experiences of the United States’ Five Eyes partners, particularly Australia and Britain, offer encouraging evidence for reform, having achieved tightly targeted development programs supporting diplomatic and strategic priorities. They also offer sobering lessons about implementation pitfalls, including the abrupt disruption of established programs, especially those already aligned with strategic policy, loss of critical skills among government personnel and heightened unease among international partners.

The logic driving aid integration is compelling. In an era of great power competition, maintaining separate tracks for diplomacy and development is an unaffordable luxury. China has harnessed development, along with trade and financial investment, as an instrument of strategic influence through both soft and hard means. Both Australia and Britain recognised this reality, merging their aid agencies into their foreign ministries to create more strategically coherent development policies. Having made clear its intent to fundamentally reshape USAID, the Trump administration has the opportunity to learn from its allies in the pursuit of the American national interest.

A unified strategy: Australia 

The Australian government integrated the Australian Aid Agency (AusAID) with the Department of Foreign Affairs and Trade (DFAT) in 2013 with the stated goal of better aligning Australia’s development, foreign policy, trade priorities, strategies and objectives while bringing an enhanced focus on the Indo-Pacific. The integration accompanied a reduction of Australia’s development funding. After reaching a peak of more than $5 billion in 2013–14, or 0.33 percent of gross national income, Australia’s development budget has progressively declined. In 2023-24, the budget was $4.8 billion, or 0.19 percent of gross national income. This change is also stark in terms of the slice of the Australian budget spent on foreign aid compared to defence expenditures.

An independent review of the integration in 2019 found that 90 percent of the Australian government’s strategic targets for the integration had been met, driving development allocations towards infrastructure and the Pacific. The review also found ‘examples of development goals being more strongly advanced through joined-up, whole-of-department efforts.’

These initial efforts—such as the Pacific Seasonal Worker Scheme and the Australian Infrastructure Financing Facility for the Pacific—have since grown to enable more ambitious and innovative integrated development and strategic initiatives. Key among these are the Falepili Union with Tuvalu (which provides Australia with strategic denial rights and Tuvalu with climate resilience monies and opportunities for migration), the agreement between Australia and Papua New Guinea (which encompasses development and security elements) and Telstra’s acquisition of Digicel Pacific, the largest mobile provider in the Pacific, with the Australian government’s support amid rumors of interest from China Mobile. While the review stepped carefully around the issue, it found integration had increased Australia’s ability to counter efforts to overshadow Australia’s influence, like China’s Belt and Road and Digital Silk Road initiatives.

However, the review also found several areas of concern. Early morale problems among staff arising from the abrupt way the integration was implemented had largely dissipated by 2019, but a ‘pronounced deterioration in skills and systems’ remained. The review found that ‘almost 1000 years of experience left [government service] shortly after integration.’ Additionally, ‘estimates suggest another 1000 years of experience’ left the department in the five years before 2019 due to the department underestimating the capability needed to design and deliver development programming.

This loss of know-how continues to hamper effectiveness over a decade later. While development is now firmly accepted as a tool of statecraft, best wielded as part of a whole-of-government strategy, an article by the review’s author 15 months ago suggested DFAT still had room to improve in terms of fully harnessing its development delivery.

Strategic prioritisation: Britain

The merger between Britain’s Department for International Development and its Foreign and Commonwealth Office occurred in 2021. The principal intention behind the merger was to better align Britain’s development activities with its wider diplomatic, trade and geopolitical interests, both in strategic terms and in terms of in-country representation. The merger coincided with a decision to reduce the Britain’s development funding commitment from the 0.7 percent of GDP enshrined in law to 0.5 percent of GDP. Notably, the integration occurred while Britain was experiencing the economic slowdown of the Covid-19 pandemic, which resulted in a double blow to funding in absolute terms, constituting a 30 percent reduction overall.

Alongside the budget reductions, a strategic prioritisation of development initiatives was pursued, in which Britain focused on bilateral funding to a smaller group of countries where measurement of effect is often easier to determine, but at the expense of some wider bilateral and multilateral commitments which were deemed to deliver less tangible value to Britain.

In addition, Britain identified a select set of issues for its development focus, namely climate investments, girls’ education, and global health, where it had demonstrated expertise and where funding would have constructive spillover effects. For example, improving girls’ education is found to reap positive dividends for local security, prosperity and governance. These initiatives, concentrated in Africa, the Indo-Pacific and South Asia, are all areas in which Britain’s adversaries were harnessing development as an instrument of influence, dependence and coercion.

Britain’s National Audit Office (NAO) review of the progress of the merger in 2024 found positive evidence ‘of where a more integrated approach has improved the organisation’s ability to respond to international crises and events, which has led to a better result.’

Two such examples were Britain’s coherent humanitarian, diplomatic, and military response as the leading European power supporting Ukraine after Russia’s invasion, and the joint humanitarian and political response to the Ebola crisis in Uganda. The findings supported the rationale for the merger and the modernisation of the department as fit-for-purpose in sharpening the Britain’s geopolitical interests. However, the NAO also noted that ‘the indirect costs’ of the merger ‘in terms of disruption, diverted effort and the impact on staff morale should not be underestimated.’

The NAO also reviewed the effect of the overseas development aid reduction and found that while the prioritisation compelled in the government’s activities had some positive dividends, ‘the speed and scale of the budget reduction, and the lack of long-term planning certainty, increased some risks to value for money.’

What can the US learn?

These cautionary tales suggest some considerations for the Trump administration:

First, pace matters more than may be immediately apparent. While decisive action has its advantages, too rapid a transformation risks institutional damage that could take years to repair. Recipient partners need to be assured about the value of the relationship, as reputation matters when development partners have the luxury of choice. A phased integration that maintains critical expertise while gradually aligning strategic direction would likely prove more effective in the long term.

Second, capability preservation requires active management. Both Australia and Britain learned the hard way that development expertise isn’t quickly or easily replaced. The technical knowledge required for effective commissioning, procuring, financing and managing of development programs, while not unique to the aid world, is distinct from traditional diplomatic and geostrategic policy skills. Any US reforms must include concrete plans for retaining and developing each of these specialised capabilities and empowering them to work together to deliver coherent whole-of-government priorities.

Third, funding stability enables strategic coherence and builds influence with partners. Britain’s experience shows that simultaneous organisational and budgetary upheaval can undermine even well-conceived reforms. While efficiency gains are desirable, treating integration primarily as a cost-cutting exercise risks strategic self-harm. With strategic competitors snapping at our heels, such interruptions cannot always be remedied.

Fourth, clear metrics for success must encompass traditional development indicators and strategic effects. Australia’s focus on its immediate neighbourhood and Indo-Pacific infrastructure and Britain’s emphasis on areas of demonstrated expertise and reputational value offer useful models for linking foreign aid and development assistance to broader national interests.

The stakes for getting this change right are immense. China has outflanked the West in harnessing foreign aid as a strategic tool of statecraft, having learned from the experiences of Western development agencies. The US cannot afford to unilaterally disarm in this arena and sacrifice its many areas of retained advantage through poorly executed reforms.

Secretary of State Marco Rubio’s framework of strength, safety and prosperity provides useful guideposts. Development programs should demonstrably enhance US security partnerships, expand trade relationships that benefit US workers, or strengthen allies facing authoritarian pressure. Programs that cannot do this should be reconsidered.

Achieving these goals requires maintaining the US’s development capabilities even as they are more tightly aligned with strategic objectives. The experiences of Australia and Britain suggest this balance is achievable but demands careful attention to ensure areas of national strength and influence are strengthened, not squandered.

Europe needs shared defence capabilities

Following Donald Trump’s victory in the US presidential election, Europe has recognised the need to strengthen its security and bolster its economic resilience. European defence industry leaders have called for more investment in the sector, and defence ministries are spending more on science and technology to ensure their countries’ readiness for the wars of today and tomorrow.

But it is not enough for each country to act alone. The European Union and Britain must approach technological innovation with the goal of building shared defence capabilities. Recent moves in this direction are promising: the German defence company Rheinmetall said it would open a new factory in Britain in 2027, as part of a landmark defence agreement between the two countries. Britain’s BAE Systems, Italy’s Leonardo and Japan’s Mitsubishi Heavy Industries are collaborating to develop a next-generation fighter aircraft. Germany’s Helsing, which specialises in AI-based defence software, is working closely with Swedish defence giant Saab and plans to expanded its presence in Britain.

Focusing on collective, rather than national, interests would enable large economies of scale. Each country could build on its comparative advantages, both in technological innovation and military capabilities, and thus strengthen European resilience for decades to come. This would also ensure that Europe serves as a strong partner to the US, contributing its unique defence expertise and industrial base.

Advanced European technological capabilities also form the foundation of economic prosperity, as reflected in Mario Draghi’s recent report on the future of European competitiveness and the European Commission’s policy agenda. But national policies continue to focus on technological sovereignty, with the goal of strengthening and protecting domestic industry, at the expense of sharing resources and information with allies.

This is the wrong approach. The proliferation of critical technologies means that even the strongest European economies cannot build an advantage on their own. Moreover, each country going it alone would stifle growth opportunities by inadvertently limiting exports and reducing market size below what is economically efficient or desirable.

Gaining a technological edge requires building European alliances that promote and protect shared capabilities. This collective statecraft would allow smaller economies such as Denmark, Norway and Estonia, which are home to innovative entrepreneurs working in quantum, space, and cyber technologies, to contribute to Europe’s sovereignty. These countries are too small to support a broad-based tech sector; working more closely with European allies would help them build their industrial base and boost domestic economic growth.

The idea is far from new. During World War II, the British shared extraordinary advances in radar with the United States under the auspices of the Tizard Mission. Today, NATO allies are developing drones with Ukraine. But to adopt a more consistent approach to pursuing collective sovereignty over tech outside of wartime, European governments must consider two factors: dependency and vulnerability.

Becoming a leader in critical technologies requires mutual dependence in terms of expertise, geographic advantage, and cumulative production. For example, quantum-computing systems rely on expertise in a wide range of areas, from superconducting materials to cryogenic engineering, which is usually spread across countries, highlighting the importance of alliances. Other innovations, such as space-launch technology, depend largely on geography: Norway’s Andoya spaceport, inside the Arctic Circle, will be essential for European space sovereignty. Lastly, some countries, after years of investment, have a cumulative advantage in production, such as Taiwan with semiconductors. Here, well-established manufacturing operations in Germany and Britain could be complementary.

Equally important is the question of vulnerability, which can stem from dependence. The war in Ukraine, for example, has highlighted Europe’s vulnerability to Russia’s control over natural gas (as well as supply-chain vulnerabilities in drone components). As the energy transition accelerates, the region will need to ensure that it can access critical material inputs and technology—which requires a shared effort.

Multilateral institutions can facilitate such collaboration. For example, the AUKUS security alliance, established in 2021 by Australia, Britain and the US, is committed to delivering advanced capabilities and ensuring license-free defence trade. Likewise, NATO should enable the sharing of non-military technologies.

Fortunately, some progress is already being made on this front. Last year, NATO established an innovation fund to invest in technologies that advance security goals. More recently, the European Commission launched a Trusted Investors Network to remove barriers to co-investing in breakthrough technologies with the European Innovation Council Fund.

At its core, collective economic statecraft means recognising that one country might be better served by supporting industry in another. Only by developing a collaborative framework that enables capital from across Europe (and the US) to be channeled to the most promising ventures can Europe gain the technological advantages that will help it meet important military challenges.

Such bold action would resolve a fundamental tension that has beset discussions of national security and economic competitiveness in Europe. Shifting the conversation from defending the homeland or strengthening its competitiveness to a discussion of how to advance collective interests would lead to measures that both promote and protect Europe’s sovereignty and economy. But first, each European country must be clear about its technological, geographic and production advantages and about how it can best contribute to collective peace and prosperity.

In 2024, a global anti-incumbent election wave

In a year in which political incumbents around the world were either voted out of office or forcibly removed from power, one statement, repeated in various forms by Mohammad Al Gergawi, the United Arab Emirates’ minister of cabinet affairs, stands out: ‘The role of government is to design a future which gives citizens hope.’ Looking ahead to 2025, political leaders should take this message to heart and shift their focus from constant crisis management to crafting a bold, hopeful agenda.

The global anti-incumbent wave has been breathtaking. In March, Senegalese President Macky Sall was decisively defeated after trying and failing to postpone the presidential election. In June, the African National Congress, which had ruled South Africa since the end of apartheid, lost its majority for the first time in three decades, forcing the party to form a coalition government. The same month, Indian Prime Minister Narendra Modi’s Bharatiya Janata Party also lost its parliamentary majority.

This trend continued through the summer and fall. In July, the Labour Party won Britain’s general election in a landslide, ending the Conservative Party’s 14-year rule. In October, Japanese Prime Minister Ishiba Shigeru’s ruling Liberal Democratic Party lost its majority for the first time since 2009. Then, earlier this month, Michel Barnier became the first French prime minister to be ousted by a no-confidence vote since 1962. A few days later, German Chancellor Olaf Scholz lost a vote of confidence, paving the way for an early election, while Canadian Prime Minister Justin Trudeau fired his finance minister, plunging his country into political uncertainty.

Other established leaders were ousted by popular uprisings. In August, Bangladeshi Prime Minister Sheikh Hasina fled the country aboard a military helicopter as protesters stormed her official residence. And Syrian President Bashar al-Assad was forced to flee to Russia after his regime collapsed in December.

Why are incumbents losing? One possible explanation is social media. Studies have shown that increased internet access often erodes trust in government and deepens political polarisation. In the United States, for example, Democratic and Republican-leaning voters have become increasingly polarised, with each side becoming more deeply entrenched in its partisanship.

Social media fosters connection between people who consume similar content, reinforcing their worldviews and amplifying the psychological effect known as ‘conformity’. Social media algorithms act as powerful megaphones for simple, emotionally charged messages, making these platforms fertile ground for conspiracy theories and fearmongering.

But while early evidence suggests that social media bolsters support for far-right populists, recent election results show that this is not always enough to gain power. In Mexico, Spain, Greece, Ireland, Britain, Japan and South Africa, incumbents or other mainstream parties won, albeit significantly weakened.

Consequently, one clear takeaway from this historic election year is that governments must learn to use social media more effectively. A good place to start is to engage directly with voters’ concerns. Earlier this year, two advisers to Prime Minister Sir Kier Starmer visited the town of Grimsby in northeastern England and asked residents to describe the government in one word. The responses they received mirror what I have heard in many other countries: ‘irrelevant’, ‘authoritarian’, ‘distant’, ‘elitist’, ‘inaccessible’, ‘self-serving’, ‘unambitious’, ‘untrustworthy’, a ‘joke’.

Another major takeaway is that to restore trust, leaders should focus on economic growth and citizens’ empowerment. A comprehensive 2022 study of the political economy of populism highlights strong evidence that economic conditions, such as rising unemployment and cuts to social spending, have a profound impact on people’s views of government.

This helps explain why voters in Spain and Greece in 2023 and in Ireland this year chose to re-elect incumbent leaders, while French voters rejected the ruling party. In 2022, Spain’s economy grew by 5.7 percent and Greece’s by 6.2 percent. By contrast, in Germany, which will hold an early election after the government lost a parliamentary no-confidence vote, the economy shrank by 0.3 percent in 2023 and is expected to contract by 0.1 percent in 2024. France fared slightly better, with GDP projected to grow by 1.1 percent this year, after growing by 0.9 percent in 2023.

Beyond boosting short-term economic growth, political leaders must consider the future they are offering their citizens. Too many politicians’ and policymakers’ plans are limited to annual budget cycles and focused largely on cuts. Meanwhile, voters—grappling with rising living costs, post-pandemic austerity and a pervasive sense that they have lost control over their lives—need leaders who give them reasons for hope.

Budgetary constraints should not be an excuse for failing to envision a better future. Some of the boldest government initiatives have been conceived during times of economic hardship. Notable examples include US President Franklin D Roosevelt’s New Deal in the 1930s, Britain’s postwar welfare state, Dubai’s post-1958 infrastructure boom and Singapore’s rapid development after 1959.

Political leaders must draw inspiration from these bold programs and be more ambitious in addressing the root causes of their citizens’ frustrations. The good news is that every country and community has creative individuals, in both the private and public sectors, whose work requires them to think ahead and plan for the future. Leaders must identify and reach out to such visionaries, who are rarely included in policy discussions, and leverage their expertise.

A politics of hope is essential to restoring faith in democratic institutions. In Grimsby, local residents said they longed for a politics that is ‘realistic’, ‘meaningful’, ‘passionate’, ‘hopeful’, and ‘empowering’. A government that can fulfill these aspirations will prove itself worthy of its citizens’ trust.

Editors’ picks for 2024: ‘GCAP: a big fighter designed for Pacific (and Australian) distances’

Originally published on 21 August 2024.

BAE Systems and its Global Combat Air Programme (GCAP) partners pulled off a coup of technology theatre at the Farnborough air show in July, unveiling a new design for their GCAP figher, in full-scale model form, that looked very different from any other existing or proposed aircraft. Surprises for the combat aircraft community included the aircraft’s size, much larger than the Typhoon or F-35 fighters, and a quite enormous, moderately swept delta wing.

GCAP is supposed to become the mainstay of Japan’s combat aircraft force after entering service in 2035, as well as the chief fighter of partners Britain and Italy. The stealthy aircraft is also a clear candidate as Australia’s next fighter.

What we see from the design is a long-range fighter that far better suits Pacific (and Australian) distances than aircraft now available, though it lacks extreme flight performance, which is looking ever less useful in air combat.

GCAP also has room for growth in capability.

The team at the air show did not disclose dimensions, and a journalist who produced a tape measure in the exhibit was, I am told, encouraged to leave at his earliest convenience. GCAP has been described as one-third bigger than Typhoon—roughly F-15 size, perhaps 20 metres long, but with a 50-degree swept classic delta wing spanning around 16.5 metres and having twice the area of the F-15’s.

GCAP leaders were firm that the model reflected the evolution of the design. The design has probably changed to meet changing requirements.

First macro-observation: the requirements are different from anything else. The last generation of European fighters were essentially F-16 or F/A-18-type fighters with added capabilities. South Korean and Turkish designs today, and the Shenyang FC-31, are US-inspired. Not so GCAP, formed to a Euro-Japanese requirement that edges towards the light-bomber end of the fighter spectrum, with an emphasis on payload and range, in a way we have not seen since the 1960s and the (much bigger) F-111.

The wing’s shape and size contribute to performance in two ways: massive fuel volume and low drag in cruising flight. Both promote range. It’s not a classic delta in the style of the Mirage III’s; it’s more like the capacious wing of the promising but never built F-16U, from 1995, or that of the Boeing X-32 contender for the Joint Strike Fighter program. The F-16U carried 80 percent more internal fuel than the standard aircraft; the X-32 wing, only half the area of the GCAP wing, could accommodate 9 tonnes of fuel, compared with 3.2 tonnes in the F-16C, for example.

The GCAP should have a usefully greater combat radius on internal fuel than most other current combat aircraft can manage with external tanks, while leaving space in the lower fuselage for weapons. That makes a lot of sense for a stealth aircraft, where fuel and bulky weapons must be carried internally.

Among the tactical opportunities of greater range is use of bases farther from the territory of the opponent–say, China. They would be more costly to attack with missiles and easier to defend.

The large span and area of the GCAP’s wing contribute to efficiency in cruising flight and good turn performance. The relative size of the engine inlets and exhausts and the smallness of the vertical stabilisers suggest that, to dominate the fight, the designers are not going for ultimate agility but are relying on sensors, long-range weapons and even teaming the fighter with uncrewed aircraft. (An aircraft this size could carry uncrewed vehicles into the fight under its wings, releasing them outside detection range.)

One wonders whether the European and Japanese planners have read the air combat study by researcher and former US Air Force pilot John Stillion, which pointed to a trend to longer-range engagements and declining instances of turning fights.

The wing sweep angle doesn’t seem to be optimised for supersonic cruise—supercruise. A fighter that can supercruise has much greater opportunity to make intercepts, but the feature has costs: it needs either an engine design that isn’t ideal for subsonic speed (one reason for the F-22’s non-stellar range) or one that has the complex and costly feature called ‘variable cycle’ (which has not been mentioned at all in the GCAP context).

Supercruise makes the airframe hot and therefore detectable, with a unique thermal signature that can be used to identify the aircraft. GCAP planners appreciate this: mindful of high-power radar-jamming from Soviet strike aircraft in the Cold War, the Royal Air Force was eager to get an infra-red search and track sensor (IRST) for the Typhoon. The one that’s on the Typhoon, the Leonardo Pirate, is as good as IRST gets, with a neural-net processor to filter false alarms.

Against such sensors, supercruising aircraft are not stealthy. That explains the apparent decision to forgo the capability.

Managing heat inside a fighter is a huge challenge. If it builds up faster than it can be dissipated through the skin, it can be stored for a while in the fuel. The Lockheed Martin F-35 program has struggled with this, but GCAP will try to get it right at the outset.

Engine company Rolls-Royce has demonstrated an embedded starter-generator and describes a system in which fuel and oil pumps are electrically driven and energy storage is provided for peak requirements. Meanwhile, the wing’s large surface area will help to offload heat without the skin getting too hot (and therefore too detectable).

Size and integrated energy and cooling will give GCAP room for growth. There is an interesting lesson here from the F-35. The JSF requirement was written when the Moore’s-law-driven development of electronics over two decades had vastly improved the F-16’s capabilities; it seemed clear that the development of electronic technology would continue, and it did. But what was not recognised was that, in a tightly packed and thermally sealed airframe, the limit on increased performance of electronics was not their volume and weight but getting rid of their heat. GCAP’s designers seem to have taken this to heart.

The power could be used in novel ways. There have been persistent reports of British work on high-power microwave (HPM) technology since the early 2000s. And Leonardo and the British Ministry of Defence expensively launched development of the latest radar for the Typhoon without foreign cooperation. A radar antenna could become an HPM weapon—and now Rolls-Royce says GCAP needs generators with the extraordinary output of around 2 megawatts. All that seems to add up to GCAP using HPM.

HPM attack can disrupt or damage radio-frequency systems—sensors and communications. HPM systems have challenges, including a risk of damaging friendly aircraft, but if they can be made to work they could be a powerful weapon for suppressing ground defences.

GCAP is different, better adapted to the Pacific than shorter-range jets, and has growth potential. As the largest Europe–Asia joint defense project and a major technological advance for all parties, the program faces challenges. But the design seen at Farnborough suggests that the requirement has been well thought through. It’s a promising start.

Editors’ picks for 2024: ‘Submarine agency chief: Australia’s SSNs will be bigger, better, faster’

Originally published on 28 May 2024.

The nuclear-powered, conventionally armed submarines to be built under the AUKUS agreement are on track to be the world’s most advanced fighting machines, says Australian Submarine Agency Director-General Jonathan Mead.

‘They’ll have greater firepower, a more powerful reactor, more capability and they’ll be able to do more bespoke operations, including intelligence gathering, surveillance, strike warfare, special forces missions and dispatching uncrewed vessels, than our current in-service submarines,’ Vice Admiral Mead says in an interview.

With a displacement of more than 10,000 tonnes, the SSN-AUKUS class will be larger than current US Virginia-class attack submarine of just over 7000 tonnes. Australia’s six conventionally powered Collins-class submarines are each about 3300 tonnes.

The SSN-AUKUS submarines to be built for Australia and Britain, with help from the United States, will be a ‘bigger, better, faster and bolder’ evolution of Britain’s Astute-class submarines, Mead says. The design will have the advantage of more US technology and greater commonality with US boats.

Australian steel will be used to build Australia’s SSN-AUKUS submarines, subject to a comprehensive qualification process expected to be completed in the first half of 2025.

The steel is also being qualified to both the British and US standards. Having Australian industry involved will deepen and bring resilience to the three nations’ supply chains, with greater mass, confidence and scale, Mead says.

In April, major US warship builder Newport News Shipbuilding lodged an initial purchase order for processed Australian steel from Bisalloy Steel’s Port Kembla plant for testing and training.

The government has committed to having eight nuclear submarines, Mead says, ‘and we’re on track’.

‘We’re planning on three Virginias and five SSN-AUKUS. That takes the program through to 2054.’

The SSN-AUKUS submarines built by Australia and Britain will be identical, incorporating technology from all three nations, including cutting-edge US technologies.

Those for the Royal Australian Navy will all be built at Osborne in South Australia. ‘Osborne will be the fourth nuclear-powered submarine shipyard among the three countries and one of the world’s most advanced technology hubs,’ Mead says.

The SSNs will all have an advanced version of the AN/BYG-1 combat system, used in the Collins class and in US submarines, and the Mark 48 heavyweight torpedo, an advanced version of which has been developed by the United States and Australia.

Mead says each Virginia has a crew of about 133 and the likely size of the SSN-AUKUS crew is being calculated as design work progresses.

The massive scale of the program and the nuclear element has understandably attracted strong attention, including criticism and questions about how skilled workforces will be found to build and crew the boats. Commentary has included suggestions that AUKUS is ‘dead in the water’.

Mead has no doubt that the project can be completed as planned. ‘Every day we ask ourselves the same question: ”Are we on track?” The answer is “yes.”’

For the program to succeed, it must be a national endeavour involving the Commonwealth, states and territories, industry, academia and the Australian people, Mead says. ‘To develop that social licence, we must provide confidence that we are going to deliver this capability safely and securely and not harm the environment.’

To build a nuclear mindset there must be an unwavering commitment to upholding the highest standards of safety, security, stewardship and safeguards, with all decisions underpinned by strong technical evidence. ‘It’s essential that everything we do is underpinned by strong technical and engineering evidence,’ he says. The reactor will be delivered as a sealed and welded unit that won’t be opened for the life of the submarine.

Mead acknowledges that recruiting is the big challenge.

He says comprehensive training of crews has begun, with Australian officers and enlisted sailors already passing nuclear training courses. ‘Australian officers have also topped courses in both the US and UK, showing that our people are up for the task that lies ahead.’

It’s intended that about 100 Australian officers and sailors will be in US training programs this year and they’ll go on to serve on US submarines as part of their crews. Other Australians will train in Britain and serve in Royal Navy boats.

Mead’s agency now has 597 staff, including engineers, project managers, lawyers, international relations specialists and policy makers. That is likely to rise to about 1000.

Given that Australia is the first non-nuclear nation acquiring nuclear-powered warships, the agency is working flat out to ensure rigorous regulations and safeguards are in place, along with the international agreements to back them.

Mead says Australia’s Optimal Pathway for acquisition of nuclear-powered attack submarines (SSNs) was designed to ensure that Australia would meet the exhaustive requirements to own and operate such vessels as soon as possible.

According to the Optimal Pathway, the first stage will see the first of several US and British submarines operating from the base HMAS Stirling in Western Australia as Submarine Rotational Force–West (SRF-West) from 2027.

In 2032, Australia will receive the first of three Virginia-class submarines from the US. One of the Australian officers now in US submarines is likely to be its commanding officer after extensive service on a US boat. The first two of those boats will be Block 4 Virginias, each with about 10 years’ US service, and they’ll be delivered after two years of deep maintenance and with 23 years of operational life left in them, Mead says, adding that the third US boat will be a brand new Block 6 Virginia. The US Navy has not yet put the Block 6 design into production.

The plan is to have the first SSN-AUKUS completed in Australia by early 2040s. Australia has an option to ask for two more Virginias if the SSN-AUKUS effort is delayed.

Mead says that how long the Collins are kept operational will be a decision for the government of the day as the SSNs arrive. The current plan is to begin big overhauls, called life-of-type extensions, for the Collins class in 2026.

He acknowledges that having the Virginias, SSN-AUKUS and Collin classes all operational could bring supply chain and training issues, but he believes those challenges can be handled. Having combat systems and torpedoes that are common to all these submarines will help.

Australians are on the design and design review teams for SSN-AUKUS. ‘We are embedding more technical and engineering people into the British program.’

Large numbers of Australian workers will soon be embedded in the British submarine construction site run by BAE Systems at Barrow, UK. ‘Many will come from the Australian Submarine Corporation, where they’ve been working on Collins. They’ll deepen their expertise, very specifically on how to build a nuclear-powered submarine,’ Mead says.

BAE will bring the intellectual property to the partnership with ASC to develop Osborne into a shipyard for nuclear-powered submarines.

It’s often suggested in Australia that, because the US has fewer submarines than it believes it needs, it will refuse to hand any over to Australia if its own situation worsens.

Senior American officials have expressed strong alternative views on why the project’s success is very important to the US and why it is in their own interests to make it work.

The US publication Defense News quoted the commander of US submarine forces, Vice-Admiral Rob Gaucher, telling a conference in April that co-operation with Australia would help the US submarine fleet in important ways. These included increasing the number of allied boats working together on operations. Having Australian personnel gaining experience on US boats would help ease a recruiting shortfall in the US Navy that flowed from the Covid-19 epidemic, and having access to the Australian base at HMAS Stirling in WA would extend the US Navy’s reach and maintenance options.

Gaucher said that, because the Australian SSNs would operate in co-ordination with American boats, ‘we get more submarines far forward. We get a port that gives us access’ to the Indo-Pacific region.

He said that by the end of this year the US Navy would graduate about 50 Australians as nuclear-trained operators and another 50 submarine combat operators. They would train on US submarines for the rest of this decade, increasing the number of people qualified to stand watch on American boats.

‘We get the opportunity to leverage an ally who can help us with manning and operating. We get surge capacity because now I have another area [where] I can do maintenance,’ Gaucher said.

Dan Packer, a former navy captain who is now the US director of naval submarine forces for AUKUS, told Defense News that Australia had eight officers in the inaugural training cohort that began in 2023. Three of those eight will be moved into an accelerated training pipeline, and one will eventually be the first Australian Virginia-class commanding officer.

Packer said the US was helping Australia build its submarine force from about 800 personnel to 3000. This year the US would bring 17 Australian officers, 37 nuclear enlisted and 50 non-nuclear enlisted into its training program. ‘And we’re going to up that number every year.’

These personnel would be fully integrated into US attack submarine crews until Australia could stand up its own training pipeline.

At some point, he said, the US Navy would have 440 Australians on 25 attack submarines, with each fully integrated crew including two or three Australian officers, seven nuclear enlisted and nine non-nuclear enlisted sailors. ‘They will do everything that we do’.

Mead says Australian navy personnel have been aboard the US submarine tender USS Emory S. Land for several months learning to maintain and sustain nuclear-powered submarines, and a US Virginia-class boat will visit HMAS Stirling for maintenance this year. Parts will come from an evolving Australian supply chain.

That visit will not include reactor work, ‘but ultimately, we will undertake work on systems that support the sealed power unit, within the compartment that houses it on the submarine,’ Mead says.

He says providing the industrial base to build and sustain the submarines, and crewing them, will involve about 20,000 jobs. A lot of work is being done with universities, technical schools and industry to prepare this formidable workforce.

Mead has long been a student of international relations and says the decision to equip Australia with SSNs was based on recognition that the Indo-Pacific is becoming a more dangerous place and ‘nuclear submarines provide a very effective deterrent’.

He rejects the argument that technology will soon make the oceans too transparent for crewed submarines to operate safely. ‘Our allies and partners and other countries in the region do not see it that way, and neither do we. We’ve done our analysis, and we see that crewed, nuclear-powered submarines will be the leading war-fighting capability for the next 50 to 100 years.’

He’s at pains to stress that the submarines will always be under full Australian sovereign control.

‘They will always be under the Australian government’s direction, operated by the RAN, and under the command of an Australian naval officer.’

Seven things for Britain’s AUKUS review to fix

The AUKUS review that Sir Stephen Lovegrove will deliver to the British government this month represents a vital opportunity to consolidate the project’s successes and turn a clean page on the areas of dysfunction and inertia that have dogged the project’s first three years.

Sir Stephen has been tasked with assessing British progress with AUKUS, identifying obstacles and advising on further opportunities for the Australian-UK-US defence technology partnership.

Since AUKUS was announced in September 2021, Britain has succeeded in assembling a community of highly motivated officials to work at an impressive pace on this long-term and deeply complex project. This task has been even more commendable in the shadow of the urgent demands made of Britain as the leading European power supporting Ukraine. But the lack of centralised Cabinet Office oversight, the absence of dedicated political leadership for the project, and the failure to connect AUKUS to an integrated economic and national security mission have impeded progress and threatened government’s capacity to deliver on its high ambitions.

Sir Stephen played an instrumental role in the initial conception of AUKUS in his then position as Britain’s national security adviser until he left the government in late 2022 ahead of the announcement of the Optimal Pathway agreement in March 2023. The review will confront not only the highly debated project design for developing and building the SSN-AUKUS submarines but much less visible but equally important questions of process, ownership and leadership. Seven of these issues requiring urgent attention are set out below.

Governance reform

The current machinery-of-government in Britain facilitating AUKUS must be rethought. A decision in 2023 to move the project’s leadership from the Cabinet Office to the Ministry of Defence (MoD) embedded an institutional perception that AUKUS is a limited to a narrow defence-capabilities delivery project. It also put AUKUS at risk of falling on the chopping block when ‘hard choices’ between MoD budget lines have to be made.

The MoD must remain the major stakeholder in AUKUS, but both the prize at stake in AUKUS and the path to achieve it go well beyond defence. Both Pillars 1 and 2 require system galvanisation from the very top and whole-of-government visibility, coordination and leadership to deliver the vision. The oversight and accountability for its success must therefore sit in the Cabinet Office.

Political leadership

Delivering on a project of this scale and complexity will require a specific minister with a dedicated focus to harness all levers available to the government. In the important effort to the foster bipartisan support required to sustain momentum, we have tended to underemphasise the political nature of AUKUS. It is and always has been a deeply geopolitical project that will succeed only if its contemporary custodians can find a political language and rationale to justify its considerable resources.

To date, Britain has sought to lead a fundamentally disruptive project largely through efforts to optimise governmental processes. Yet it is becoming increasingly clear that anything less than full-throated support will see AUKUS wither on the vine.

AUKUS as an economic growth project

AUKUS needs to be recognised for its centrality to the British government’s economic ambitions. One of the most important institutional decisions of the past decade has been the choice to prioritise Britain’s knowledge economy—specifically, research and development, higher education and technological innovation—as the foundation of the national prosperity agenda. This means that a project such as AUKUS Pillar 2 (which seeks to accelerate our technological readiness pipeline in cooperation with our closest allies) gives Britain not only the capacity to engage meaningfully in strategic competition but also a leg-up on its core economic mission.

So, AUKUS must be integrated into the British government’s growth agenda and understood as deeply relevant to the nation’s domestic outcomes. The argument must be won with the Treasury to reframe AUKUS as a long-term investment in the nation’s future. As a growth mission, AUKUS can be run with a more ruthless focus on delivery—prioritising fewer projects than now, with proper resourcing, so its deterrence function can be achieved.

Strengthen the stakeholder ecosystem

The government must understand that it has an interest in keeping a broad group of stakeholders informed about AUKUS and in listening to what they have to say: industry, academia, Parliament, the media, think tanks and the general public.

It will benefit greatly, first, from an external policy environment that can help provide meaningful insights and advice to unlock the complex maze of challenges it faces in delivering AUKUS. Second, even though it may not always feel disposed to fostering greater scrutiny, the government will also benefit from an active public debate around all aspects of AUKUS.

Both of these require British institutions forging meaningful engagement settings with different stakeholders and directly supporting initiatives that enable these groups to make a substantive contribution to the project’s success.

The enabling environment

The government must understand that it will need to have a very active hand in fostering the conditions by which industry and academia can get on with it and deliver AUKUS projects.

Reforms to the US International Traffic in Arms Regulations mean the three nations can freely share about 80 percent of advanced technologies with each other. This is game-changing, but the reforms must be seen as simply the beginning and not the pinnacle of Pillar 2 achievement. There remains plenty of low-hanging fruit for the government to address—for example, the harmonising and expediting security clearances between the three partners. The government will also need to be the driving force behind industry-academic collaboration, mitigating the security and funding issues that have led to the privatisation of research labs.

Even the process of driving non-government funding into the AUKUS ecosystem, cajoling venture capitalists and pension funds to invest in defence innovation, will require government facilitation. Resources are tight, but achieving success in these endeavours for AUKUS will also provide wider benefits for Britain’s highly productive defence and technology industries.

Create compelling narratives

The need to design impactful and evolving narratives around AUKUS has been consistently undervalued. This is partly a legacy of the pact’s origins as a highly sensitive security project, but it also reflects miscalculations about the willingness of citizens to engage with the realities of Britain’s security environment. There has been an inclination to present AUKUS in the simple terms of retail politics, promising micro-level job creation opportunities in specific communities already deeply integrated with defence industrial production.

We know from opinion polling that Britons are sold on the bigger picture, supporting initiatives that facilitate allied cooperation, promote deterrence and lift national competitiveness.

There has also been an unwillingness to engage directly with misleading narratives, some promoted by well-meaning critics and others by our international adversaries. This lack of engagement has created a vacuum that risks putting the government on the back foot. It’s time for a grown-up conversation with the public about AUKUS, properly explaining what is being worked towards and confronting misinformation head-on.

AUKUS is the vanguard project of our allied future

AUKUS needs to be understood as a prototype for a new era of co-creation and co-development with our closest friends, particularly those from the G7+3 (the three being Australia, South Korea and India). Within this grouping of 10 nations, we should be hoping to achieve self-sufficiency in access to vital technologies and capabilities that can compete with the ferocious pace of innovation in China.

For this reason, we must stare down the notion that AUKUS is a zero-sum game of prioritising two allies at the expense of others. The benefits of AUKUS will be shared in part through the principle of NATO interoperability and in part due to the project’s experimental nature as the closest possible expression of allied cooperation outside wartime. AUKUS can and must be the blueprint of a future status quo.

Britain has taken some important actions to improve its performance in AUKUS in the past year, but there is much to be done for us to position our institutions to deliver on the considerable opportunities at stake. The Lovegrove review represents the best chance we have to inject new vigour, political ownership and structural reorganisation into AUKUS, so that Britain can best access the project’s full potential and its role in our future resilience.

Australia toughens enforcement of foreign investment rules

Treasury has stepped up enforcement of Australia’s foreign investment regime, however it continues to try to balance protecting national interests and encouraging investment inflows.

Data suggests some foreign investors, noting national security provisions in the system, are choosing other destinations for their money or keeping it at home. Chinese investors remain notably unenthusiastic about Australia.

The latest quarterly report on Australia’s foreign investment shows Treasury issued 16 infringement notices for non-compliance with conditions in the December quarter, up from only one in all 2021–22 and none at all in the previous financial year.

Treasury gets a fairly steady stream of referrals from government agencies and the public over potential non-compliance, with 48 received between July and December last year and 114 in 2022–23.

In the first half of 2023–24, Treasury approved 616 investment proposals worth a total of $86.7 billion (not including residential real estate). That was roughly in line with 2022–23, when 1310 proposals worth $171.5 billion were approved over the 12 months.

However, the number of proposals withdrawn reached almost a quarter of the numbers approved. This was double the rate of withdrawals over the previous two years and may point to growing difficulty in winning official approval.

Although Treasury provides no explanation for investment proposals being withdrawn, a common reason is that investors are told their proposals will not be approved or may require unacceptable conditions or restructuring.

About 75 percent of approvals by value are made subject to conditions, which may relate to tax structuring, board representation, data security or deadlines for developing projects. Companies pay hefty fees to submit a foreign investment proposal for approval.

Following a 2021 toughening of national security provisions in the foreign investment legislation, investors in specified sectors must seek Foreign Investment Review Board approval even if investments are below the mandatory review thresholds.

In the half year to December, only 29 proposals worth a total of $600 million were approved under the new national security provisions. Just three were made subject to conditions.

This is a sharp fall from the previous two years and suggests the new national security provisions may be deterring investment. In 2022–23, the FIRB approved 110 proposals worth $5.7 billion under the national security provisions, while in 2021–22, there were 119 proposals worth $10.1 billion.

Australia’s foreign investment screening has become much more rigorous over the past decade, with far greater involvement of the national security agencies and the Australian Tax Office and imposition of significant application fees designed to fund monitoring and compliance. There were big legislative overhauls in 2015 and 2021.

Foreign investment lawyers say increasingly onerous requirements are a disincentive to investment. This year’s budget included measures to ease compliance obligations for ‘low risk’ investors—the example given was Canadian pension funds—and also offering fee refunds to investment proposals that were not approved.

The actual flow of foreign direct investment into the country (as measured by the Australian Bureau of Statistics, rather than the FIRB, which tracks only new proposals) bounces widely from one year to the next, but a four-year trend suggests Australia is becoming less attractive to foreign business.

The $189 billion of foreign direct investment from 2020 to 2023 was the lowest since the four years to 2010 and 30 percent down from the peak four years of 2016 to 2019. (This includes only direct investment by foreign companies and excludes portfolio investment by pension funds and other institutions.) While the latest period includes the pandemic, investment flows last year were little more than they were in the heart of the 2008–09 global financial crisis.

There are many possible reasons for the decline besides the screening regime, starting with Australia’s 30 percent corporate tax rate, compared with an OECD average of 23.6 percent.

The annual World Investment Review from the United Nations Commission on Trade and Development (UNCTAD) shows Australia is not alone in managing the tension between encouraging investment for economic reasons while trying to protect sectors of national importance, including security-related concerns.

Australia has screened foreign investment since 1975 and for decades was almost the only country to do so. UNCTAD records that in 1995, only three countries screened foreign investment.  By 2011, 10 countries had adopted foreign investment screening while the latest UNCTAD report shows 37 nations now vet foreign investment proposals for national security risks, with eight more in the process of introducing screening. The OECD says the Australian regime is still one of the world’s most restrictive, second only to New Zealand.

The rising sensitivity to potential threats from foreign investment is the product of an increasingly difficult geopolitical environment and emerging doubts, particularly in the developed world, about benefits flowing from globalisation. UNCTAD’s latest report comments that ‘global economic fracturing trends, trade and geopolitical tensions, industrial policies affecting strategic and manufacturing sectors, and moves by corporates to diversify supply chains are reshaping international production and FDI patterns’.

UNCTAD data shows that apart from the 2020 pandemic year, the US$1.3 trillion in global foreign direct investment last year was the lowest since 2010, while there has been no underlying growth in global investment flows since the years preceding the global financial crisis. UNCTAD reports that foreign direct investment last year would have shown a 10 percent fall but for corporate restructuring forced by the new global minimum tax regime.

It is possible that this tax restructuring contributed to the sharp fall in foreign direct investment in Australia last year, which dropped from $91 billion to $45 billion. Swiss, Canadian and Dutch companies pulled large sums out of Australia last year while the three biggest investors—companies from the United States, Britain and Japan—all continued to increase Australian holdings.

US firms poured a record $35.8 billion into Australia last year, reversing the losses that occurred following the Trump administration’s tax changes designed to encourage firms to repatriate investment. US firms withdrew a net $22.3 billion in 2020 and 2021.

Investment from China remains weak. In 2022, Chinese firms withdrew a net $3.3 billion from Australia while their new investment last year was only $873 million, according to the ABS. China’s accumulated investment in Australia stands at $88 billion, which ranks it 10th, behind the Netherlands and Canada but ahead of New Zealand. US investment in Australia by contrast is approaching $1.2 trillion, while Britain has 10 times as much investment in Australia than China has, at $879 billion.

Australia has always claimed a much larger share of global investment flows than its economic size would suggest. In 2022, Australia was ranked seventh, just behind France and Brazil, attracting foreign direct investment flows equivalent to 4.6 percent of the global total. Inflows last year dropped Australia’s ranking to 12th and its global investment share to 2.7 percent.

Will Labour keep Britain at full tilt in the Pacific?

Britain has a new prime minister, Keir Starmer, leading its first Labour government in 14 years. Key questions for us now are how Britain under Labour will approach the security partnership with Australia and whether London will remain committed to investing defence resources in the Indo-Pacific.

The report published by ASPI today, Full Tilt: the UK’s defence role in the Pacific, provides vital context for addressing these questions. In this series of articles, originally published in ASPI’s The Strategist this year, ASPI authors review the historical underpinnings and future course of Britain’s strategic recoupling with Australia and this region, especially the Pacific Islands, from perspectives ranging from deterrence to climate resilience.

Britain’s relationship with the region did not feature prominently in the election campaign. But Labour reaffirmed its commitments to AUKUS, to raising overall defence spending to 2.5 percent of gross domestic product (without specifying a timeline or where the extra money would be spent) and to maintaining the UK’s independent nuclear deterrent. Labour also recaptured the parliamentary seat in northwest England where AUKUS nuclear-powered submarines will be built, fending off a local Conservative campaign focused on the future of defence industry jobs.

In April, David Lammy, now Britain’s foreign secretary, put forward his case for ‘progressive realism’. Under this conceptual framework, Britain would pursue ‘ideals without delusions about what is achievable.’ Lammy reiterated that European security would be Labour’s priority. But he argued that realism dictated that Britain must also strengthen its engagement with the Indo-Pacific, because the region ‘will be fundamental to global prosperity and security in the decades ahead.’

Lammy later said that the Foreign, Commonwealth and Development Office would be upskilled with experts on China, artificial intelligence and other critical technologies. The Australian-born Catherine West, who is likely to be the junior foreign minister covering this region, has also advocated learning from Australia on China. Such enthusiasm tallies with the sanguine assessment of bilateral security relations provided by Stephen Smith, Australia’s high commissioner in London, speaking to the ASPI Defence Conference in June.

However, there are also some clouds on the horizon, including hints that British statecraft in the Pacific may not be adequately resourced.

Lammy has said that fiscal restraint demands lateral thinking about the role of embassies, with greater openness to co-location, giving the example of British representation to Pacific Island Forum nations. Lammy frames this in terms of extending diplomatic reach, which would be an opportunity for Australia to offer support. But Canberra must state loudly and clearly that any winnowing of Britain’s recently expanded diplomatic posts in the Pacific would destroy London’s credibility as a serious partner to the region.

If money is tight, Britain’s forward defence presence in the Indo-Pacific risks getting squeezed. The pledge to rotate one the Royal Navy’s seven Astute-class nuclear submarines through Western Australia from as early as 2027 should be paramount, as it’s integral to AUKUS. But sustaining the tempo of visits and joint exercises by aircraft carrier strike groups, littoral response groups and other military engagements is also vital.

This Labour government also needs to decide on replacements for the two offshore patrol vessels currently forward-deployed in the Indo-Pacific, HMS Tamar and HMS Spey, which are particularly important in the Pacific Islands. As ASPI’s Euan Graham has suggested, Australia could shape that decision by offering port facilities for two Royal Navy Type 31 or Type 32 frigates, defraying costs while supplementing capability gaps in the Royal Australian Navy. This could also reinforce interoperability with Indonesia, which will operate a variant of the Type 31.

Contributing to the ASPI Conference, Sophia Gaston, head of foreign policy and UK resilience at Policy Exchange, a London-based think tank, stressed the need for early engagement with the new Labour government. Sadly, Prime Minister Anthony Albanese will miss a prime opportunity by ducking out of the NATO summit in Washington this week. Let’s hope Deputy Prime Minister Richard Marles, who will stand in for Albanese, still gets the chance to bend Starmer’s ear. But outreach must extend deeper, mobilising Australia’s think tanks and experts to reach into UK Labour’s roots, including the large cohort of new MPs, many of whom have scant foreign or defence policy experience.

Building from the Full Tilt report, I offer some recommendations for how to strengthen the Australia-UK partnership and shape Britain’s approach to our region:

1. Britain’s new defence secretary, John Healey, should promptly and publicly reaffirm the UK’s commitment to a persistent forward defence presence in the Indo-Pacific, including Submarine Rotation Force – West.

2. Australia should support Lammy’s interest in establishing a new College of British Diplomacy, particularly to supplement expertise on China, economic security and countering coercion. ASPI’s work with the European hybrid centre of excellence in Helsinki provides a good model for cross-regional exchange.

3. Britain and Australia should initiate a dialogue between senior defence and foreign ministry officials about defence strategy and deterrence, modelled on the annual Australia–US strategic policy dialogue. Reflecting deepening Anglo-Australian military cooperation, the dialogue should include discussion of regional contingencies, including Taiwan, and both conventional and nuclear deterrence. This would be consistent with the US concept of integrated deterrence, which encourages Washington’s allies to develop cross-bracing partnerships.

4. Britain should be regularly consulted about the shape and implementation of Australian Defence’s comprehensive workforce plan, which selectively allows non-nationals to join the Australian Defence Force, both from the pool of permanent residents and by streamlining the existing scheme for directly recruiting military specialists overseas. As the scheme expands, Australia could learn from the British armed forces’ experience in recruiting non-citizens overseas, including from Fiji, which is also expanding its defence ties to Britain. Engaging Britain would also support the military and industry workforce coordination required for AUKUS, helping to allay concerns about the poaching of talent.

5. Britain should consider establishing a consulate in Adelaide (as the UK high commissioner to Australia, Vicki Treadell, advocated on the ASPI podcast), where the Royal Australian Navy’s SSN-AUKUS nuclear-powered submarines and Hunter-class frigates, both based on British designs, will be built. The business case could plausibly meet Lammy’s threshold for funding physical diplomatic premises. Australia should also consider ways to extend its diplomatic reach in northwest England, providing a corresponding local presence where many of Britain’s defence industries, including its main submarine-construction facilities, are concentrated. There is no substitute for a visible and persistent presence on the ground when it comes to forging research and industrial networks.

Thankfully, recent British and Australian governments of every political stripe have woken up to the fact that even strong bilateral partnerships need constant nurturing and should not be taken for granted because of familiarity. With that in mind, let’s hope Starmer stops over in Australia when he attends the Commonwealth heads of government meeting in Samoa in October. If Britain seeks to understand the world from every angle, it pays to spend time down under.