Continental Drift - By Bates Gill

The so-called pivot to Asia gets a lot of attention in Washington -- from the secretary of state, from the secretary of defense, and from the president himself. It has become the Obama administration's signature shift in grand strategy. No one knows quite what it will look like, but everyone agrees that one key aim is to hedge against a rising China -- a purpose carefully left unstated by American officials lest they upset economic relations with Beijing or provoke the very military response that they are trying to discourage.

But lost amid the care over what the pivot means for U.S.-China relations has been the question of what it means for U.S. allies and their relations with China. Those allies don't necessarily see China the same way as Washington does, but their cooperation will be key to implementing the pivot successfully.

Australia -- long one of America's closest allies -- is a case in point. The U.S.-Australia relationship is shaping up to be far more strategically important than it has ever been in economic, diplomatic, and military terms. American investors have poured some $130 billion into Australia -- the United States is the largest source of foreign direct investment in the country by far -- with major American companies such as ExxonMobil, Chevron, and ConocoPhillips fueling the recent energy resource extraction boom in western and northern Australia.

Last month, Canberra released a 350-page white paper, "Australia in the Asian Century." A year in the making, the document dwells predominantly on the country's future relations with key Asian states such as China, India, Indonesia, and Japan, but it also makes clear Australia's commitment to its alliance with the United States:

We consider that a strong and consistent United States presence in the region will be as important in providing future confidence in Asia's rapidly changing strategic environment as it has been in the past. We will continue to support US engagement in the region and its rebalancing to the Asia-Pacific, including through deepening our defence engagement with the US and regional partners.

Australia's election to a non-permanent seat on the United Nations Security Council will likewise strengthen the opportunities for strategic cooperation between Canberra and Washington.

In defense and security affairs, the two countries have also steadily strengthened an already robust relationship. Australia has remained committed in Afghanistan, currently fielding 1,550 troops there, the largest contingent of any non-NATO country; Australia has lost 39 soldiers in Afghanistan, half of those in the past two years alone. During his visit to Australia a year ago, President Obama announced plans to rotate U.S. Marines, for training purposes, through an Australian base in Darwin, with the aim of rotating up to 2,500 Marines a year by 2017; the first detachment of 200 Marines arrived in April and wrapped up their training six months later. These rotations will constitute the largest ongoing U.S. military presence on Australian territory in decades.

When Secretary of State Hillary Clinton and Secretary of Defense Leon Panetta visited Perth in November for the annual U.S.-Australian ministerial, the two sides agreed to continue augmenting the U.S. military presence in Australia, particularly for joint training, and discussed the possibility of increased American access to Australian naval facilities, such as HMAS Stirling on the Indian Ocean. Another important outcome was the agreement to locate highly advanced U.S. space surveillance capabilities in the form of radars and telescopes in Australia in order to better track space assets and debris. Looking ahead, enhanced defense science and technology cooperation is also in the works.

Seen from these angles, the U.S.-Australia relationship is stronger than ever and should grow even more so as each country looks to devote more resources to successfully engaging the increasingly dynamic Asian region.

But here is where the tensions and contradictions arise. To begin with, Australian defense spending will be at its lowest level as a proportion of the national economy since 1938, according to the Australian Strategic Policy Institute. The government budget released in May provides 24.2 billion Australian dollars (about 25.3 billion U.S. dollars) for defense in the 2012-13 fiscal year, equivalent to about 1.6 percent of Australian GDP. Most of the defense spending cuts -- amounting to AU $5.5 billion over four years -- will come from reduced capital investments in equipment and facilities. This more austere budgetary environment will constrain Australia's contributions to the pivot.