Cabinet documents 2001: John Howard's war on terror began the 'tragic' decline of 'smart diplomacy'

The September 11 twin towers attack in New York City is often seen as the moment the world's trajectory took a turn.

It's especially true for the United States, which saw a gradual shift from a war on drugs to a war on terror.

But thousands of kilometres across the Pacific Ocean, the major terrorist attack had "tragic" long-term implications for Australia and its diplomatic role in the now-contested Asia-Pacific region.

Cabinet papers from 2001, released by the National Archives of Australia on Saturday, show the terrorist attacks sent ripples through the country's defence and national security agencies.

Then-defence minister Peter Reith warned the national security committee in a secret cabinet submission that an additional tactical assault group would be necessary in the event of simultaneous, coordinated terrorist attacks.

The Australian Defence Force could establish the second response group by shifting and redeploying existing resources for a six-month period, he said in October 2001.

But longer-term initiatives, leading into the latter half of 2002 and beyond, would require "considerable additional resources".

Defence had released its white paper just the year before, which focused on self-reliance from the US and increasing capability without extra funding.

But the September 11 attacks would result in significant switch in that position.

Twenty years later, Defence's budget has nearly reached $50 billion a year - about 2 per cent of GDP.

Similarly, the bottom lines for the national intelligence community soared with a tripling of the combined budget to a billion in the decade after 2001.

Researchers from the University of Melbourne estimated in 2019 Defence's budget had grown nearly 300 per cent since 2001 while ASIO and ASIS's budgets had both increased by more than 500 per cent each.

Meanwhile, spending on foreign affairs and diplomacy has largely flatlined and, in more recent years, shrunk.

Foreign policy think tank Lowy Institute's latest power ranking for the Asia-Pacific region, released in December, put Australia at sixth - primarily due to its defence network and capabilities - behind the US, China, India and Japan.

On economic and diplomatic influence, however, Australia was on the decline.

After the 2020-21 budget was released in October 2020, the institute estimated the combined foreign affairs and diplomacy budget would drop to just 0.08 per cent of GDP by 2024.

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Associate Professor Chris Wallace, the National Archives cabinet historian, said the decline in diplomacy first triggered with the events of 2001 was "a tragic development".

"It didn't have to be the case - smart diplomacy, of course, enables you to be secure and to avert wars," she said.

"[It's] understandable against the backdrop of what happened that you'd spend more on security and intelligence matters but you'd think diplomacy should have been at least maintained, if not expanded, in proportion. But that didn't happen."

This year saw an escalating diplomatic row between the Australian government and French officials over the fallout of a billion-dollar submarine deal.

Labor senator Penny Wong told the Lowy Institute in November the worsening stoush indicated the Department of Foreign Affairs and Trade had either failed to provide government with informed advice or lost its influence.

"When you make a decision in the national interests, which you know, is going to be a difficult decision to land, you have to do the whole job and you have to focus on what is it that we can do to minimise the blowback, minimise the damage," she said.

"Clearly, that was not done."

Diplomacy, or an apparent lack of it, is also a major consideration for souring relations between Australia and China.

Twenty years prior, then-prime minister John Howard recalled "solidarity" from the then-Chinese president Jiang Zemin during the first APEC meeting in China, weeks after the September 11 attacks.

The meeting had occurred "under the shadow" cast by threat of international terrorism.

Mr Howard said, however, his relationship with the Chinese leader was "very positive" and he had been surprised by his interest in Western pop culture and literature.

But in the two decades that have since past, tensions between China and Australia have intensified, being largely played out publicly between non-diplomatic figures.

Mr Howard said he was regretful of the situation Australia was now in with its largest trading partner.

"The attitude of the current Chinese leadership is more aggressive and belligerent - I regret that," he said at the release of the documents in December.

"I think we have to play a long game with China."

The long-serving prime minister's role in the decline of Australia's regional diplomacy is small but central.

A US-focused security strategy after the twin tower attacks was the most obvious pathway in 2001 but it came at the cost of simultaneously boosting diplomatic and soft power efforts.

DFAT's former secretary, a career diplomat herself, Frances Adamson warned at an event in 2020 that diplomacy is "our first line of defence against forces that threaten our way of life".

It was a sentiment Chief of the Defence General Angus Campbell, who was in the audience, also agreed with.

And it's a line needed now more than ever.

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