Australia and the US are both federations of states in which power is shared constitutionally between the national and subnational levels of government. However, traditionally, one domain that hasn’t been considered a shared power, but rather the constitutionally enshrined responsibility of the national governments, has been international affairs (in the US Constitution through Article I, Section 10 and other clauses and in the Australian Constitution through section 51 (xxix), known as the external affairs power). For this reason, foreign-policy and national-security decision-makers in Washington DC and Canberra have rightly seen themselves as the prime actors in the policymaking that develops and strengthens the US–Australia alliance and all global relationships, with limited power held by subnational governments.

However, in our globalised and digital world, constitutional power no longer means that subnational governments have only narrow roles and influence on the international stage. While national governments will continue having primary responsibility for setting foreign policy, subnational governments have offices overseas, sign agreements with foreign governments, and regularly send diplomatic delegations abroad. Recent events, including the Covid-19 pandemic, have highlighted subnational governments’ decisive role in shaping, supporting, adapting to and implementing national and international policy. The pandemic, including post-pandemic trade promotion, demonstrated that the relationships between layers of governments in both federations are essential to national security, resilience, economic prosperity and social cohesion.

Subnational governments have vital roles to play in helping to maximise national capability, increase trust in democratic institutions, mitigate security threats and build broader and deeper relationships abroad. At the subnational level in Washington and Canberra, people-to-people, cultural and economic links create the deep connective tissue that maintains relationships, including those vital to the US-Australia alliance, no matter the politics of the day. But that subnational interaction must be consistent with national defence and foreign policy.

Australia’s federal system should help facilitate international engagement and incentivise positive engagement while ensuring that the necessary legislative and policy levers exist to require the subnational layer to conduct essential due diligence that prioritises the national interest. In this report, the authors make a series of policy recommendations that will support the development of such a framework.