Waking up to the new world order

Britain may still consider the US to be its closest ally, but it must look beyond old friends to new

Every foreign secretary quotes Lord Palmerston, who famously said we have no permanent allies and no permanent enemies, only permanent interests. But is it true? Today, we have permanent alliances. The US is the single most important bilateral relationship. We are committed members of the EU. We are proud of our role in the UN. These alliances are founded on shared values and embedded in shared institutions. The evolution in foreign policy is not in our values or alliances, but in changing circumstances and the changing distribution of power. This requires new thinking and new solutions.

Foreign policy has never been more integral to building success domestically. Our prosperity relies on a more open Britain - open to new investment and trade, to new people and ideas. Our security relies on tackling injustice at home and abroad, and co-operating with countries on terrorism, migration and organised crime. Our mission to empower citizens depends on global agreements and institutions to tackle glo bal problems alongside more local accountability for local issues. Foreign policy should be a force for good for Britain and in the world. The two are interconnected. But the new distribution of power requires a new diplomacy.

During most of the past century our security concerns were primarily about excessive and expansionist state power. Today, some of the greatest threats emerge in countries where state power is too weak, not too strong - in failing or fragile states. At the same time, we have seen the re-emergence of China, India and Russia. Within 20 years political, economic and military power may be more geographically dispersed than it has been since the decline of the Chinese empire in the 19th century.

Equally significant, however, is that the power to co-ordinate at scale is no longer dependent upon access to the hierarchies of bureaucra- cies; co-ordination can occur through networks. This can be seen in benign forms with Linux challenging Microsoft Windows, or political campaigns such as Make Poverty History, Stop Climate Chaos and MoveOn. The malign counterpart is the increasing capacity of extremists and terrorists to co-ordinate their activities without the vulnerability of a single point of control.

These shifts in power have implications for how we carry out foreign policy. Our influence in the world will depend on four key tools. The first is intellectual leadership - winning the battle of ideas. This means being clear about questions of principle: for example, rejecting the false charge that our foreign policy is targeted against any one set of people or countries. We are right, for instance, to argue for the urgency of a two-state solution in the Middle East. But we do so because it is right, not to placate al-Qaeda.

We also need to be clear about values. For example, the agreement at the world summit in 2005 on the "Responsibility to Protect" marked a vital new stage in the debate about the relationship between human rights and national sovereignty. And leadership means being clear about facts and evidence, such as the economic and national security implications of an unstable climate.

The second tool is influence within institutions and networks. Britain acting alone does not possess the power or legitimacy to effect change. Acting with others, we can make a difference. Bri tain must use its strength as a global hub, financially, culturally and politically.

Multilateral action is not a soft option. Just look at Afghanistan - a country that symbolises our dual goal of protecting our national security and promoting human rights. Our forces are deployed as part of a Nato operation, backed by a UN mandate. The military operation is backed by a comprehensive approach including EU and UN investment in development and humanitarian assistance.

Nor does multilateralism replace the need for bilateral relationships. In practice, multilateral action requires the participation of the major world powers. The US is our single most important bilateral partnership because of shared values but also because of political reality. The US is the world's largest economy. Engaged, whether on the Middle East peace process or climate change or international development, it has the greatest capacity to do good of any country in the world. That is why we welcome the commitment of President Bush to give priority to long-term political negotiation of a two-state solution side by side with short-term humanitarian support for the Palestinian government, led by President Abbas and Prime Minister Fayyad.

Some people try to compare our relationship with the US with our position in the European Union. But the EU is not a bilateral relationship - we are members of the EU. That membership is an asset in economic terms, guaranteeing markets and setting standards. It is an asset in tackling crime. And it needs to be an asset in foreign policy, not substituting for nation states, but giving better expression to the common commitments of nation states. But the EU was founded to tackle a threat that no longer exists: conflict within western Europe. If it is to renew its mandate, it needs to find a new raison d'être, including, I believe, a focus on addressing climate change. Creating an Environmental Union is as big a challenge in the 21st century as peace in Europe was in the 1950s.

The third tool - incentives and sanctions - represents harder power. History suggests that the attraction of becoming members of "clubs" such as the EU, the WTO, or Nato is a powerful one.

The benefits of free trade or military protection are linked to states playing by the rules. I am a strong supporter of Turkish accession talks with the EU. The prospect of EU membership has built a bridge to Turkey. In recent years it has abolished the death penalty and improved the rights of women and minorities.

A balanced package of incentives and sanctions is also required to apply pressure to particular countries and regions. Iran has every right to be a secure, rich country, but it doesn't have a right to set off a nuclear arms race in the Middle East or undermine the stability of its neighbours. That is why we are taking a dual-track approach. We are continuing to discuss further sanctions with the group of nations that comprise the E3+3, an international coalition brought together to address concerns about Iran's nuclear programme. In parallel, through the E3+3 process, we are offering a comprehensive package of incentives, including help with a civil nuclear power programme and measures to support Iran's access to international markets and capital.

There are times when incentives and sanctio ns will need to be combined with, or replaced by, a fourth tool: direct intervention.

Obligations to Iraq

It was right in Kosovo in 1999 to deal with the terrible ethnic cleansing going on there. Almost a decade later, it is right that the UN and African Union are working together to put a strengthened force into Darfur to protect vulnerable civilians there, and right, too, that under French leadership the EU is working on deploying a small military force along the Chad/Darfur border. In Iraq, the Prime Minister has made clear that we will fulfil our international obligations to the Iraqi people and we are determined to do so. As we take these propositions forward, we need to tap into the expertise and insight that lie in and beyond traditional diplomatic circles. That process begins this week in a conversation about how we do business.

First, priorities. Given the levers I have just described, where should the UK concentrate its global effort; where are we most needed and where can we most effect change? My starter for ten would be that if we are to succeed at anything we must succeed at tackling radicalisation and terrorism, building a European Union that is a force for good within its borders and outside, and shaping the global drive for the transition to low-carbon prosperity.

Second, co-operation across UK government. The Foreign Office is a unique global asset. But diplomacy has to be allied to other assets across government: aid, trade, financial institutions and military intervention. How can we improve co-ordination across the FO and other departments on particular countries and challenges?

Third, how can we engage beyond Whitehall, with faith groups, NGOs, business and univer sities? The new diplomacy is public as well as private, mass as well as elite, real-time as well as deliberative. And that needs to be reflected in the way we do our business.

Those of us committed to engaging with the world face profound questions. We confront scepticism and fatalism. John F Kennedy got this right. He said foreign policy should be based on "idealism without illusions". I am under no illusion as to the challenges and the difficulties. But the idealism is there - above all about Britain's ability to be a global hub for discussion and decision-making about the great economic, social and political questions we face.

David Miliband MP is Foreign Secretary