Australia Signs Defense Trade Agreement With USA

John Howard (left)
G.W. Bush (right)
(click to view full)

Australia introduces the required legislation. (Nov 2/11)

On Sept 5/07, The Australia-United States Treaty on Defense Trade Cooperation was signed by Australian Prime Minister John Howard and US President George W. Bush. The USA and Canada have had a special agreement for several decades, designed to remove many defense export restrictions on US-Canadian industrial cooperation. In June 2007, Britain and the USA also agreed to a treaty framework.

The new agreements with Britain and Australia were not fully defined when signed, however, and full implementation is a long and complicated process. Over 4 years later, it’s still ongoing. This article explains the issues with the current system, the intent of the treaty, and the steps involved on the way to implementing it. The latest step is Australian legislation:

• The Trouble With the Current System
• How the New Treaty Is Intended to Work
• Steps Toward Final Approval, and Updates [updated]
• Additional Readings

The Trouble With the Current System

X-35
(click to view full)

The difficulty with the current set-up is the need for licenses at all stages, where each license can take from 3-12 months for approval. Licenses must be sought even for efforts involving cooperation between subsidiaries, such as Raytheon Co. and Raytheon Australia. This is an important feature of any serious export control regime, because it prevent “cut-out technology transfers”; nevertheless, it does get in the way of relations between trustworthy allies.

These difficulties with the existing arrangement manifests in a number of ways. It even strikes at the very initial stages of cooperation, by creating huge hurdles and costs for any discussions and sharing of technical data to even begin exploring cooperation between American and Australian firms. It strikes at the active cooperation stage by making full Australian participation in joint projects difficult, because licensing slows down the process and makes it easier to select US partners instead. Finally, it gets in the way of transfers of US-origin equipment and technical data, slowing down any effort to do more maintenance and sustainment work locally after Australia buys US equipment or upgrades what it has.

The US Congress agreed to pass a watered-down “solution” in 2004. It gave UK and Australian export requests expedited status, which improved but did not fix the situation. US defense industry companies have also banded together on this issue to press for change to export system as a whole.

How the New Treaty Is Intended to Work

Under the Treaty, US exporters working with firms in the “approved community of companies” can forego the licensing requirement, and just advise the US State Department that they have engaged in an eligible defense export activity with Australia. Eligible exports will include exports for:

• Mutually determined security and defence projects where the Commonwealth of Australia is the end-user (which will not include the F-35, since that’s a multinational project with its own agreements);
• Cooperative security and defence research, development, production and support programs; and
• Combined military or counter-terrorism operations.

A compliance and audit regime whose details must still be determined will be set up to monitor the agreement. This will include accreditation standards for “approved community” status, covering issues like facility clearance, business history, export licensing and compliance record and relationships to countries of concern.

Australian companies that are not part of the “approved community” will still be able to use existing US export control arrangements. ITAR et. al. will also apply to any highly sensitive exports (still to be mutually determined) that are not covered by the treaty.

Steps Toward Final Approval, and Updates

It has taken several years of parallel developments to flesh out and to ratify this treaty. While the document signed in September 2007 indicates agreement in principle, implementing arrangements had to be developed and agreed upon that define precisely how the Treaty will operate in both Australia and the US, and how its obligations will be implemented. Implementation involves changing both countries’ legal and regulatory regimes, and putting these changes into effect.

On the political front, this treaty must be approved by the US Senate, which has happened. It must also be tabled in Australia’s Parliament, which has now happened, and examined by Joint Standing Committee on Treaties (JSCOT). Some Australian legislation, such as the Customs Act 1901, Customs (Prohibited Exports) Regulations 1958, and Weapons of Mass Destruction (Prevention of Proliferation) Act 1995 (WMD Act) may also require amendment, in order to comply with the treaty’s terms and conditions. In the wake of the November 2007 national elections, that task fell to the new Labor Party governments, first under Prime Minister Kevin Rudd, and then under Julia Gillard after Rudd was ousted by his party.

Nov 2/11: Australia’s Labor government introduces the Defence Trade Controls Bill 2011. It sets out the terms for certification as a member of the “The Australian Approved Community” of defense companies, lists offenses that could revoke this status, provides the Government with monitoring powers over that group, clarifies “Australian person” (holder of a permanent visa under the Migration Act), gives the Minister the power to list items covered by Australia’s new export control and permit system in one place, and makes a number of amendments to clarify the current hodgepodge. It’s still missing key regulations, which are due by the end of 2011. Minister for Defence Materiel Jason Clare summarized the stakes as follows:

See also: Australia Minister for Defence | Australia Minister for Defence Materiel | The Advertiser.

July 2011: Stage 3 of Australia’s industry consultation process: release of the exposure draft of the Defence Trade Controls Bill 2011 for broader industry and community feedback. Source.

May 2011: Stage 2 of Australia’s industry consultation process: establishment of the Defence Trade Cooperation Treaty Industry Advisory Panel under Ken Peacock AM. It included experts from major Australian defence companies, small-to-medium businesses and the Department of Defence. Source.

December 2010: Stage 1 of Australia’s treaty-related industry consultation process: meetings with Australian defence companies in 8 cities. Source.

Sept 27/10: The US Senate, by unanimous consent, approves this implementing legislation to implement both the US-UK and US-Australian treaties. Britain’s A|D|S industry association | USA’s AIA industry association | Australian Broadcasting Corp. | MarketWatch | USA’s conservative Heritage Foundation | Agence France Presse.

Sept 21/10: The US Senate Foreign Relations Committee reports favorably on the U.S.–U.K. Defense Trade Cooperation Treaty, the U.S.–Australia Defense Trade Cooperation Treaty, and a bill that would implement both of these treaties. The work is a joint effort by Sens. John Kerry [D-MA] and Richard Lugar [R-IN]. Foreign Policy magazine reports that:

“Administration sources said that in the home stretch leading up to the committee vote, Undersecretary of State Ellen Tauscher played a large role in ironing out differences, not only between the administration and Congress, but also between the State Department and the Justice Department. “

See also: Australia’s The Age | Sydney Morning Herald | Agence France Presse | AP | Defense News | Export Law blog.

Sept 19/08: The US Aerospace Industries Association releases a statement regarding the Australian and British defense trade treaties, which were not put forward for voting and approval by the majority leader (in this Congress, that was Sen. Harry Reid [D-NV]). The statement says:

“We are very disappointed that Congress has deferred approval of the U.S.-UK and U.S.-Australian Defense Trade Cooperation Treaties. We had been optimistic that they would be approved and signed by the president this session, despite the press of last minute business facing the Senate…. It is critical to our nation’s security and economic prosperity to continue with modernization efforts in the next administration and Congress, to include passage and implementing these treaties.”

Dec 5/07: Australia’s DoD releases the full text of the Sept 5/07 document [PDF format] into the public domain. Ratification by the respective legislatures in Australia and the USA is still pending. Australia DoD press release.

Sept 5/07: The Australia-United States Treaty on Defense Trade Cooperation was signed by Australian Prime Minister John Howard and US President George W. Bush. Australia Prime Minister release | Fact Sheet [PDF] | Media Q&A transcript [PDF].

Sept 5/07: The Australia-United States Treaty on Defense Trade Cooperation was signed by Australian Prime Minister John Howard and US President George W. Bush. White House Joint press conference with President Bush & John Howard: Audio [mp3] | Video [Windows Media] | Fact Sheet: U.S.-Australia Alliance: Steadfast and Growing.

Additional Readings

• DID – USA Moves to Improve Arms Export Regulation Process

• Australian Parliament – Defence Trade Controls Bill 2011

• British MoD (June 22/07) – US & UK sign treaty on defence co-operation. The counterpart to Australia’s similar treaty.

• DID (updated July 31/07) – US Industry Associations Pushing to Reform Export Controls

• DID (Dec 1/05) – UK Warns USA Over ITAR Arms Restrictions. Explains ITAR export control restrictions, and the red tape they create, in more detail.