US-UK Treaty Aims to Ease ITAR Export Control Burdens
In December 2005, the interference of American arms export restrictions within the huge F-35 program became so burdensome that they became a high-level diplomatic problem. Despite the promises of 2 successive American Presidents, the ITAR exemptions that Britain had sought remained blocked in America’s legislature – and European initiatives to resume defense exports to China were not improving the situation in Congress. Meanwhile, MPs in Britain were becoming very insistent on a fix, and there was even talk of abandoning the F-35. The stakes were high.
In time, many of these issues were worked out. In August 2006, the US and UK reached a technology transfer agreement concerning the F-35 fighter, which would serve as a model for other F-35 industrial partners. By December 2007, Tier 1 partner Britain had signed the F-35’s Production, Sustainment & Follow On Development MoU. A broader fix was still on the agenda, however, and in July 2007 it materialized as a a treaty that would change the way the American and British defense firms cooperate on defense programs.
This Spotlight article aims to act as a one-stop briefing that explains the treaty’s motivation, key terms, and outstanding issues. It also links to the key documents, and keeps track of events en route to full implementation nearly 5 years later…
US Export Policy and Britain: Current Issues
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Many of these issues are laid out in “UK Warns USA Over ITAR Arms Restrictions” and “ITAR Fallout: Britain to Pull Out of F-35 JSF Program?“. The UK Parliamentary Defence Committee’s assessment of the current US licensing systems was harsh (footnoting removed):
“Arms and related technologies subject to US export control cannot be exported from the US without an export licence issued by the Department of State’s Directorate of Defense Trade Controls. In its evidence to us, the UK defence industry identified two key difficulties in obtaining goods and technologies from the US: the excessive length of time it took to secure licences; and the restricted terms of US export licences and consents.
Industry found the US export system to be an administrative burden that tied up “huge amounts of resource” every time an application was made. It questioned the point of this procedure as over 99% of applications to the UK were eventually approved. EGAD(Export Group for Aerospace and Defence) said that, even after a licence had been issued, it was “very, very narrow and prescriptive” and, if the recipient wanted to step outside its terms, he or she had to go through the whole licensing process again.” Dr Sandy Wilson, President and Managing Director of General Dynamics UK, explained that he had had problems in getting clearance for Urgent Operational Requirements (UORs). UORs might be very short programmes, of perhaps four or nine months, and that was “almost out with the timescale for getting TAA [Technology Assistance Agreement] approval”. While General Dynamics UK had been successful in negotiating with the US State Department a one-off waiver, it had taken “a long effort” and “the next time a programme appears with the same kind of timescales that process will not apply”. In UK industry’s view, the US system was not capable of responding in the time required by modern business and modern defence requirements.”
Dr Jerry McGinn of Northrop Grumman concurred, and Dr. Wilson added that:
“…if you are producing a system in the UK you do have a choice of where you go for that technology. It might be indigenous to the UK, it might be from Europe, it might be from the US. Currently there are many advantages to not using US technology because [of] the administrative burden […] We consciously have made decisions not to […] use US technology coming from the greater GD in certain programmes in the UK. […] Sometimes the US has fantastically good technology and it would be very useful and beneficial to the UK to have that here, and it would still be fought for in the competitive market-place that is UK defence but […] it is a sensible way of getting rid of a barrier that has prevented us from offering some things into the UK because it is such a difficult process.”
In addition, the British government told the Parliamentary Committee examining the treaty that there had been “some occasions when the ability to address problems on the ground has been delayed as the information that needs to be transferred at the operational level has been subject to licence.”
The Treaty & Implementation
In June 2007, the US and UK took the next step with a draft treaty that would exempt approved UK firms from some aspects of the ITAR process. Until that point, only Canada had such exemptions, under a broader 1950s effort to create a linked defense industry that reflected close Canadian-US industrial linkages.
The US-UK treaty is more narrowly defined. It operates in addition to both countries’ existing export control arrangements, and British and American exporters will be free to choose which regime they wish to work under: the treaty, or the existing arrangements. In addition, all relevant legislation in both countries, including items like Britain’s Official Secrets Act, will apply to any goods and technologies exported under the Treaty.
While the UK treaty document was signed by British Prime Minister Tony Blair and American President George Bush in 2007, a number of implementation details remained to be worked out. Key areas to be finalized include the criteria for membership in the Approved Community; and the “sensitive technologies” that would be excluded from the scope of the Treaty.
Both sides have requested certain limitations. In the end, they agreed that the treaty will only apply to defense articles listed on the United States ITAR Munitions List for US or UK Government end-use. It will not cover the export to the UK of defense articles intended for use by other nations, nor will it cover “certain highly-sensitive technologies,” which were defined and listed in the Implementing Agreements. Stealth technologies, and certain sensitive communications technologies are expected to be listed.
Arms and defense technologies not covered by the Treaty can still be exported, of course, as long as they meet licensing requirements under the existing systems.
It Takes a Community
The “Approved Community” is the cornerstone of this treaty. Membership removes the requirement for an individual export license from the US unless the item is on the exclusions list, and will also allow the transfer of those articles within the Approved Community without further US authorization. In the UK, the Approved Community will include Government facilities, Government personnel, companies and individuals; the eligibility requirements for inclusion in the Approved Community will be set out in the Implementing Arrangements, but in broad terms admittance to the “approved community” will involve a number of criteria, including:
- Current membership of the UK “List X” group, the group of establishments that have been cleared by the UK Government as being able to handle classified material. List X currently includes a number of small enterprises and university facilities;
- An “appropriate” level of Foreign Ownership, Control or Influence (FOCI), as decided by the UK and US Governments;
- Past performance on export controls, judged against UK and US records of violations; and
- Any potential national security risks for the US, due to interactions with countries proscribed in US law and regulation.
The Approved Community is a kind of sandbox, however; goods and technologies may not be re-exported or transferred outside of that community without subsequent approval by both Governments. Certain exceptions to this provision, such as those for goods or services being used in support of the UK’s deployed Armed Forces, will be mutually agreed and set down in the Implementing Arrangements.
One corollary is that multinational programs like the F-35 Strike Fighter are outside the treaty, and must mirror the F-35 program’s approach of having their own technology transfer agreements. Should a US and UK firm wish to develop an F-35 add-on system as a joint venture, however, they could develop it under the treaty’s provisions. They would then have to apply under a separate formal process to have it included under the multinational agreement, or simply license it to appropriate customers under classic US & UK export control rules.
Enforcement & Ratificaton
In terms of enforcement, each party shall have the right to conduct end-use monitoring of exports or transfers conducted under this Treaty, and both Governments will be obliged to investigate any suspected violations and inform the other party of the result of such investigations.
To keep the treaty working smoothly, both parties will consult at least once a year on the cooperative aspects of export controls, and review the treaty’s operation. Any disputes arising out of, or in connection with, the Treaty are to be resolved on a bilateral basis and will not be referred to any court, tribunal or third party. In a worst case scenario, notification can be given of withdrawal from the treaty, which will take effect in 6 months time.
In the UK, treaties are ratified by the Government, but are customarily laid before Parliament for 21 days before ratification. At the UK Parliamentary Defence Committee’s request, the Government agreed to an extension to the period for Parliamentary scrutiny for this Treaty that ends on Dec 12/07. Given the committee’s approval, ratification can be expected by the government after that date.
In the USA, ratification of the Treaty requires a 2/3 majority vote in the US Senate, which has responsibility for treaties.
Legal changes need to be made after ratification, so that other laws, regulations, etc. all reflect its terms. The process is very similar to changing key software code, which then requires changes within the rest of the system.
US and British “Transmission Belt” Concerns
One of the issues holding up success on this front has been Britain’s linkages to Europe’s defense industry, where companies in particular have been willing to export advanced technologies to countries like Russia, China, Venezuela, Saddam’s Iraq, et. al. The EU is also working through the EDA to create tighter linkages and more technology sharing agreements among Europe’s defense industry. As such, the Americans’ biggest concern is that a system of overlapping treaties with no safeguards would effectively create a “transmission belt” of sensitive technologies from the USA, to Britain, to multinational defense firms operating in countries like France, who could then sell the proceeds to Russia, China (if EU policy changes), et. al.
Thales, which is deepening its collaboration with Russia’s government-controlled firms in areas like advanced sensors, advanced fighter plane avionics, naval design & construction, and submarine design, would be one example. The firm successfully sells some equipment like its TopOwl helmet-mounted helicopter display in the American market, and operates Thales Communications Inc. in the USA as a separate company with indigenous R&D, very tightly restricted linkages to its parent, and some market successes. The same walls are not in place for Thales UK, however, which is one of Britain’s most significant defense companies.
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On the one hand, the treaty states that items transferred outside the Approved Community must have the approval of both governments. On the other hand, scrutiny into the internal operations of corporations will not be as strong, and the line between the simultaneous arrival at similar engineering solutions and technology transfer can be a hazy one. This sort of thing is likely to become an ongoing flash point if the US insists on the integrity of its technology transfer safeguards, as the UK Parliamentary Committee has singled out admission of European firms to the Approved Community as a key issue:
“In our view a UK Approved Community which was drawn more tightly – by excluding SMEs or major foreign-owned defence companies – would seriously blunt the effectiveness of the Treaty.”
This may be so, but it would appear that either:
- Walls that offer the Americans adequate confidence as outlined under the Implementing Arrangements must be erected within European defense firms who wish to sell to countries the USA considers dangerous/ off limits, and who also wish to do business in the UK as a member of the Approved List; or
- A de facto 2-tier system will be created in Britain, where companies who restrict their dealings abroad will have an Approved List procedural and technological advantage in the UK market over firms that do not. The question then becomes whether a blunted treaty that benefits a number of UK firms is better than no treaty at all; or
- The US must waive its concerns over these firms’ subsidiaries, for instance by the procedural legerdemain of examining only direct violations of UK export restrictions, rather than looking at a parent firm’s record exports to countries of concern to the USA. The question then becomes whether industry lobbying and the status of the British diplomatic relationship could protect the treaty in the USA from future revelations concerning transferred technologies.
Concern has also been raised re: EU treaties, which frequently are not transparent and contain unadvertised provisions. Accusations have been raised that some provisions may restrict the UK’s ability to prevent technology transfer within the EU zone. The government did not address this issue head-on, nor did the Parliamentary report, which said only that:
“The Government replied that it had been careful in all its negotiations to make sure that it did not discriminate against any commitments the UK had with the European Union (EU), and “the Treaty itself says that we will maintain our international obligations and commitments to any international body”. The Treaty will not apply to dual-use goods, that is, goods that could be used for both a civilian and military use. The UK Government was not able to enter into negotiations on these goods as they form an EU competence and therefore not a matter that the UK can negotiate on its own.”
Meanwhile, the British had some concerns of their own; indeed, the Parliamentary Defence Committee recommended that:
“…the UK Government should restrict any open or general licences it issues, to meet the requirements of the Treaty, to exclude the re-export or transfer from the US of UK goods and technology to third countries other than to US or UK forces.”
Israel and Colombia were targeted with specific mentions in that capacity.
Updates & Events
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.
Jan 25/10: Deputy Defense Secretary William J. Lynn III speaks at the British House of Commons, before the All-Party Parliamentary Group on Transatlantic and International Security. Lynn said his goal is to strengthen collaboration between the 2 countries’ militaries and defense industries, and cites the draft ITAR treaty as an important step.
What he doesn’t do, is commit to a significant executive push that would put it on the US Senate’s agenda. DefenseLINK: “Lynn: New Threats Require New Capabilities.”
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 Senate 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 11/07: The UK’s Parliamentary Defence Committee publishes HC 107, “UK/US Defence Trade Cooperation Treaty” [Press notice | Full report – PDF]; its 3rd Report of Session 2007-08. The report notes that the UK Parliament has given up on the idea of an ITAR waiver for now, but they support the UK’s ratification of the UK/US Defence Trade Cooperation Treaty as an acceptable substitute that represents progress. They do have one qualification:
“But the Treaty only provides the framework. The detailed operation will be set out in Implementing Arrangements. When we carried out our inquiry, these were still under negotiation. Still to be finalised are the criteria for membership of the Approved Community, to which arms and technologies could be exported, and the technologies which would be excluded. Provided that these Implementing Arrangements are not drawn too restrictively, excluding substantial goods and technologies or significant parts of the defence industry, we would expect the Treaty to bring benefit to the UK defence industry and to the UK Armed Forces… In the expectation that the UK and the US will agree satisfactory Implementing Arrangements, we support the UK’s ratification of the UK/US Defence Trade Cooperation Treaty.”
Nov 21/07: The UK’s Parliamentary Defence Committee issues HC 107-I, an uncorrected transcript of oral evidence regarding the proposed US-UK treaty. Presentations were given by Mr Ian Godden, Mr David Hayes, Dr Jerry Mcginn, Dr Sandy Wilson And Ms Alison Wood, Baroness Taylor Of Bolton, Mr Stephen French, Mr Paul Lincoln, Mr Tony Pawson And Ms Gloria Craig.
Nov 21/07: Northrop Grumman, which also has extensive facilities in the UK, issues a release urging legislators in both countries to adopt the treaty.
Oct 15/07: A release from Britain’s Parliamentary Defence Committee publicizes its intent to hold an enquiry into the US-UK Defence Trade Cooperation Treaty, and offers links to relevant documents.
Sept 24/07: The full text of the treaty is made available via Britain’s Access to Information site [PDF, 330 kb].
June 22/07: British Prime Minister Tony Blair and American President George W. Bush sign the “Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America concerning Defense Trade Cooperation.”
Additional Readings & Sources
- UK Access to Information – Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America concerning Defense Trade Cooperation [PDF format]
- UK Government FCO – Explanatory Memorandum on the UK/US Defence Trade Cooperation Treaty
In December 2005, “UK Warns USA Over ITAR Arms Restrictions” and “ITAR Fallout: Britain to Pull Out of F-35 JSF Program?” seemed to herald a very difficult period in Anglo-American defense relations. Despite the promises of 2 successive American Presidents, the ITAR exemptions that Britain had sought remained blocked in America’s legislature – and European initiatives to resume defense exports to China were not improving the situation. Meanwhile, MPs in Britain were becoming very insistent on a fix. The stakes were high.
In time, many of these issues were worked out. In August 2006, the US and UK reached a technology transfer agreement concerning the F-35 fighter – an agreement that would serve as a model for other F-35 industrial partners. By December 2007, Tier 1 partner Britain had signed the F-35’s Production, Sustainment & Follow On Development MoU. A broader fix was still on the agenda, however, and in July 2007 it materialized as a a treaty that would change the way the American and British defense firms cooperate on defense programs.
This Spotlight article aims to act as a one-stop briefing that explains the treaty’s motivation, key terms, and outstanding issues; keeps track of ongoing developments; and links to the key documents. The treaty has now been ratified…
