Jim GledhillJim GledhillDefence Materiel AttacheDefence Materiel AttacheEmbassy of Australia (Washington)Embassy of Australia (Washington)

Embassy of Australia

US/Australia Defense Trade Cooperation TreatyUS/Australia Defense Trade Cooperation Treatyand Australia’s Defence Industry Policyand Australia’s Defence Industry Policy

6 December 20076 December 2007

Topics

• Export Control Current Process (pre-Treaty)

• Treaty

• Treaty Benefits and Obligations

• Australia’s Defence Industry Policy

Embassy of Australia

Export Control Current Process

• Under the ITAR US Exporters must apply for: A Technical Assistance Agreement (TAA) before they can engage

in discussions with Australian companies; An export licence before any hardware is exported to Australia.

• For most defence programs, a number of TAAs and licences are required and these take time – on average about 3 months each.

• Cumulative impact on projects and sustainment can be years.

• “Retransfers” especially problematic for Australian Industry.

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Current Process (cont’d)

• 2361 licences and 312 agreements were approved for Australia in 2006 About 1/3 (718) of Australia’s licences and all agreements (312) are

referred Average licence approval time for referred licences is about 150 days Average licence approval time for non-referred licences is about 80

days• licences and agreements referred to other agencies can take as

long as 12 months; 15 % licences are for operations and are very quick

• Total processing time in 2006 was around 640 yrs

• Plus knock-on inefficiencies (eg. “Retransfers” in sustainment).

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Treaty Introduction• Our Treaty was signed 5 September 2007 by President Bush and Prime

Minister Howard.

• The Australia/US Treaty parallels the UK/US treaty signed in June but with minor differences.

• The Treaty provides for: “Licence free” defence trade between Australia and US; Transfer of articles within the ‘approved communities’ without

need for prior approval; Safeguards against unauthorised release or diversion of

technology.

• Trusted Australia/US Community concept.

• Implementation arrangements (about 20) have been negotiated.

• Treaty can be found at www.defence.gov.au/publications.cfm

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Treaty Arrangements• Under the Treaty, US exporters will only need to advise State Department

that they have engaged in eligible defence export activity;

• Prior export authorisations will not be required.

• Eligible exports will include:• Agreed security and defence projects where the Governments of either

country are the end user (classified and unclassified data, software, services and material);

• Cooperative security and defence research, development, production and support programs;

• Combined military or counter-terrorism operations.

• The Treaty arrangements will operate in parallel with existing US export controls

• this will allow those outside the ‘approved community’ to continue business as usual, ie “Opt out” is allowed.

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Treaty Benefits• We expect there will be five key benefits for Australian and US

companies:

1. Reduced licence processing times;

2. Increased efficiency in business and shortened delivery times;

3. Enhanced business opportunities;

4. Reinforcement of the special AS/US relationship; and

5. More efficient use of personnel resources by Industry

• Total processing time in 2006 was around 640 yrs.

• Estimate around 50% processing not required (320 years saved!)

• Impact is not just raw processing time. It is multiplier effect of uncertainty $ = (Numerous Workforce) X (unexpected delays).

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Enhanced Business Opportunities

• The Treaty is expected to improve business opportunities for Australian companies because:

US companies won’t be deterred by protracted US licence approval times; There are improved prospects for Australian companies to participate in

US requirements; There is freer exchange of defence-related work between US companies

and the Australian subsidiaries.

• The Treaty will also enhance opportunities for AS companies to bid for support work for equipment we buy under FMS.

Retransfer approvals currently take 15 months. “Retransfer” is the big win for SMEs in the Trusted Community.

Embassy of Australia

Accessing the Treaty BenefitsEstablishing the ‘approved community’:

• Getting in will be voluntary;

• Admission is likely to be based on: Facility and personnel clearances; An appropriate Business History; An appropriate Export licensing and compliance record; No problems in relationships with countries of concern.

• A public list of member companies and individuals will be maintained (company responsibility to provide data).

• Employees seeking membership will need to be: Australian citizens Security clearance of at least Restricted Valid need to know.

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Obligations for Australian Government under the Treaty

The Australian Government will:

• Maintain visibility of the transfer of US articles;• Control access to US technology by dual nationals;• Oversight the safeguarding of US technology provided to Australian companies;• Control intangible transfers;• Monitor and enforce what AS companies do with US defense articles;• Strengthen our domestic export control legislation;• Consider changes to Customs legislation to track the importing of articles under

the Treaty.

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Obligations for Industry Under the TreatyThose who choose to participate will:

• Gain the prior approval of the US exporter before transferring articles within the approved community;

• Gain prior approval of State before transferring articles outside the approved community;

• Ensure that articles received are not used for any purposes other than authorised under the original contract;

• Implement safeguards to ensure that only authorised employees have access to the defense articles;

• Maintain records of transactions conducted under the treaty – and make them available for audit.;

• Transgressions bring the ITAR into effect.

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Treaty Considerations• The aim is to have:

• Equivalent treatment by the US of Australian technologies exported to the US; and

• US agencies undertake compliance auditing of members of the US approved community.

• We have negotiated about 20 Implementing arrangements to give effect to the Treaty;

• The timeline for completing the IAs is …. ;

• Consultation with Australian Industry is occurring;

• Expectation is that the IA’s will be completed to allow US Congress to consider asap.

• Each country will need to ratify the Treaty under their respective laws;

• Important that US parent companies work with Australian subsidiaries to make it happen.

Embassy of Australia

Embassy of Australia

The Industry Policy Statement - Why did we need one ?

• New and changing demands on industry due to the ongoing high tempo of ADF operations

• Significant additional investment in the ADF

• Aligning industry policy with the new approaches to procurement

• The reshaping of defence industry worldwide through globalisation strategies and rapidly changing technologies

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The Policy Statement - What is it meant to do ?

• Provide the Government side of the infrastructure to allow “the cost effective delivery of equipment and support to the ADF in line with Australia’s strategic circumstances”

• Provide guidance to Australian industry to better target its investment

• Create a more economically competitive defence industry within Australia

• Create a cost competitive defence industry competing in the global defence economy

• Improve working relations between Defence and Industry

• 9 Strategies to address the requirements

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Australia’s Industrial Requirements

• The Australian Industrial Capability (AIC) program:• Based on strategic guidance from Government in the Defence Industry

Self-Reliance Plan• Priority Local Industry Capabilities• Tenders seeking capabilities will require any costs and risks

associated with delivery to be identified

• Defence Capability Plan (currently 2006-16, next will be 2008-18)

• Recognition of any clearly defined ‘Premium’ for capabilities to be resident in Australia• Demonstrated through competition• Focus will be on supporting the ADF

www.defenceindustrypolicyreview.com.au and at ww.defence.gov.au/dmo

Embassy of Australia

9 Strategic Objectives of Australia’s Industry Policy

• Strategic approach to equipping and sustaining the ADF

• Maintaining priority local industry capabilities

• Securing value for money through best-practice procurement

• Creating opportunities for Australian firms, where they are internationally competitive

• Encouraging small and medium enterprises

• Supporting the development of skills in defence industry

• Facilitating defence exports

• Driving innovation in defence technology

• Defence and industry working together

Mr Jim GledhillDefence Materiel AttacheEmbassy of Australia (Washington)

(202) 797 3388 (Work)(202) 250 4051 (Mobile)

jim.gledhill@defence.gov.au

Embassy of Australia