Jim Gledhill Defence Materiel Attache Embassy of Australia (Washington)

1. Embassy of Australia US/Australia Defense Trade Cooperation Treaty and Australia’s Defence Industry Policy 6 December 2007 Jim Gledhill Defence Materiel Attache Embassy of Australia (Washington)

2. Embassy of Australia • Topics • Export Control Current Process (pre-Treaty) • Treaty • Treaty Benefits and Obligations • Australia’s Defence Industry Policy

3. 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.

4. Embassy of Australia • 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).

5. Embassy of Australia • 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

6. Embassy of Australia • 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.

7. Embassy of Australia • Treaty Benefits • We expect there will be five key benefits for Australian and US companies: • Reduced licence processing times; • Increased efficiency in business and shortened delivery times; • Enhanced business opportunities; • Reinforcement of the special AS/US relationship; and • 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).

8. Embassy of Australia • 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.

9. Embassy of Australia • Accessing the Treaty Benefits • Establishing 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.

10. Embassy of Australia • 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.

11. Embassy of Australia • Obligations for Industry Under the Treaty • Those 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.

12. Embassy of Australia • 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.

13. 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

14. Embassy of Australia • 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

15. Embassy of Australia • 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

16. 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

17. Embassy of Australia Mr Jim Gledhill Defence Materiel Attache Embassy of Australia (Washington) (202) 797 3388 (Work) (202) 250 4051 (Mobile) jim.gledhill@defence.gov.au