The United States and the United Kingdom signed a defense trade
cooperation treaty on June 21 and 26, 2007. The United States
and Australia signed a similar treaty on September 5. The
purpose of these two treaties is to permit the United States to
trade most defense articles with these two close allies without an
export license or other written authorization.
Both treaties require the Senate's consent prior to ratification
and entry into force. President George W. Bush transferred the
treaty with the United Kingdom to the Senate on September 20, 2007,
and the treaty with Australia on December 3, 2007. Before voting on
these treaties, the Senate needs to understand how they would
benefit U.S. security interests.
Current Defense Trade
The existing defense trade relationships between the U.S. and
these two close allies are based on issuing licenses for arms
exports from the U.S., which is managed by the State Department.
This licensing process can be both time-consuming and confusing.
For example, in 2007, an industry coalition expressed concerns
about arms export control procedures, noting that the State
Department had a backlog of 10,000 license applications in 2006.
Likewise, in February 2007, defense trade representatives from a
number of U.S. allies, including Australia and the United Kingdom,
expressed concern that the U.S. arms export licensing process was
creating barriers to defense cooperation.
Frequently, the process has become an impediment to an efficient
defense trade relationship that could otherwise provide the best
quality weapons to the U.S. military as quickly and cheaply as
possible. The Department of Defense acquisition system operates in
the context of a globalized defense industrial base, which presents
advantages to the Defense Department by including suppliers from
As odd as it sounds, U.S. law requires U.S. export licenses for
imports of weapons and equipment for use by the U.S. military. This
is because the foreign suppliers require access to U.S. defense
technology and systems to participate in Defense Department
acquisition programs. Under U.S. law, such access is defined as an
"arms export" and is subject to the licensing process. The
treaties with Australia and the United Kingdom would facilitate
closer and more efficient relationships with defense suppliers from
these two countries by effectively exempting them from the
licensing process in most instances and providing a more direct
route to participating in U.S. defense acquisition programs.
Further, the treaties are reciprocal in that they would give
U.S. defense suppliers easier access to the Australian and U.K.
defense markets. They are not just tools for facilitating defense
imports from Australia and the United Kingdom. From this
perspective, the licensing exemption would facilitate defense
exports to the militaries of these two reliable allies in the
traditional meaning of the word "exports." Such exports would
expand and strengthen the U.S. domestic defense industrial
Finally, a closer defense trade relationship would facilitate
joint defense acquisitions with Australia and the United Kingdom.
Joint acquisitions provide two advantages to the United States.
First, they would improve the economies of scale,
particularly in major acquisition projects. For example, Australian
and U.K. participation in the acquisition of the Joint Strike
Fighter (JSF) will increase the total number of JSFs produced and
thereby reduce the unit price to the U.S. military.
Second, joint acquisition will also facilitate efficient
joint operations because all three militaries will be using the
The Content of the New Treaties
The object of the two treaties with Australia and the United
Kingdom is to exempt most defense exports from export licensing
procedures. Specific provisions within the treaties reveal how
defense trade will work between the U.S. and these two allies under
the exempted system. The Senate needs to understand these specific
provisions because they explain how appropriate security standards
would be applied under the exempted system.
Provision #1: The treaties apply to
most, but not all, defense articles.
Article 3 of both treaties contains a number of limits on the
scope of arms export licensing exemptions. Specifically, the
treaties' implementing arrangements, which are not yet fully
drafted, may continue to require export licenses for identified
defense articles. Further, an exporter may choose to obtain a
license for a certain article, and the licensing procedure would
continue to apply under that circumstance. Thus, these treaties are
not a wholesale abandonment of due diligence standards in the
export of arms and other defense articles that would compromise
sensitive technology or permit U.S. weapons to fall into the hands
of potential enemies.
Provision #2: The treaties cover only
government agencies and relevant private industries with security
The treaties identify the "communities" within each country that
may operate under the licensing exemptions. Under all
circumstances, the communities are limited to public agencies and
departments and private entities that are eligible to export
defense articles and have appropriate security accreditations.
Thus, the scope of the institutions entitled to operate under the
treaties is carefully limited.
Provision #3: The licensing exemptions
focus on exports of defense articles between the U.S. and its
These two treaties are designed to facilitate defense trade
between the U.S. and Australia and between the U.S. and the United
Kingdom. They do not provide unlimited authority to either ally to
re-export the covered defense articles. Article 9 of the treaties
specifically requires appropriate documentation of U.S. approval
for any re-export of covered defense articles under most
Provision #4: The existing rules
governing the protection of proprietary information continue under
The question of protecting proprietary information in defense
contracting is complex in any circumstance, and these treaties are
not designed to alter the existing rules regarding this sensitive
matter. Article 10 of the treaties states that nothing in the
treaty "shall be construed as granting, implying, diminishing, or
otherwise affecting rights to, or interest in, intellectual
property or other proprietary information of the Parties or of
persons or entities within the Approved Community pursuant to this
Treaty." However, there is an understanding that a reciprocity
standard between the U.S. and Australia will pertain under this
provision in the U.S.-Australia treaty.
Provision #5: Security and classification procedures,
including the keeping of accurate records, will be observed.
Article 11 of the treaties explicitly requires both countries to
honor and observe the classification requirements that pertain to
any defense articles transferred under the treaty. In relevant
cases, this includes the application of marking, storage, handling,
and safeguarding standards. These standards are in accordance with
previously established general security agreements.
Provision #6: The parties are required
to strictly enforce the treaties' rules covering the transfers of
Article 13 of the treaties requires the parties to investigate
promptly all suspected violations of the procedures established by
the treaty and its implementing arrangements. Each party is obliged
to inform the other of the results of such investigations. The
parties are also required to cooperate with each other in
conducting such investigations.
Provision #7: Disputes between the
parties regarding the treaties will be resolved by direct
Article 18 of the treaties limits the dispute resolution
procedures to direct consultations between the parties. It
expressly prohibits referring such disputes to any international
court or tribunal or to any third party. Unlike the U.N. Convention
on the Law of the Sea, this treaty does not permit, let alone
establish, mandatory dispute settlement procedures that would allow
international institutions to intrude into sensitive U.S. arms
export policies and procedures. Such procedures would
constitute an attack on U.S. sovereignty. This provision therefore
avoids what otherwise would have been a fatal flaw in the
The Implementing Arrangements
The defense trade cooperation treaties with Australia and the
United Kingdom envision the adoption of detailed implementing
arrangements to govern how they will be interpreted and applied.
These implementing arrangements will fill in many important details
under the treaties, including:
- A description of the process for government agencies and
private contractors to make the transition from the arms export
licensing and other authorizations under U.S. International Trade
in Arms Regulations (ITAR) to the new procedures to be established
under the treaties;
- The scope of the weapons and equipment that are covered under
- A list of the government agencies and private entities in
Australia and the United Kingdom that are given licensing
exemptions under the treaties; and
- Procedures for obtaining approvals for the re-export of weapons
and equipment covered under the treaties.
The treaties require the parties to conclude these implementing
arrangements on an "expedited basis." The Senate Foreign Relations
Committee, which is the committee of jurisdiction for these
treaties, may put off consideration of the treaties until the
implementing arrangements are drafted. Given the importance of the
details in the implementing arrangements, the Senate Foreign
Relations Committee has an interest in what they will say. However,
unless provisions of the implementing arrangements depart from the
stated intent or meaning of the treaties in a material way, the
implementing arrangements should not become a basis for the Senate
to withhold its consent to ratification.
What the Senate Should Keep in
Some Senators may be tempted to focus on the perceived risks to
national security posed by the defense trade cooperation treaties
with Australia and the United Kingdom and may therefore largely
ignore how these treaties would improve the U.S. national security
posture. The primary perceived risk is that exempting weapons and
equipment exports to these countries from the existing licensing
process will increase the likelihood that sensitive defense
technology will fall into the hands of potential enemies.
Aside from the perceived risk's underlying assumption that the
licensing process is the primary tool in preventing unwise or
illicit technology transfers, the treaties themselves offer an
alternative approach to preventing diversion of defense technology.
The treaties preserve security and classification procedures and
the expansive approval obligations regarding the re-export of
weapons and equipment, and they also require strict enforcement.
The implementing arrangements will spell out the details of the
alternative procedures. The Senate should recognize that a simpler
and more tailored arms export control process for these two allies
can still guard against unwise transfers to potential adversaries,
as the treaties account for the standing of close and reliable
allies like Australia and the United Kingdom.
The Senate should also examine the treaties' value from a
broader perspective. An overly narrow focus on the risks of the
diversion of defense technology fails to account for the
considerable benefits to national security that are offered by a
simpler and more efficient system of defense trade with Australia
and the United Kingdom. The Senate would do well to keep the
following opportunities in mind as it considers ratification of
these two treaties.
Opportunity #1: Ratification of the treaties would
create a more discriminating arms export control process.
Australia and the United Kingdom are among the closest and most
reliable allies of the United States. A more effective arms export
control process would discriminate between close, reliable allies
and less reliable countries.
Clearly, the broad exemption to export licensing requirements
granted by these treaties is appropriate only for close, reliable
allies. This is why Australia and the United Kingdom have been
chosen for such treatment under these treaties. U.S. ratification
of these treaties would not be a precedent for dismantling the
broader arms export licensing process. Other countries that are not
as close to the U.S. will continue to be subject to the licensing
requirements. This is why these treaties were negotiated as
bilateral treaties and not as a broader multilateral agreement.
Further, the potential efficiencies offered by a more
discriminating arms export control process are considerable. The
Department of State has stated that the treaty with the United
Kingdom in particular will permit its Directorate of Defense Trade
Controls to redirect some of its resources elsewhere. With
the State Department attempting to overcome a significant backlog
in export license applications, ratification of these treaties
would provide much-needed relief to the State Department. More
important, it would allow the State Department to devote more time
and attention to considering the license applications in which the
risk of technology diversion is greater.
Opportunity #2: Ratification would better position the
Department of Defense to take advantage of the globalizing defense
Congress needs to recognize that the defense industrial base is
globalizing. If the U.S. manages this properly through carefully
chosen instruments such as these treaties, U.S. national security
could tangibly benefit from globalization by acquiring superior
weapons more quickly and efficiently.
In 2005, The Heritage Foundation published a study that examined
the scope of the globalization process in the defense industrial
base. In addition to confirming the trend
toward globalization in the defense industrial base, the study
included a series of tabletop exercises in which the participants,
who played the roles of governments and defense suppliers,
addressed four hypothetical bottlenecks in the defense supply chain
based on scenarios designed by Heritage Foundation analysts.
The four defense articles identified in the scenarios were
submarines, a specific component for precision-guided munitions,
satellites, and small-caliber ammunition. The participants in the
exercises were instructed to take steps to relieve the bottlenecks
by acquiring the identified defense articles in sufficient quality
and quantity in a timely manner and at a reasonable cost. In all
four cases, the exercises revealed that foreign suppliers would
play a significant positive role in relieving the bottlenecks.
The defense trade cooperation treaties with Australia and the
United Kingdom would permit the Department of Defense to access a
broader and more flexible defense industrial base. Such access
would provide a wider array of technological choices and reduce
costs for taxpayers. In short, defense suppliers in Australia and
the United Kingdom can provide high-quality goods and services to
the Department of Defense.
The alternative approach is for the U.S. to establish an
autarchic defense industrial policy that would seek to supply the
U.S. military exclusively through domestic suppliers. Although it
would reduce the risk of the diversion of military technology to
potential enemies, such a policy is all but unobtainable in today's
world. In fact, the investment costs of even attempting to
establish an autarchic policy would be extremely high, and it would
fail to ensure the supply of cutting-edge technology to the
military. The latter shortcoming stems from the fact that isolated
and protected industries tend to be less creative. For example, the
Soviet Union made enormous investments in its defense industrial
base but could not match the U.S. in defense technology. In short,
global interaction tends to foster creativity in the defense
If the legitimate security risks can be limited by engaging
suppliers from reliable allies, then global industrial engagement
would be the preferred option for the Department of Defense. The
defense trade cooperation treaties with Australia and the United
Kingdom offer the opportunity for global defense industrial
engagement at a limited risk that defense technology would be
diverted to potential enemies.
Opportunity #3: Ratification would be a step toward a
more open defense market for potential suppliers.
Congress should recognize that the U.S. needs to ease entry into
the U.S. defense market by suppliers that have not participated in
the past. This is essential to improving the Defense Department's
access to cutting-edge technology.
In the past, the Defense Department funded a large share of U.S.
research and development. Today, non-defense government and
private-sector funds account for the bulk of U.S. investment in
research and development. This trend is all but certain to
continue, which means that the Defense Department will need to find
ways to encourage potential suppliers--especially suppliers that
have not participated in the past--to participate more in the
Complicated regulations may become contributing factors in
discouraging non-traditional or new suppliers from entering the
defense market. Arms export regulations under ITAR are a
significant portion of this body of complicated regulations.
Companies operating in the civilian market may be reluctant to
supply products to the Defense Department because the department,
after acquisition, could identify the products, which previously
were not subject to arms export licensing requirements, as defense
articles and therefore subject to controls. Pressures from foreign
competitors offering "ITAR-free" products are prompting even U.S.
defense suppliers to state that they are at a competitive
disadvantage in international markets.
It may be just a matter of time before current defense suppliers
follow suit by offering new ITAR-free products, shunning the
defense sector with certain high-technology product lines for
civilian applications. The opportunity cost to the defense sector
that is created by high-technology companies shunning the defense
market is difficult to calculate, but it could become
Ratification of the defense cooperation treaties with Australia
and the United Kingdom would be a step toward a more open U.S.
defense market for suppliers in two ways.
First, it would directly facilitate easier market access
for potential defense suppliers that are located in Australia and
the United Kingdom. Particularly in niche technologies, suppliers
from these countries can provide advanced components that will
improve the quality of the weapons and equipment in the hands of
the U.S. military.
Second, the treaties would create a more open defense
market that would give potential American defense suppliers broader
access to the Australian and U.K. markets without confronting a
complex licensing process. This would encourage more suppliers to
enter the defense market because they could supply Australia and
the United Kingdom, in addition to the Department of Defense,
without confronting the export licensing process.
Opportunity #4: Ratification would expand the
opportunities for joint U.S.-allied acquisition strategies.
The Senate should recognize that these treaties could assist in
joint U.S.-ally acquisition of major weapons, which would lower
costs by increasing the economies of scale. Advanced weapons
systems are expensive. One approach to reducing the unit cost of
such weapons is to increase production by including allied
militaries in the overall acquisition strategy. The Department of
Defense is using this approach in procuring the Joint Strike
Fighter. Both Australia and the United Kingdom signed memoranda of
understanding on cooperative development of the JSF a little over a
However, arms export control policies have complicated execution
of the joint acquisition strategy for the JSF. The JSF case
shows how reforming U.S. arms export control policies and
procedures could strengthen the relationships between the U.S. and
its allies in joint development and acquisition.
Opportunity #5: Ratification would improve coalition
The U.S.-allied joint acquisition strategies would allow the
U.S. military to operate with its Australian and U.K. partners in a
more integrated fashion on the battlefield because it would
increase the likelihood that all three forces would be using common
weapons and equipment.
Among U.S. allies, Australia and the United Kingdom are the most
likely to join the U.S. in coalition operations. For example, both
nations have been major contributors to operations in Iraq.
However, different weapons and equipment can impede efficient
integration, undermining the effectiveness of coalition forces.
Separate command, control, and communication systems are only the
most obvious barriers to integrated coalition forces.
Ratification of these two treaties would improve the likelihood
of successful joint acquisition strategies among the U.S.,
Australia, and the United Kingdom, which would provide a direct
solution to the problems of integrating coalition forces. For
example, the joint acquisition of the JSF will help to integrate
air operations among the three militaries because all three forces
will be using the same weapons platform.
Australia and the United Kingdom are among the closest and most
reliable allies of the United States. Both countries have
participated in U.S.-led military operations, including ones in
which popular support for the operations among other nations was
low. Both countries have also been responsible partners in
preventing diversion of sensitive defense technology. Finally, both
countries can make important contributions as suppliers to the U.S.
military and as acquirers of weapons and equipment produced by
U.S.-based defense companies.
The defense trade cooperation treaties with Australia and the
United Kingdom that are pending in the Senate would exempt most
arms trade with Australia and the United Kingdom from the licensing
process. Thus, they would enable the U.S. to leverage its close
relationships with both countries to improve both the weapons and
equipment provided to the U.S. military and the fighting ability of
joint U.S.-allied forces.
The Senate should keep the benefits of this closer relationship
in defense trade with Australia and the United Kingdom firmly in
mind as it considers granting its consent to the ratification of
these two treaties.
Baker Spring is F. M. Kirby
Research Fellow in National Security Policy in the Douglas and
Sarah Allison Center for Foreign Policy Studies, a division of the
Kathryn and Shelby Cullom Davis Institute for International
Studies, at The Heritage Foundation.