Report Finds US Regulatory Barriers Endanger AUKUS

The success of AUKUS could be at risk unless U.S. lawmakers are prepared to make further concessions toward Australia and the United Kingdom on arms trade regulations, according to a new report from the United States Studies Centre.

The report, titled AUKUS enablers? Assessing Defence Trade Control Reforms in Australia and the United States, was authored by Tom Corben, a Research Fellow in Foreign Policy and Defence at the Centre, and William Greenwalt, a Senior Fellow at the American Enterprise Institute.

They conclude that politicians in all three countries have made “notable progress” in harmonising defence trade control regimes over the past 12 to 18 months.

However, they caution that these advancements may be undermined “if further regulatory adjustments are not made and if lingering barriers to implementation endure.”

They estimate that the reforms already concluded or currently underway would exempt 70 to 80 percent of trilateral defence trade from licensing requirements, potentially reducing industry compliance costs and enabling easier cooperation on everyday defence industrial and technology exchanges between the AUKUS countries.

“Of particular note, adjustments to the United States International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) would see Australia and the United Kingdom effectively granted the same privileged status as Canada within the US defence industrial base,” the authors predict.

More Work Needed on Trade Harmonisation

However, the authors suggest that if the aim is to realise a long-standing objective of creating a “defence free-trade zone” between Australia and the U.S., then more work needs to be done, particularly on the U.S. side.

Related Stories

For the past two decades, successive Australian governments have long sought to create such a zone.

Previous efforts, such as the 2007 Defence Trade Cooperation Treaty and the 2017 expansion of the U.S. National Technology and Industrial Base to include Australia and the United Kingdom, were intended to bring it about, but ultimately failed to deliver, according to the report.

The authors highlight that ITAR’s “enduring structural challenges” and the exclusion of key AUKUS-relevant technologies from U.S. licensing changes will hinder AUKUS Pillar II cooperation, especially on precision-guided weapons.

Australia had argued that its defence trade controls were similar to U.S. regulations, but U.S. officials required Australia and the UK to adopt ITAR-like rules to qualify for AUKUS defence trade exemptions.

“As a result, Australia has enacted reforms to its own defence trade controls, which many stakeholders worry could replicate well-known challenges with the US ITAR system,” the report says. These include “structural disincentives to defence innovation.”

This is mostly due to an Excluded Technologies List (ETL) within ITAR that captures technologies central to both Pillar I and Pillar II projects.

The authors attribute their omission from license-free trade to “reasons of national competitiveness, international treaty obligations, and anxieties over industrial security threats posed by China, Russia, and other competitors.”

To fully benefit from AUKUS, the three countries must address legal, political, and technical challenges, including how licensing exemptions apply to U.S.-originated technology made in Australia and modified foreign commercial products used in AUKUS projects.