US begins review process for key AUKUS pillar

The U.S. State Department has opened the public review process for proposed changes to export controls that would allow defense contractors in Australia and the United Kingdom to import American military technology without needing to obtain licenses.

Australia and the United Kingdom would join Canada as the only countries with exemptions from licensing requirements under the International Traffic in Arms Regulations, or ITAR, which is meant to stop U.S. defense technology falling into the wrong hands.

Public comment on the proposed exemptions – central to “Pillar 2“ of the AUKUS security pact among Australia, the United Kingdom and the United States – is being sought by May 31, according to a statement issued by the State Department on Thursday. 

The change “would create a license exemption supporting billions of dollars in license-free defense trade between Australia, the United Kingdom, and the United States and allow for deeper security cooperation and innovation among AUKUS partners,” it said.

“All three nations are committed to working with our private sectors and our research communities – those who will use these exemptions – to ensure the exemptions, taken together, support the goals of the AUKUS enhanced security partnership,” the statement said.

AUKUS Pillar 2 aims to create a broad and “seamless“ defense industry across the three nations amid ongoing production backlogs in America as its defense industrial base is stretched by growing commitments to allies in Europe, the Middle East and Asia.

However, the proposed ITAR changes have been criticized by some U.S. lawmakers, including the ranking Democrat on the House Foreign Affairs Committee, Rep. Gregory Meeks of New York, who has asked whether Australia can protect defense secrets from Chinese spies.

ITAR exemption

Officials at the State Department last year also expressed concerns about the proposed ITAR exemptions, arguing that Australian and British firms can freely access U.S. military technology after being vetted and going through the licensing process.

Proponents of Pillar 2, though, said the process is bureaucratic and burdensome for many foreign firms and that exemptions are needed to facilitate production innovation across the three AUKUS countries.

Congress ultimately approved the possible exemptions in last year’s defense spending authorization bill and gave President Joe Biden until last month to evaluate whether Australia and the United Kingdom had appropriate safeguards in place to protect U.S. military secrets.

On April 19, though, the State Department said Biden had not yet reached such a determination and would again evaluate the allies in 120 days, at which time the exemptions could be “finalized.”

Sen. Jim Risch, a Republican from Idaho and his party’s ranking member of the Senate Foreign Relations Committee, slammed the decision at the time as undermining the AUKUS pact.

“The Biden Administration’s determination that the U.K. and Australia do not have a system of export controls comparable to those of the United States is deeply misguided and further delays the implementation of AUKUS,” Risch said in a April 22 statement. 

“This judgment means our trade with the U.K. and Australia will continue to operate under the existing ITAR rules for at least the next four months,” he said. “It is time to deliver on the promise of AUKUS. Continued failure to do so would demonstrate the administration is fundamentally unserious about competing with China.”

Last year, Risch noted that Australia and the United Kingdom were – along with Canada and New Zealand – already trusted as part of the “Five Eyes” intelligence sharing alliance with the United States.

Widening net

Those critical of the exemptions point out that Five Eyes is an arrangement with trusted foreign governments, while the changes to ITAR would put U.S. defense technology into the hands of private companies who would then be responsible for safeguarding it.

Australian and British companies would no longer need to seek approval from the State Department “prior to any export, reexport, retransfer, or temporary import of defense articles” from America, according to a filing on the U.S. Federal Register.

In order to mitigate the risks involved with that, the proposed exemptions say individuals in Australia and the United Kingdom with access to sensitive U.S. technologies would need the equivalent in their countries of “Secret”-level clearance in the United States.

The exemptions would also not be comprehensive. 

The State Department will compile “a list of defense articles and defense services excluded from eligibility for transfer under the proposed new exemption,” the Federal Register filing said.

Whatever the case, the Biden administration seems intent on passing the exemptions that could dramatically expand military production amid fears about China’s aims of territorial expansion in the Pacific. 

Deputy Secretary of State Kurt Campbell – who until February was Biden’s top adviser on Asia – said last month that Pillar 2 of AUKUS was “basically … the way forward” from the massive backlogs that he said have plagued the U.S. defense industrial base.

In time, U.S. officials said that Pillar 2 could be expanded to include more allies. Last month, officials indicated Japan could be the first extra country added, but also said Tokyo has to wait until the arrangement with Canberra and London is “fully fleshed out.”

South Korea this week expressed interest in joining.