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Monday, 21 November 2011
Page: 13095


Mr BALDWIN (Paterson) (16:25): The recent visit of President Obama to Australia demonstrated, and the President mentioned it in his speech to the House, that the relationship between our countries has never been stronger. This is a relationship that has been supported by both sides, and it is in that spirit that I rise today to speak on the Defence Trade Controls Bill 2011 and the Customs Amendment (Military End-Use) Bill 2011. The purpose of these bills is to implement a treaty between the government of Australia and the government of the United States of America concerning defence trade cooperation. It is also important to remind the House that this year marks the 60th anniversary of the ANZUS alliance. This bill came about from a coalition initiative that came to fruition when Prime Minister John Howard and US President George W Bush signed the Australia-United States Treaty on Defence Trade Cooperation over four years ago. It might have taken some time, but I broadly welcome the government's decision to bring this legislation forward. It will bring Australia more into line with what Canada has had with the US for several decades now, namely, a special arrangement designed to remove any defence export restrictions on industrial cooperation. This is something that the US and Britain were also able to achieve in a treaty framework.

Although the treaty was signed in September 2007, it has not yet entered into force. It will come into effect once the domestic legislative requirements of both countries have been met. The coalition is responsible for additional parliamentary and Committee on Treaties procedural safeguards that will apply. We take our bilateral and multilateral treaty obligations very seriously, and we are keen that such international arrangements are made with full reviews of the obligation placed on us, including the economic, environmental, social and cultural effects of the proposed treaty; the obligations imposed by the treaty; how the treaty will be implemented domestically; the financial costs associated with implementing and complying with the terms of the treaty; and the consultations that occurred with state and territory governments, industry and community groups and other interested parties.

In respect of this particular agreement, the difficulty with the current setup is that there is need for licences at all stages, and each licence can take from three to 12 months for approval. Licences must be sought even for efforts involving cooperation between subsidiaries such as Raytheon Company based in the US and Raytheon Australia. This is an important feature of any serious export control regime because it prevents cut-out technology transfers. Nevertheless, it does get in the way of relationships between trustworthy allies. These difficulties within the existing arrangements manifest themselves in a number of ways. They even strike at the very initial stages of cooperation by creating huge hurdles and costs for any discussions and sharing of technical data to even begin exploring cooperation between Australian and American firms. They strike at the active cooperation stage by making full Australian participation in joint projects difficult, to say the least, because licensing slows down the process and makes it easier to select US partners instead. Finally, it gets in the way of transfers of US origin equipment and technical data, slowing down any effort to do more maintenance and sustainability work locally after Australia buys US equipment or upgrades what it has. The US congress agreed to pass a watered-down solution in 2004. It gave the UK and Australian export requests expedited status, which improved but did not fix the situation. US defence industry companies have also banded together on this issue to press for a change in export systems as a whole.

Under this treaty, US exporters working with firms in the 'approved community of companies' can forgo the licensing requirement and just advise the US Department of State that they have engaged in an eligible defence export activity with Australia.

Eligible exports will include exports for: mutually determined security and defence projects where the Commonwealth of Australia is the end user, which will not include the F35, since that is a multinational project with its own agreements; cooperative security and defence research, development, production and support programs; and combined military or counterterrorism operations.

A compliance and audit regime, whose details must still be determined, will be set up to monitor the agreement. This will include accreditation standards for 'approved community' status, covering issues like facility clearance, business history, export licensing and compliance record and relationships to countries of concern. Australian companies that are not a part of the approved community will still be able to use existing US export control arrangements. ITAR et al will also apply to any highly sensitive exports, still to be mutually determined, that are not covered by the treaty. Once in force, the treaty will create a framework for two-way, licence-free trade in certain defence articles between Australia and US members of the approved community. The approved community will include government agencies and private companies in both countries.

The potential benefits of the treaty include: reduced time delivery for new defence projects; improved sustainment by permitting transfers within the approved community without further US approvals; improved business opportunities by permitting Australian and US companies to share technical data without licences; and a greater opportunity for Australian companies to tender for US contracts. That, in particular, is one area I want to focus on and that I will come to later in my speech.

Under the treaty, Australian companies will avoid having to seek US government approval for each transaction. The treaty will remove administrative delays associated with the existing Australia-US export licensing system, while ensuring that sensitive defence technology is appropriately protected. Australian defence companies will be able to apply to become members of the approved community. The approved community allows government agencies and private companies in both countries to trade in defence articles without the administrative delays caused by US and Australian export controls. Applying for membership in the approved community will be a voluntary commercial decision. Those that choose not to join the treaty will continue to operate within existing Australian and US defence export controls.

To qualify for membership, companies must be accepted and must comply with security standards, marking and handling requirements, and regular audit and compliance obligations. Entry into the Australian approved community will be a commercial cost-benefit decision for individual companies, based on the level of business a company is likely to undertake with the US government or with US defence companies. Implementation costs to individual companies will vary depending on the level of access to treaty articles and the level of security they currently have in place.

The Defence Trade Cooperation Treaty is a significant step towards cooperation between the Australia and the US defence industry. In December 2010, the Defence Export Control Office, DECO, conducted consultation sessions with industry in each state and territory. DECO has continued to engage with industry throughout 2011.

The opposition wants the treaty to work as effectively as possible, the initial benefit being the provision of better access to US defence technology, while still maintaining assurances that it will be protected appropriately. However, in the future we hope our companies will be able to use the legislation and its simplified procedures to more efficiently export indigenous technology to the US.

Australia has the capacity to design and develop sophisticated defence technology. An example of that is the uniquely designed Nulka rocket-designed decoy missile, which takes antiship missiles away from their targets. It has already been fitted to more than 130 Australian, Canadian and United States warships and is probably one of Australia's most successful defence exports. Another example is the Bushmaster, the mine protected vehicle which does so much to protect our nation and other nations that are using them in Afghanistan by deflecting away the force from IEDs and other similar devices. I say this to the government: we have a unique technology, a design technology, and I am just amazed that this government has not sought more opportunity to sell the Bushmaster program into the US market. In fact, this government joined up and paid US$40 million to US companies to be a part of the JLTV program, a program now in trouble because it never met its design criteria. Yet Australian companies like Thales, who produce the Bushmaster, have also developed the Hawkeye, a smaller version which can comply with their technology. So what we need is a greater emphasis from this government in promoting Australian defence technologies into other markets and, in particular, the US market, which is a great procurer.

In my area of the Hunter Valley, defence industries provide many thousands of jobs. Forgacs, for example, has played a major role in the air warfare destroyer project, which was started in 2009. It will have built 14 of the 31 blocks that will make up the first ship, HMAS Hobart, and 13 of 31 blocks that will make up the second ship, HMAS Brisbane. The contracts won as part of this project in 2011 are worth $80 million and creates 200 more jobs for that company. Other Hunter companies which have capabilities to profit from defence contracts include BAE Systems, which only this year won a new three-year contract to provide vital usage monitoring services for the Royal Australian Air Force's FA18 Hornets. Under the contract they will gather, track and report fatigue related information about the Hornet's airframes and engines using an unique Australian developed, maintenance diagnostic and service life monitoring system.

There may be great opportunity to export that technology to other countries to help with their aspects of through-life systems and fatigue monitoring but, at the same time, we have the capability here in Australia and we should use that capability and that initiative to sell into other areas. In fact, the number of companies in the Hunter that do amazing work and are exporting already around the world, but are not able to penetrate the US market in any great way, are companies like C-E Solutions, who manage complex systems engineering, communication and defence projects; Cowan Manufacturing, who construct the most amazing recompression chambers which are fitted to warships throughout the world and in commercial operations; ATSA Defence Services, who specialise in the support of mine warfare underwater vehicles for the Royal Australian Navy; Puzzle Precision, who are an amazing company that develop low-level—in terms of production—but highly sophisticated circuit boards and, at times, one-off circuit boards for defence and related industries; Sisley Clothing, who manufacture the Nomex flight suits and other safety clothing; and, of course, GH Varley, who build a number of defence vehicles and are currently doing some specialised trayback modules for our new defence vehicles. Those companies are innovators. They are just some of the companies involved in defence industries in the Hunter. We have a spirit there of innovation and technology development. What is disappointing is that as they try to approach the US markets, it is all too hard. What we need—and I hope it comes as part of this work on this treaty—is greater access into the US defence systems for Australian technology.

If this legislation is passed, and I assume it will be because it has the support of the coalition, I want businesses in regions such as the Hunter, and small and medium enterprises in particular, to be able to use their expertise to take advantage of future export opportunities to create additional investment and, more importantly, jobs. It is in this spirit of implementation that more work needs to be done to realise the advantages to both the Australian and US governments. So the coalition will be keeping a close eye on how these regulations associated with this legislation are implemented to make sure they do not disadvantage Australian industry. As a part of this we welcome the consultation projects, which should not be just about informing industry but about providing an opportunity for those who will be affected by the arrangements to help shape how these measures will be applied in practice. Australia can ratify the treaty once this parliament has passed this bill and I would ask it to do so without unnecessary delays. This legislation also proposes to strengthen export controls in a number of areas, including brokering, intangible transfer of technology and the provision of services. These enhancements will ensure Australia's position is at the forefront of international best practice, and the passing of this legislation will allow the treaty to be enacted. It is anticipated that it will be introduced into parliament this year. Without any reservation we support this legislation. The legislation framework was commenced by the Howard government. I am glad to say the carriage of it has continued despite the delays in the US, and we ask that it be expedited as quickly as possible.