US State Dept reduces arms licensing burden for UK, Australia

FILE PHOTO: U.S. President Biden meets with Australian PM Albanese and British PM Sunak at Naval Base Point Loma in San Diego

By Mike Stone and David Brunnstrom

WASHINGTON (Reuters) -The U.S. State Department and Australia's Department of Defence on Tuesday unveiled a plan to reduce licensing requirements for transferring military gear and sensitive technology among the United States, Australia and Britain under the AUKUS pact.

AUKUS, formed in 2021 to address shared worries about China's growing power, was designed to allow Australia to acquire nuclear-powered attack submarines and other advanced weapons such as hypersonic missiles from the United States.

However, the sharing of closely guarded technology, which is governed by strict U.S. International Trafficking in Arms Regulations (ITAR), has been a hurdle for cooperation.

Under the rule change proposed by the State Department on Tuesday, the department's Directorate of Defense Trade Controls (DDTC) will no longer be required to license or approve defense articles, reducing some administrative burdens for companies seeking to make defense products in Australia or the UK.

"This exemption is designed to foster defense trade and cooperation between and among the United States and two of its closest allies," the State Department said in its posting in the Federal Register.

"These exemptions will be a game changer for AUKUS countries and revolutionizes how the United States, the United Kingdom and Australia cooperate on defense trade," Kevin Rudd, Australian ambassador to the United States, said in a written statement.

"For the first time, AUKUS defense industries will be able to work in a seamless, licence-free environment, making it easier for us all to develop the scientific, technological and industrial capabilities we need for our security and to promote global stability," Rudd said.

Australia's Department of Defence said in a statement the proposed changes by the AUKUS partners would remove the requirement for 900 export permits, valued at A$5 billion a year, from Australia to the United States, and remove the requirement for 200 permits on defense exports from Britain to Australia.

License-free trade would be enabled for more than 70% of defense exports subject to ITAR from the United States to Australia, and for 80% of defense trade subject to Export Administration Regulations, it added.

The UK was set to release similar rule changes, a State Department official told reporters, adding that the U.S. move "exempts the vast majority of current licensed defense trade" between the three countries.

The State Department said the new rule would still generate an "excluded" items list, making approval necessary for articles with national security import. That includes items governed by an international arms control agreement called the Missile Technology Control Regime (MTCR) and inputs for nuclear devices and some landmines, the State Department official said.

A list of authorized users would also be generated to help sensitive technologies remained contained.

Bill Greenwalt, a former senior Pentagon official for industrial policy and a senior fellow at the American Enterprise Institute, said the exclusion list is so broad as to make the policy changes almost meaningless.

"The message in that list is that we really don't trust our closest allies to do much with us or are confident in their ability to positively contribute in those areas," he said.

Jeff Bialos, a former senior Defense Department official now a partner with the Eversheds Sutherland law firm, said the State Department has resisted blanket exemptions for Britain and Australia since they were first proposed by the Pentagon nearly 25 years ago, while he was in office.The U.S. Commerce Department announced it was scaling back export control requirements for Australia and the United Kingdom this month. The Commerce Department only handles licensing of some defense-related items, not the broader range of items covered by the ITAR regime, which is governed by the State Department's Bureau of Political-Military Affairs.

A public comment period on the U.S. and Australian rules will begin on May 1 and end on the 31st.

(Reporting by Mike Stone and David Brunnstroml; additional reporting by Dan Whitcomb and Kirsty Needham in Sydney; Editing by Philippa Fletcher, Michael Erman and Gerry Doyle)