Australia races ahead with defence export control reforms

The Albanese government is racing ahead with controversial reforms to export controls that will introduce a “licence-free environment” for technology sharing between AUKUS partners at the expense of local companies and researchers working with other countries.

Defence minister Richard Marles introduced the Defence Trade Controls Amendment Bill 2023 to Parliament on Thursday, less than two weeks after a short one-week consultation on the draft legislation wrapped up.

The move has further alarmed the academic and science communities, with two peak bodies immediately calling for changes to the bill that they say threatens Australia’s research standing with non-AUKUS nations.

Defence Minister Richard Marles

The bill, which appears largely unchanged from the draft, is intended to reduce barriers to technology transfer between AUKUS allies by supporting the creation of an “export licence-free environment” for defence exports to the United States and United Kingdom.

It will introduce three new criminal offences for the sharing of certain sensitive technologies or services listed on the Defence and Strategic Goods List (DSGL) with non-US or UK countries and individuals, including those working in Australia.

The changes are deemed crucial for the three nations to realise the “full potential of AUKUS”, according to the bill’s explanatory memorandum, allowing partners to cooperate on defence industrial and technology issues.

The US is currently considering reciprocal legislative changes – that have not progressed in six months – to provide exemptions from US export licensing requirements, while the UK is also examining its export controls regime.

“Australia’s access to this national exemption will require Australia to have comparable export controls laws, regulations and policies to the US,” he said introducing the bill to Parliament on Thursday.

“Complemented by the Defence Amendment (Safeguarding Australia’s Military Secrets) Bill the government introduced earlier this year, the reforms in this bill are expected to achieve this comparable standard.”

Mr Marles talked up internal modelling that shows the reforms are “expected to provide a net benefit to the Australian economy of $614 million over a 10-year period”, including by removing the need for almost a third of annual export permit applications.

But in reducing red tape for AUKUS, the expanded trade controls regime also creates a large compliance burden for companies and could restrict international research collaboration outside of the AUKUS partner nations.

Local companies making dual-use products that have applications in both the defence and civilian commercial markets will be snared by the changes if they have hired specialists from outside of Australia, even if they work in Australia.

Up until the 2023 bill, anyone who was eligible for an Australian government-issued work visa was considered ‘Australian’ for the purposes of export controls. Carve outs were also applied to exempt transfer to employees.

Introducing the bill on Thursday, Mr Marles said that the reforms are “not intended to prevent foreign nationals from working with Australia on DSTL goods or technologies”, but that permission will be required under the new regime.

Mr Marles also said that the bill was not intended to “prevent foreign students or academics from engaging with Australian academic institutions”, following concerns from one of Australia’s most esteemed scientists.

“Much of the existing collaboration and trade between Australia and international partners will be unaffected by these changes. Rather, the policy intent of the bill is to prevent sensitive defence goods and technologies from being passed to foreign individuals or governments in a manner that may harm Australia’s interests,” he told Parliament.

“Individuals or entities who want to supply controlled goods or technology on the DSGL to certain persons or from certain foreign companies will be required to first seek permission to do so. This is to ensure their activities are not damaging Australia’s national interest.”

The Defence minister said each permit application would be considered on a “case-by-case basis” and that they could be “varied or revoked in certain circumstances”. Permits may also be refused if the activity may harm Australia’s security, defence or international relations.

Acknowledging that the “measures in this bill are serious and in some aspects complex”, Mr Marles said the bill would be referred to the Senate Standing Committee on Foreign Affairs, Defence and Trade for inquiry, meaning the bill is unlikely to progress further before the end of the year.

“The government looks forward to a thorough inquiry into this bill by the committee, including any recommendations on whether sensitive amendments can be made to ensure the bill is fit for purpose,” he said.

Mr Marles said that government will work with industry and academia to ensure they understand their obligations under the bill, which will also include a transition period in which offences will not apply.

Australian Academy of Science president Professor Chennupati, who was one of the first to raise the alarm with the proposed changes earlier this month, said the bill threatened the “very architecture and nature of Australia’s capability to engage in the global research system”.

“This legislation will see Australia expand its backyard to include the US and the UK but raise the fence for many other countries when it comes to international research collaborations,” he said in a statement.

Professor Jagadish has called on the government to include an “exemption for fundamental or basic research” in the legislation to “protect and give confidence to scientists that this legislation will not unnecessarily restrict scientific progress”.

“The Academy recommends that amendments be made to the bill include an exemption for ‘fundamental research’ in the legislation aligned with the US definition in the National Security Decision Directive 189,” he said.

The University of Sydney also backed this change in its submission to the consultation on the draft legislation, arguing that “proposed changes are likely to have significant consequences for the missions, international competitiveness and practical operations of Australia’s universities”.

Universities Australia chief executive Catriona Jackson also raised concerns with the “complex legislation”, particularly the “amount of detail that is deferred to subordinate legislation, in particular around the application of exemptions”.

“Universities are concerned that the bill, as drafted, could place at risk our sector’s ability to engage in collaborative research with non-AUKUS partner nations. This is not in anyone’s interest,” Ms Jackson said.

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