Australian defence industry could be treated as US ‘domestic source’

US President Joe Biden has told Australia’s Prime Minister Anthony Albanese that he (Biden) plans to ask the US Congress to add Australia as a “domestic source” within the meaning of Title III of the US Defense Production Act.

Doing so would streamline technological and industrial base collaboration, accelerate and strengthen AUKUS implementation, and build new opportunities for United States investment in the production and purchase of Australian critical minerals, critical technologies, and other strategic sectors, according to a joint statement.

Australia and the United States have also reached agreement in principle, subject to final domestic authorisations, on the Technology Safeguards Agreement (TSA), to allow for the controlled transfer of sensitive US launch technology and data while protecting US technology consistent with US non‑proliferation policy, the Missile Technology Control Regime and US export controls.

“As founding signatories to the Artemis Accords, and building on more than 60 years of cooperation in lunar exploration, we intend to establish a new Australia-based ground station supporting NASA’s Artemis program that will provide near-continuous communications support to lunar missions,” their joint statement said.

The two leaders met in Japan during the G7 summit and signed a Statement of Intent – not an actual agreement – to advance cooperation across a range of sectors, including climate, clean energy and, most importantly, critical minerals.

In a joint media conference President Biden said, “Together, we’ve expanded our cooperation across a range of challenges, from space to emerging technologies while advancing our shared vision of seeing a free and open and secure Indo-Pacific.”

As well as the nuclear-powered submarine and advanced capabilities to be developed under the two pillars of AUKUS, the leaders’ joint statement added, “We are prioritising improving information sharing and technology cooperation mechanisms required to advance our defence and security collaboration, including through AUKUS.

The two leaders said their countries would seize the opportunities of quantum and other advanced technologies and “to work bilaterally and with partners to drive innovation and responsible norms and standards for emerging technologies as we lead the quantum revolution.”

They singled out space as an opportunity to build high-skilled, well-paying jobs and increase investment between the countries.

The newly-established Australia-U.S. Forum on Clean Energy Industrial Transformation and Taskforce on Critical Minerals will allow both countries to deepen cooperation to deliver sustainable, resilient, and secure critical minerals and clean energy to the world and reduce emissions. However, the statement didn’t provide any details about critical minerals which include those used in everyday features of modern life such as mobile phones and electric vehicles.

There has also been some concern that a closer relationship between the US and Australia might benefit the US but leave Australia still hostage to the US’s so-called ‘Buy American Act’ which overrides many of the trade-liberating intentions of the 2005 Free Trade Agreement (FTA) between the two countries.

According to the US Government Accountability Office (GAO), “The Buy American Act [first enacted under President FD Roosevelt in 1933] requires Federal agencies to procure domestic materials and products. Two conditions must be present for the Buy American Act to apply: (1) the procurement must be intended for public use within the United States; and (2) the items to be procured or the materials from which they are manufactured must be present in the United States in sufficient and reasonably available commercial quantities of a satisfactory quality. The provisions of the act may be waived if the head of the procuring agency determines the act to be inconsistent with the public interest or the cost of acquiring the domestic product is unreasonable.”

So the default would still seem to favour a US supplier and insulate US companies from foreign competition. However, the act doesn’t prevent joint ventures and technology sharing, but under the current ITAR (International Transfer of Arms Regulations) regime established by the US State Department, virtually anything that a foreign company shares with a US partner becomes US property and so cannot be exported – even to the country and company of origin – without formal US government permission.

Australian companies must patiently await more detail on how the AUKUS Agreement will tackle this thicket of contradictions.