U.S.-Australia Trade Relationships Information Paper

Accel Innovation Corp.

Oct 19, 2023

The U.S. and Australian Governments share several agreements that set conditions for both countries to collaborate more, especially on the defense front with the ongoing threats of China in the Indo-Pacific Area of Responsibility (AOR). These agreements and the latest talks between the two countries open opportunities not just through Foreign Military Sales (FMS), but also Direct Commercial Sales (DCS). This last one allows American commercial companies to conduct business with foreign buyers, in this case, Australia.

Facts:

The U.S. and Australia have a Free Trade Agreement (FTA) that came into effect on January 1, 2005. This agreement eliminates all tariffs on most goods and opens the market for services, investment, intellectual property, and government procurement between the two countries. This is the first trade agreement the U.S. has entered with a major economy since 1988 and Australia's first trade agreement with a major economy. As a result of the FTA, tariffs that average 4.3 percent were eliminated on more than 99% of the tariff lines for qualifying U.S. manufactured goods exported to Australia. The agreement opened markets for services such as life insurance and express delivery, improved protection of intellectual property, and helped facilitate American investments through predictable access and a stable business environment. This agreement also made advances in e-commerce and market access for pharmaceuticals.

The U.S. and Australia signed a Defense Trade Cooperation Treaty in 2007. The Treaty is intended to improve the efficiency of eligible two-way transfers between the U.S. and Australia by facilitating the export of controlled goods within an Approved Community without the need for an export license. This treaty came into effect on 16 May 2013. Some of the benefits of this treaty include and can provide:

reduced delivery time for new defense projects.
improved sustainment, by permitting transfers within the Approved Community without further Australian or U.S. approvals.
a more efficient way for U.S. companies to share technical data with the Australian Community without licenses.
consistent compliance requirements across the Australian Community.
avoidance of delays sometimes associated with the export licensing process.

The Treaty establishes a comprehensive framework for the export of certain defense articles and defense services from the United States to certain Australian facilities and entities. Where the Treaty applies, such export may occur without a license or other written authorization from the Department of State's Directorate of Defense Trade Controls, which is the office responsible for developing and implementing the International Traffic in Arms Regulations (ITAR). Once exported, these Defense Articles may be transferred within what is referred to as an ``Approved Community'' without case-by-case review and the issuance of export licenses by the U.S government. Transfers out of such an Approved Community would however, be subject to Directorate of Defense Trade Controls authorization requirements, and any unauthorized transfers would constitute violations of the Arms Export Control Act (22 U.S.C. 2751 et seq.) (AECA).

Background:

The U.S. and Australia have a long-lasting relationship as coalition partners, and now as they face the same threat from China, both the U.S. Department of Defense and State officials have increased talks with Australia to provide and increase support to achieve each country's Defense Strategies. Australia has been looking to pivot from armor to missiles with the threat of China in the Indo-Pacific AOR. The U.S. and Australia have increased their partnership on every front. From assistance to refit Australian infrastructure to sharing information/technologies, to bringing long range bombing capabilities. Also, the increase of U.S. troops rotations into Darwin.

Analysis and conclusion:

With the increased tensions in the Indo-Pacific AOR, the U.S. and Australia's governments have increased collaborations in many forms, allowing American commercial companies producing high-tech defense equipment to utilize Australia as a test bed. These companies are already collaborating with certain entities from the Department of Defense and State, can bridge a gap to get their products into the right hands to become relevant in this state of competition/conflict. Fighting in a multi-domain environment requires a better and quicker way to get the right equipment in the right hands. Treaties and agreements like the ones between the U.S. and Australia and the situation in the AOR will allow more commercial off-the-shelf defense equipment to be put into play through the DCS and provide our forces and coalition partners the edge they need to succeed in this new battlefield.