Anthony Albanese, Australia’s prime minister (left), and U.S. President Joe Biden shake hands at the Point Loma naval base in San Diego, California, U.S., Monday, March 13, 2023. The prime ministers of Britain and Australia are meeting with Biden today as the three nations unveil the next phase of the AUKUS nuclear submarine program, a security partnership designed to counter China. Photographer: Eric Thayer/Bloomberg via Getty Images

SYDNEY — Much-publicized reforms to the ITAR arms export system for AUKUS are unlikely to contribute to the development of advanced weapons for Pillar II, a capabilities cluster including hypersonics, autonomy, artificial intelligence and other advanced weapons, according to a new report from Australia’s US Studies Centre.

The report, “AUKUS Enablers? Assessing defence export control reforms in Australia and the United States,” cautiously concludes that at the highest level, “AUKUS-driven reforms could succeed where previous efforts have failed. They could realise the long-standing goal of creating a ‘defence free trade area’ between Australia and the United States.”

And yet the authors – Bill Greenwalt of the American Enterprise Institute and Tom Corben of the US Studies Centre – warn that there are major hurdles that have not been addressed by recent reform efforts and that must be overcome if AUKUS is to reach its full potential.

“However, reform efforts could fizzle out if further regulatory adjustments are not made and obstacles to implementation remain,” they write. “In fact, stakeholders in all three countries fear that the ongoing structural challenges posed by ITAR and the exclusion of many AUKUS-relevant technologies from the proposed U.S. license exemption will hinder cooperation under the second pillar of AUKUS and hamper alliance initiatives on precision-guided weapons.”

Australian Defence Minister Richard Marles has hailed the ITAR reforms as a “generational change” and Australian politicians are generally willing to accede to American demands to change Australia’s arms export system to make it more American. The ITAR system is, of course, notorious for its often slow and complex processes, which are overseen by the US State Department’s Politico-Military Office.

The reforms, which come into effect on September 1, are designed to help Australia buy and build nuclear attack submarines under the AUKUS agreement between Australia, the UK and the US. While nuclear technology is not regulated by ITAR, many of the components and systems of the two Virginia-class submarines Australia is expected to buy are covered. The purchase of the Virginia-class boats and subsequent construction of the SSN Aukus fleet have been described as Pillar I of the AUKUS agreement, with Pillar II focusing on a variety of new technology developments, potentially with other countries outside the three AUKUS core nations.

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During a briefing on the report this morning, Greenwalt said: “Pillar Two will not be feasible under the reformed system, except for those systems with unique military technologies and unique military suppliers.”

One of the biggest problems, the report said, is the Excluded Technology List (ETL). Each country will have such a list, which will require arms export licenses between the three countries unless there is an exemption based on specific laws. If a technology or weapon, such as hypersonics or artificial intelligence, is on this list, it will be subject to standard treatment as described in the ITAR.

This means, the authors say, that they are subject to the “well-documented ‘stigma’ effect of ITAR, which in the past has deterred U.S. allies and commercial companies from participating in technology sharing and joint development projects with the Pentagon.” The list “deliberately captures technologies that are central to both Pillar I and Pillar II projects and excludes these items and services from license-free trade for reasons of national competitiveness, international treaty obligations, and fear of industrial security threats from China, Russia, and other competitors,” the report says.

Although no weapons have yet gone through the new process, Greenwalt and Coben write: “Early indications suggest that the three countries are missing an opportunity to create a common defense export control framework that does not address the well-known structural problems of the ITAR system. Making matters worse, many AUKUS-related technologies could be excluded from the very framework designed to facilitate their broader sharing and development.”

They recommend minimizing the number of excluded technologies and removing deep cultural and political barriers to “improve implementation.”

The authors call on the United States to “clarify how the proposed license exemption applies to: the manufacture and co-production of American-origin defense technologies in Australia; to foreign military sales (FMS) and direct commercial sales (DCS) to Australia; and to commercial products modified for military use abroad that are subsequently included in AUKUS co-development projects.”

Australia should, for its part, hire more people for the Defense Export Control Office and the Defense Industry Security Program “in anticipation of an increase in the number and complexity of requests for assistance,” the authors write.