Terms of the Inquiry
Background to the Defence Trade Controls Bill 2011
The Defence Trade Controls Bill 2011 (the bill) was introduced into the
House of Representatives on 2 November 2011, passed on 21 November 2011 and
introduced into the Senate on 22 November 2011. The bill, with its companion
bill the Customs Amendment (Military End-Use) Bill 2011 (the customs bill), was
referred to the Joint Committee on Foreign Affairs, Defence and Trade.
On 10 November 2011, pursuant to the Senate Selection of Bills Committee
Report, the provisions of the Defence Trade Controls Bill 2011 were referred to
the Senate Foreign Affairs, Defence and Trade Legislation Committee for inquiry
and report by 12 April 2012. The reasons for referring the bill were to 'allow
further investigation into issues of concern within the defence industry'.
The customs bill was not referred to the Senate Foreign Affairs, Defence and
Trade Legislation Committee for inquiry.
On 21 November 2011, the Joint Committee made a statement advising that it
had agreed not to inquire into the bills in order to avoid duplicating the
examination being conducted by the Senate committee.
Draft regulations accompanying the bill, the Defence Trade Controls
Regulations 2012 (the regulations), were circulated by the Department of
Defence (Defence) for industry consultation between 22 December 2011 and 17
Purpose of the bill
The bill gives effect to the Treaty between the Government of
Australia and the Government of the United States of America concerning Defense
Trade Cooperation (the treaty). Signed in 2007 by former Prime Minister
John Howard and former United States President George W Bush, the treaty was
considered by the Australian Joint Standing Committee on Treaties in 2008.
The joint standing committee supported the treaty and recommended that binding
treaty action be taken.
In addition to giving effect to the treaty, the bill also:
introduces controls on the
supply of Defence and Strategic Goods List technology and services related to
Defence Strategic Goods List (DSGL) technology and goods;
creates a registration and
permit regime for the brokering of DSGL goods, technology and related services;
introduces a number of new
criminal offences to enforce the new provisions.
Conduct of the inquiry
Initially, the committee received 11 submissions, including one
confidential submission. All submissions except the confidential submission are
listed at Appendix 1 and published on the committee's website. In order to
examine concerns raised in the submissions, the committee held public hearings
on 2 and 21 March 2012. Witnesses who appeared at the hearings are
listed at Appendix 2.
Based on a number of submissions and evidence received at the public
hearings, the committee became aware that consultation undertaken by Defence on
the proposed legislation was seriously deficient and that as a result Defence
was in the dark about likely unintended consequences.
The committee asked Defence to work with Universities Australia and
representatives from the University of Sydney to develop a solution to the
problems created by the strengthened export control provisions in the bill. To allow
adequate time for consultation to occur, and for the committee to consider its
progress, the committee sought and was granted an extension to its reporting
date to 15 August 2012. The committee asked Defence and Universities Australia
to provide feedback about the consultation process by 30 May 2012.
Concerned about the obvious shortcomings in Defence's consultation
process, the committee also approached other academic and research
organisations to seek their submissions in regard to the effect of the bill on
their work. Nine submissions and eight supplementary submissions have since
Defence commenced consultation in earnest with the Australian research
sector about the proposed legislation during March 2012. The process continued
and on 21 June 2012 Defence informed the committee that it had met with
Universities Australia and agreed to develop principles and options for further
consultation and discussion with the university and research sectors. A
submission from the Department of Industry, Innovation, Science, Research and
Tertiary Education (DIISRTE) dated 2 July 2012 suggested that the consultation
process had some way to go before all parties could reach agreement on a
Unfortunately, as detailed in length in the committee's preliminary
report, the parties could not reach agreement on a preferred option.
Defence's submission to the committee on 8 August 2012 and Universities
Australia's submission on 10 August 2012 both advised the
committee that the consultation process had failed to produce a workable
After considering the evidence, submissions and reports on the
consultation process, the committee reached the conclusion that the bill should
not proceed. While the committee was conscious of the importance of the legislation,
it felt that it was equally important to be certain that the strengthened
export control regime would have no unintended or unnecessary adverse consequences
for the university and research sectors.
Taking into account the uncertainty surrounding the bill as drafted, the
committee decided to present a preliminary report. This measure was intended to
underscore the problems raised by the university and research sectors, allow
Defence more time to give close consideration to the issues and to consult further
if necessary, especially with the research sector. The preliminary report detailed
the committee's concerns, particularly with regard to the need for further
consultation. In its preliminary report, the committee urged Defence to
undertake further consultation with the university and research sectors.
The committee endorsed the roundtable approach proposed by Universities
Australia and recommended that Defence participate in roundtable discussions
involving key stakeholders convened by Universities Australia and chaired by
the Chief Scientist, Professor Ian Chubb. The committee also recommended that:
...further consultation be conducted by Defence with key
stakeholders, until the issues raised can be resolved to the satisfaction of all
parties. Further, the committee recommends that consultation be conducted in an
open and transparent manner, and sufficient time allowed for key stakeholders
to consider the complex issues and respond.
The committee further recommends that, in designing the
implementation of the strengthened export controls, Defence create an advisory
group of key stakeholders which must have input into each part of the process.
Key stakeholders in the group should include, but not be limited to: DIISRTE,
the Department of Health and Ageing, NHMRC, Universities Australia, and the
Chief Scientist of Australia.
At that time, the committee was encouraged by all stakeholders' support
for the legislation and optimistic that their willingness to work cooperatively
would produce a mutually satisfactory solution.
On 17 August 2012, soon after the committee had tabled its preliminary
report, the Minister for Defence, the Hon Stephen Smith MP (the minister), announced
that Mr Ken Peacock AM
and Chief Defence Scientist, Dr Alex Zelinsky,
had been appointed to conduct further consultations on the bill. They held
talks with key university and research sector stakeholders, the Chief Scientist
and the DIISRTE.
The committee understands that the report prepared by Mr Peacock and Dr
Zelinsky formed the basis for two roundtable discussions between Defence and
the university and research sectors on 6 and 21 September 2012. The roundtables
were convened by the Chief Scientist of Australia, Professor Ian Chubb.
The outcomes of the roundtable process, including proposed amendments,
and the committee's recommendations, are discussed in the following chapters.
In its preliminary report, the committee noted that it was aware that
the US Government was currently undertaking reforms to its International
Traffic in Arms Regulations (ITAR) that could have a direct bearing on the
operation of some provisions in the bill.
Since tabling its preliminary report, the committee has received
assurances from the minister and the US Ambassador, His Excellency Mr Jeffrey Bleich,
that ITAR reform currently being undertake in the US would not affect the
provisions of the treaty. The minister advised the committee:
Regardless of when the various US export control reform
initiatives do occur, the Treaty will continue to mean:
- Reduced delivery time for new defence projects;
- Improved sustainment, by permitting transfers within the Approved
Community without further Australian or US approvals;
- Improved business opportunities, by permitting Australian and US
companies to share technical data without licences; and
- Greater opportunities for Australian companies to participate in
The minister noted further that Defence was working closely with the US
Department of State Treaty Management Board to ensure the Treaty incorporates
the benefits of US export control reform.
According to the minister, both Australia and the US were committed to ensuring
that by joining the Approved Community members would continue to enjoy
benefits. Furthermore, he indicated that the Approved Community operating
within the treaty framework would remain attractive over existing control
authorisations, including in the context of the reforms underway. He informed
the committee that Defence had received a commitment from the US
Department of State that the treaty 'will always remain beneficial over the
ITAR licence regime'.
The committee thanks all those who assisted with the inquiry. It
especially acknowledges the contribution of the Chief Scientist, Chief Defence
Scientist and the participants in the roundtables who, in good faith, worked
hard to reach agreement. The committee hopes that the cooperation which has led
to this solution can continue throughout the implementation of the strengthened
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