Australian researchers face potential jail time if they share details about sensitive technology with foreigners other than Britons or Americans, under a proposed amendment to the Defence Trade Controls Act 2012.
An exposure draft of the bill outlines criminal offences for the supply of regulated technologies to foreigners without permits. Australians also face criminal sanctions for providing services related to the technologies – including help in designing, producing, testing, repairing, modifying, operating, demilitarising or destroying them – without permits.
The draft bill, which has been released for public comment, also overrides the need for permits to share regulated technologies or services with the UK or US. “It is essential that Australia has a robust protective security environment,” an explanatory document says.
“It is also critical that Australia works with like-minded partners, especially with the United Kingdom and the United States, to enhance defence trade, deepen military interoperability and enhance defence capabilities.”
Commentators have until 17 November to provide feedback on the legislation. It is part of a move to harmonise Australia’s export control regime with those of the UK and US, the co-signatories of the AUKUS agreement to supply Australia with nuclear-powered submarine technology.
“We’re looking at a paradigm shift from excellent science being about working with the best in the world, to excellent science being working with the best in the world who share our values so that it can’t be used against us,” chief defence scientist Tanya Monro told a Canberra symposium hosted by the Australian Academy of Science.
Academy president Chennupati Jagadish, whose specialist areas of nanotechnology and semiconductors are among the regulated technologies, said his team was entirely comprised of researchers and technicians from foreign countries other than the US and UK. “We will need permits for all that we do,” he told the symposium.
“Members of my group will need to operate in a closed environment to not unintentionally share knowledge that may have a dual use. Discussion at international conferences, where unpublished knowledge is shared freely to solve research problems and enable collaboration, seems unlikely if this bill becomes law.
“Some of this may still be technically legal under this new legislation, but how will I know which session of these conferences I will be able to present at, ask questions or engage in discussions with or without a permit?”
Nathan Smyth, deputy secretary of the Department of Home Affairs, promised “robust consultation” on the draft legislation. “We’re…looking to strengthen the integrity of research to give justified confidence to all stakeholders on our path to Aukus,” he told the symposium.
“We’ll continue to review the operation of our laws and take further steps as necessary to make Australia the most resilient country in the world to foreign interference. There are implications no doubt for collaboration, but arrangements [will] be implemented in a proportionate way.”
Alan Gamlen, an Australian National University professor, asked whether AUKUS was “worth the cost” if it meant closing down collaboration with countries like New Zealand “in order to get new submarines”.
Professor Monro cautioned against an “undue focus on the AUKUS elements” of the proposed changes. “We have a very clear sense of which countries we need to lean into, and New Zealand is right up there,” she told the symposium. “Don’t interpret the trilateral element in this reform as discouraging that.”
In a dinner hosted by the Australian Academy of Science on Monday night, 13 November 2023, His Excellency the Hon Dr Kevin Rudd AC, Australian Ambassador to the United States of America, addressed the issue from Washington DC.
He told the dinner audience that he can conceive the possibility of a range of academic institutions, across some research domains, being proscribed from collaborating with their Chinese counterparts.
“While collaboration on medical research and the life sciences would likely continue,” he said, “if you are at the hard edge of the sciences which are nearest and closest to the revolutionary intersections involving artificial intelligence ... it’s going to be harder and harder, as both sides seek to de-risk their engagements, for what we would describe as normal scientific collaboration to occur.”
Her Excellency Ms Caroline Kennedy, Ambassador of the United States of America to Australia, who spoke at the dinner, said, “Striking the right balance between collaborative research and national security is one of the most important and difficult goals of democratic societies like the US and Australia … we need to be clear-eyed about the risks of openness and the intent of our competitors.”
The Australian Academy of Science President, Professor Chennupati Jagadish AC, said that while the Academy welcomes a more seamless collaborative environment with the US and UK as part of the AUKUS arrangements, it is concerned about the negative impacts this will have on research collaborations with all other countries, which serve our national interest.
“Efforts must be made by government to facilitate critical scientific and technological collaboration with countries other than the US and UK,” Professor Jagadish said.
The Academy’s Chief Executive, Anna-Maria Arabia, said the Federal Government must consider the resource implications of implementing this legislation.
“This includes resources to establish secure research facilities, to educate and train the research workforce to make it more security-aware—especially as non-compliance, accidental or otherwise, will be a criminal offence—and to create opportunities to widen low-risk international collaborations, such as through association with Horizon Europe.”
InnovationAus.com says that changes to export controls on defence products and services are a disaster for local deep-tech companies making dual-use products that have applications in both the defence and civilian commercial markets.
"Having been blindsided by the proposed changes to export controls, these companies have been given one week to respond to the draft legislation. Local deep-tech companies that InnovationAus.com spoke to on Monday say the changes include draconian measures that could ultimately force some to move to the US, while others will simply be squeezed out of business" says Editorial Director James Riley.
While the proposed changes seek to harmonise export controls between the AUKUS partners and its explanatory notes say the changes will streamline defence trade between the partners, it seems to have done this by taking the worst parts of the US government’s International Traffic in Arms Regulations (ITAR) and applied it not just to weapons but to a far broader set of technologies known as the Defence and Strategic Goods List (DSGL).
As it has been written, the new bill creates three new criminal offences – and each one takes some explaining.
- The first makes it a criminal offence to “supply DSGL technology to a foreign person within Australia”. What this actually means is that if you are a local deep tech, dual-use company and you have hired or are looking to world-class, specialised engineers you are limited to where these people can hired from. Europeans look to be exempted if they are on a list of exempted countries. But its not an extensive list, South Korea is missing, so is Israel. And India, with whom Australia has a $20 million space collaboration, is not on the list of countries where deep tech’s can hire.
- The second criminal offence is for the “supply of DSGL goods and technology, that were
previously exported or supplied from Australia, from one foreign country to another foreign country, or to a foreign person within the same foreign country.” What this means is that local company is now responsible for the supply chain – including whether a ‘foreign person’ has access to the technology in that foreign country (except where the export goes to an AUKUS partner). This is basically ITAR, but as copied and pasted by our own Defence people and applied to a far broader set of dual-use technology. This will make sales to international markets other than the US and UK much more difficult – not just for defence sales, but for the technology captured by the DSGL but that is being put to civilian commercial use. - The third criminal offence is for the supply of DSGL services. The immediate concern for a dual-use tech company in Australia – it could be from anything from quantum to satellites to launch to robotics or remote automation – is whether or not they would need to get rid of non-AUKUS citizens or permanent residents who work on the technology. Because the proposed defence control regime turns the treatment of a ‘foreign person’ on its head.
Up until this new draft legislation was posted, effectively anyone who was eligible for an Australian government-issued work visa was considered ‘Australian’ for the purposes of export controls. And so, if you are a deep tech company and you have recruited leading talent in your world-class startup from some EU countries, or South Korea, or India – you may now be obliged to gain an ‘export’ clearance to keep that expert in your company. There have historically been carveouts to exempt transfers to employees, but how or whether these will persist with the new definition of foreign transfers remains to be determined.
University researchers and university collaborations may also be caught up by this legislation. This is potentially a genuine problem.
The immediate reaction from Australian deep tech companies has been horror. This is especially the case where a dual-use company produces world-leading technology that currently sits outside of ITAR restrictions (that is, the tech has been developed completely independent of the US defence tech and is therefore not captured by US ITAR regulation).
Now that our own Defence establishment has cut and pasted US ITAR-like regulation and applied it to our own defence exports, there is no advantage anymore to having a product or service that is not ITAR-tainted. And now there is a disadvantage that Australia has uniquely applied this regime not just to weapons, but to every item on a 380+ page list of dual-use tech.
The genuine concern is that the draft legislation means they may have to start sacking the world class engineers that have come to work with their company in Australia. And if nothing else, they are suddenly trying to export under a more onerous regime than any of their ‘competitor’ nations.
For the company, this would effective be an end-of-life decision. They need those engineers to be successful.
An alternative for at least one of these companies would be to shift its domicile to the United States – to become a US company.
This would immediately give that company access to the US talent pool, but also better access to US government contracts (and quite likely better access to potential Australian defence contracts also). It would mean that standard dual-use tech is no longer subject to the same onerous ITAR-like controls.
James Riley adds: "The shocking thing about this draft legislation – in addition to the one-week consultation period – is that we have been here before."
Who is looking after the interests of the Australian industry in this proposal?
The Department of Defence has previously sought to impose criminal penalties in a US-centric regulatory framework in legislation in 2012, which also sought to extend coverage of export controls from tangibles to intangibles, which swept up research work in areas that had both defence and non-defence use-cases.
There was huge push-back from the research community to these Defence proposals and from emerging dual use tech interests. And while the legislation was passed, it came with amendments and a parliamentary inquiry.
The amendment led to a review conducted in 2018 by Dr Vivienne Thom, who was critical at the time of Defence regulatory overreach, and also for not adequately consulting with industry on its regulatory impact statement.
"And so here we are again with an export control regime that appears stricter across a broader range of technologies than the US controls, and with just days allowed for industry feedback."
Arriving unannounced, it does not include the kind of explanatory notes that would signal that Defence has engaged with and recognised the concerns of Australia’s dual-use deep tech companies.
Australian industry is rightly worried.
Given the sensitive, controversial and complex nature of the Bill, public consultation is paramount and yet the Government has set up a sham consultation process that will exclude critical input from the University sector, researchers and the broader tech sector.
Senator David Shoebridge, Greens Defence and Science Spokesperson, said:
“This is a ridiculously short period for public comments, effectively opening for submissions on Monday and closing Friday. I’ve never seen anything like it.
“The draft bill, if implemented, will have far reaching impacts on Australia’s international scientific collaboration and that surely deserves more than a week’s thought.
“Australia has some of the brightest scientific minds on the planet, but collectively they account for only 4% of global scientific output.
“Without effective international collaboration we will become an international scientific backwater.
“There are definitely scientific positives by easing cooperation with UK and US counterparts but this must not come at the expense of walling us off from the rest of the world.
“A critical issue is that the boundary of what is and is not dual use military equipment is full of uncertainty and under this draft Bill if a scientist makes a wrong call then they face jail. This is a serious concern already raised by researchers.
“There must be an immediate extension of the consultation period, to a minimum four weeks, because our scientific future is at stake here,” Senator Shoebridge said.
Let's face it, this legislation has nothing to do with supporting Australian industry, academia, nor the scientific community. Nor is it really about protecting Australians. It has everything to do with ensuring the profiteering of the military industrial complex is not diminished. Full stop.
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