Chapter 1
Terms of the Inquiry
Background to the Defence Trade Controls Bill 2011
1.1
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.[1]
1.2
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'.[2]
The customs bill was not referred to the Senate Foreign Affairs, Defence and
Trade Legislation Committee for inquiry.
1.3
On 21 November 2011, the Joint Committee made a statement advising that
to avoid duplicating the examination being conducted by the Senate committee,
it had agreed not to inquire into the bills.[3]
1.4
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 February
2012.
Scrutiny of Bills Committee
1.5
The Senate Scrutiny of Bills Committee examined both bills in late
November 2011 and raised a number of concerns regarding the Defence Trade
Controls Bill 2011.[4]
After noting the response provided by the Minister for Defence, the Scrutiny of
Bills Committee recommended that Defence update the bill's explanatory memorandum
to include further information.
1.6
The Senate Foreign Affairs, Defence and Trade Legislation Committee
notes correspondence from the Minister for Defence to the Chair of the Scrutiny
of Bills Committee dated 26 March 2012, which states that Defence would update
the bill's explanatory memorandum after the Legislation Committee's report on
the bill. The committee notes the Scrutiny of Bills Committee's recommendations
and the Minister's response.
Purpose of the bill
1.7
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.[5]
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;
and
-
introduces a number of new
criminal offences to enforce the new provisions.
Conduct of the inquiry
1.8
The committee advertised the inquiry on its website. It also wrote to
relevant ministers and departments calling for written submissions, and
contacted a number of other organisations, commentators and academics inviting
them to make submissions to the inquiry.
1.9
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 Appendices 2 and 3.
1.10
Evidence received at the public hearings, and in submissions, indicated
that Defence had not conducted consultation with the university and research
sectors. Representatives of the university sector argued that they would be
negatively impacted by the strengthened export controls outlined in the bill;
they were concerned that the new controls outlined in the bill would prevent
international collaboration on research.
1.11
As a result of this evidence, 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 provide time for this consultation to occur, 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.
1.12
The committee was concerned that the research sector in Australia had
not been properly engaged by Defence in discussions about the bill. As a
consequence, the committee approached other academic and research organisations
to seek their submissions in regard to the effect of the bill on their work. Four
submissions were received from this second round of invitations to provide
submissions. They supported the aims of the bill but also had serious
reservations, similar to the university sector, about the impact of the bill as
drafted and also about the lack of consultation on the proposed legislation.
1.13
On 20 June 2012, Defence provided the committee with two briefing papers
and responses to questions on notice and in writing from the public hearings.
Defence advised that its consultation process with the university and research
sectors was progressing and that it anticipated the consultation to be
concluded by the end of June 2012. By the end of July 2012, Defence
anticipated that it would then be able to advise the committee of the results, including
possible amendments to the bill. The consultation process, however, has taken
longer than expected. The committee is encouraged by submissions from the university
and research sectors which demonstrate a desire to work with Defence to find a
solution. However, the committee notes with concern the submission from the
Department of Industry, Innovation, Science, Research and Tertiary Education
(DIISRTE) dated 2 July 2012 which suggests that the consultation process has
some way to go before all parties could reach agreement on a solution.
Preliminary Report
1.14
The committee acknowledges the concerns raised by submitters regarding
the effect of the bill on the university and research sectors and Defence's
lack of consultation with these sectors prior to introducing the bill into
Parliament.[6]
Since the 21 March 2012 public hearing, Defence has conducted consultations and
is considering amendments to the bill. The committee is aware, however, that during
this recent four month consultation period new issues have emerged.
1.15
While the committee is encouraged by Defence's advice[7]
that it has also conducted consultations with the research sector, it notes
DIISRTE's observations that the pharmaceutical, biotechnology and
nanotechnology industries may also be affected by the strengthened export
controls.[8]
The committee is concerned that not enough time has been allowed for consultation
on the strengthened export controls in the bill and that Defence has not
consulted widely enough.
1.16
In this regard, the committee is conscious that time is rapidly slipping
by without any certain resolution. It recognises the importance of the legislation
and the general support for the intention of the bill but for the sake of
ensuring that there are no adverse unintended consequences, the committee
believes that more time is needed for further consultation and consideration.
As Mr Michael Kenneally from NewSat observed:
We would rather ensure that what is implemented actually does
work efficiently for us. Our preference is that whatever time it takes to get
it right is the time it should take.[9]
1.17
The committee is firmly of the view that more groundwork is needed to
refine the proposed legislation.
1.18
In addition to allowing more time to complete the necessary groundwork
for this legislation, the committee is aware that the United States Government
is currently undertaking reforms to its International Traffic in Arms Regulations
(ITAR) that may have a direct bearing on the operation of some provisions in
the bill, particularly those relating to the implementation of the treaty. Defence
explained that the ITAR reform program is 'about streamlining the US approaches
and creating simpler lists for people and about creating exemptions such as
treaty exemptions'.[10]
The treaty, implemented in the second part of the bill, is likely to be
affected by reforms made to ITAR as both are gateways by which Australian defence
exporters can access the US defence market. The changes are anticipated by the
end of 2012.
1.19
In the committee's view, it seems premature for this bill to proceed
without the benefit of knowing precisely the detail of these changes and their
implications for the legislation now before the Australian Parliament. Unless
Defence can provide assurances to the contrary, the committee believes that it
would be folly to proceed with the bill at this time while the resolution of
important matters remains outstanding.
1.20
Taking into account the uncertainty surrounding the bill as currently
drafted, the committee has decided to present a preliminary report. This
measure is intended to allow Defence more time to give close consideration to
the issues raised by submitters and to consult further if necessary especially
with the research sector. The preliminary report outlines the committee's
concerns, particularly in regard to the need for further consultation, and
makes recommendations.
1.21
When the proposed legislation is no longer a work-in-progress, the
committee's intention is then to reconsider the provisions of the bill,
including any amendments proposed by the government, and present a final report
to the Senate.
Acknowledgements
1.22
The committee thanks all those who assisted with the inquiry.
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