Two years on, is the AUKUS agreement at the brink of failure?

In a new op-ed, Bill Greenwalt of AEI warns that the Biden administration has not publicly provided workable legislative proposals that would take aim at the ITAR challenges for AUKUS.

September 14, 2023 at 11:01 AM

With the AUKUS agreement coming up on its second birthday, the excitement around the idea of sharing nuclear submarine tech to Australia has subsided and the real work has begun. But is the toddler stage of the agreement going to net the benefits the three countries hope it will? In a new op-ed, Bill Greenwalt, a longtime US weapons acquisition expert and the author of a May paper about ITAR obstacles for AUKUS, warns that if changes aren’t made quickly, the agreement might end up just a footnote to history.

Two years ago the US, Australia, and the United Kingdom announced the AUKUS arrangement to create an Australian nuclear-powered submarine capability and, perhaps most importantly, enhance defense cooperation between the three countries on a wide range of emerging technologies and capabilities.

What is striking is that despite the fanfare of the deal, AUKUS will not result in any real change in the balance of forces in the South China Sea for almost a decade, with perhaps the exception of the potential ability to base existing US attack submarines in Australia.

Why is that the case? Some of it is simply due to the time it will take Australia to build a nuclear enterprise, especially the skilled workforce required. But the inability to reform US export control policy is encouraging failure in emerging technology cooperation while industrial base constraints leave the submarine segment well on the road to irrelevance.

There now seems to be an understanding in at least parts of Congress that the US submarine industrial base must be fundamentally strengthened and profound reforms made to the International Trafficking in Arms Regulations (ITAR). Sadly, it is questionable whether Congress and the Biden administration will make the long-term commitments in money and legislation needed.

AUKUS is a tremendously good idea that could serve as the foundation of an alliance of democracies that can counter and deter potential adversary states. If successful, lessons learned and practices from AUKUS can be applied to other allied partners across a much broader coalition. The overarching and often unrecognized problem is that, when facing the multitudes of threats on the horizon, the US no longer has sufficient military and industrial scale to go it alone and must augment its capacity by leveraging the capabilities of its allies and the commercial sector. This is as true for increasing the number of submarines on station and the size of munitions stockpiles, as it is for developing future capabilities in autonomy, quantum computing or advanced AI.

The problem with good ideas though is they have to be implemented; the lesson learned from the last two years is that in the haste to “get a deal” basic issues related to the industrial base and the role of arms export regulations were ignored.

On the Senate Armed Services Committee, Senators Jack Reed, D-RI., and Roger Wicker, R-Miss., have been right to raise concerns about industrial base constraints. The decision made six months ago to transfer Virginia-class submarines to Australia in the 2030s before relying on a yet-to-be designed British-Australian submarine to be deployed sometime in the 2040s has thrown the inadequacies of the US submarine industrial base into the open. Since 2011, the US Navy has been trying to build two Virginia class submarines each year and has only achieved a rate of only 1.2 a year. This is a far cry from what is needed since the US continues to retire boats at a faster rate than that. On top of that problem, the Columbia-class replacement for the Ohio-class SSBN will further strain undersea production capabilities at US shipyards. The AUKUS requirements will undoubtedly go to the back of the line.

Still, the 2030s are a long way off and a lot could change in the meantime. So far, there have been more expectations raised than weapons delivered. That could change if the benefits of emerging technology partnerships in Pillar Two of AUKUS lead to the deployment of new capabilities in the next two to five years. This is a realistic goal as US allies are now capable of being more than just passengers riding on past US technological weapons programs. Our allies are increasingly important sources of innovation and cutting-edge technology in their own right, making advances in hypersonics, missile defense, space systems, ASW, radars and sensors, autonomy, and computing. Their contributions to collective military-technology initiatives can be one the greatest benefits that come from US partnerships with these countries.

ITAR then becomes the primary barrier to the dream of making AUKUS a near term reality. From the notorious “ITAR taint” that sticks to both U.S. commercial and allied goods and services with even the slightest hint of American involvement to its inability to discriminate between countries, both friend and foe, ITAR is a major roadblock to implementing both the submarine and advanced technologies portions of the trilateral partnership.

These and other problems that ITAR poses to the hardware and information sharing on which AUKUS depends are well-documented. Unsuccessful attempts to reform the process to encourage allied cooperation go back to the Clinton Administration. The Biden administration has not offered a comprehensive plan to deal with these issues, nor has it publicly provided workable legislative proposals that would take aim at ITAR’s pitfalls. The few reforms the administration has offered so far have not been serious or implementable.

The House Foreign Affairs Committee (HFAC) provided a glimmer of hope in its recent mark up of legislation to change the applicability of the ITAR for AUKUS. Two of the more interesting ideas are contained in the KOALA Act (HR 4716), that would exempt Australia from ITAR; the second, the BRITS Act (HR 4715), would do the same for the United Kingdom. HFAC’s current approach could allow for positive ITAR discrimination to speed the transfer of technologies and knowhow critical to new joint innovations developed in the US, UK, and Australia. The problem is that the House’s solutions leave the discretion on how to do this with the US State Department, which has long undermined any flexibility in the exemptions and authorities it has been given.

Expecting State to pave the way for new innovative defense programs is probably a fool’s errand. Instead of reform, the Biden Administration’s AUKUS legislative proposal recently included a State Department-sponsored poison pill that would undermine the incentives for joint cooperation. While the House dropped the poison pill language in its version of the bill (the Senate made a slight modification), the signal has been sent that State does not trust our allies and is not likely to actually use any new discretion Congress may eventually give it.

There is still time to take a different course. On the industrial base, Congress should seriously consider an alternative capital budgeting mechanism to lock in long-term funding for submarine industrial base investments. The AUKUS partners should also take another look at how best to increase the number of submarines on station in this decade. 15

This could include

• extending the life of Los Angeles-class submarines while jointly manning them;
• extending production of the UK’s Astute line; and
• rapidly developing and deploying unmanned undersea systems.

A new export control regime should be created for the AUKUS nations. Control over this regime should be taken away from the State Department and moved to another agency, which would be directly overseen by the National Security Council. As long as State is the primary arbitrator of technology transfer issues it is likely that the U.S. will be unable to compete militarily in the future because State’s current rules and culture undermine defense innovation. The State Department has now become a national security problem rather than a source for a solution.

William C. Greenwalt is a nonresident senior fellow at the American Enterprise Institute and a former deputy undersecretary of defense for industrial policy.