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The U.S.-U.K Defense Trade Cooperation Treaty: Entering a New Era of Transatlantic Defense Cooperation

John C. Rood, Assistant Secretary for International Security and Nonproliferation
Remarks at a 2007 Conference: A New Era for the Transatlantic Defense Trade? The Defense Trade Cooperation Treaty and the Future of Transatlantic Defense Industrial Cooperation
London, United Kingdom
September 26, 2007

Good Morning, and thank you Professor Clarke for that kind introduction (thank BABA). I would also like to recognize and thankPaul Lincoln from the Cabinet Office for the outstanding leadership he showed as the lead negotiator for the UK on the Defense Trade Treaty. It was truly a pleasure working with you to get this agreement concluded. In addition, I'd like to recognize MaureenTucker from the State Department who played a major role in the creation of the treaty.

This conference is particularly well timed as the Defense Trade Cooperation Treaty was submitted to Parliament here in the UK and to the Senate in the United States in just the last few days, placing us on the cusp of a much wider public debate about this important agreement. It is also fitting that we discuss this issue here at RUSI, which I learned about while researching the history of this institution, which is in essence the father of all modern think tanks devoted to security issues, created by none other than the illustrious Duke of Wellington.

The United States and United Kingdom enjoy the closest of relationship and it is no cliche to properly describe this as a special relationship. This special relationship is the product of a variety of factors, such as our shared history and common language. A pint is a pint and a pound is a pound in both the UK and the U.S. (although those terms are also used to describe beer and money in the UK). But the special relationship is special because of our shared values, our shared outlook on the world, and because of our deep and longstanding cooperation over the decades to deal with the threat to our way of life. Indeed, it is not an overstatement to state that the depth and closeness of collaboration with the UK across an extremely broad range of areas is truly unlike any other relationship the Untied States has with any other country. And it has been this way for many, many years, including innovative defense trade arrangements and sharing of cutting edge technologies.

For example, in the early stages of World War II, now some 70 years ago, the Untied States under President Franklin Delano Roosevelt provided the UK with military hardware under the lend-lease program. Under this innovative program, Roosevelt found a way to "lend" military hardware to the UK for use in war. (As a former Congressional staffer, I've sometimes wondered what the budget documents submitted to Congress said about these expenditures and whether they said that the UK would return the loaned equipment that was used in the war to the Untied States).

World War II also saw tremendous advances in military technology, such as the invention of radar here in the UK and advances in code breaking, which were shared with the United States as our countries fought to defeat fascism.

Our deep cooperation continued during the Cold War, where the U.S. and UK worked extraordinarily closely to successfully defeat another   threat to our liberty and way of life: the threat from communism. And, as you would expect, this involved close collaboration betweenour defense industries, including the transfers of advanced technologies and know-how as well as large weapons systems like the Polaris missile and Tomahawk cruise missile.

Today, our nations are engaged in a struggle against another threat to our liberty, values and way of life: the fight against terrorism and Islamic extremism.

Both the U.S. and the UK have experienced significant terror attacks on our soil. The September 11 attacks in the US and the 717 attacks on the UK demonstrate the emergence of a significant transnational threat which uses unconventional fighting methods. Al Qaeda and other Terrorist organizations will use whatever technology they can acquire to accomplish this goal. As we have seen in thwarted attacks in the UK and elsewhere, they are a resourceful foe, using traditional military hardware and technology, as well as adapting less sophisticated technologies, like the ubiquitous cell phone and other common items.

This is a conflict that is global with several "fronts." The United Kingdom as been our staunchest ally in this struggle, with Australia and other coalition partners critical to U.S. efforts in Iraq and Afghanistan, and in efforts to combat terrorism and the causes of Islamic extremism internationally.

In this contemporary security environment, it is essential that we take steps to achieve more rapid movement of defense items and technologies and enable our nations to more efficiently pool resources and leverage the technological strengths of U.S. and UK industries.

Our military, intelligence, and other security personnel need to be able to work together seamlessly, to efficiently share information about combined operations, and the men and women on the "front lines" need to have interoperable equipment to successfully accomplish the mission-- whether they are on the "front line" in Basra, Kandahar, London, or New York.

In addition, our defense and security companies must be able to collaborate in the development of technologies that will effectively threats.

It was against this backdrop that we began considering ways to put in place a more effective and efficient defense trade regime. We were mindful of the security environment, but as we sought a solution we also needed to take into account the large scale of economic trade between our countries, and the large volume of defense trade.

For example, the United Kingdom is the largest foreign investor in the U.S. (over $250 billion), and the United States is the largest foreign investor in the United Kingdom (over $350 billion). Moreover, the UK is our largest defense trade partner. The Department of State approved over 7,000 licenses for defense exports to the UK in 2006, worth over $1 4 billion.

We also looked at how we were handling this large volume of defense trade and discovered that we needed to take into account the costs and benefits of continuing to perform case-by-base reviews of export license requests. Over the past two years, the State Department has processed over 13,000 such exports licenses for defense trade with the UK. Over 99.9% of these requests were approved.

We were also mindful of the less-than-hoped for results of the numerous defense trade reform initiatives of the past decade. As John Maynard Keynes observed, "the Difficulty lies not so much in developing new ideas as in escaping from old ones."

President Bush and former Prime Minister Blair were determined to bring our countries closer together, and decided to seek meaningful reform of the defense trade system between our two countries. They recognized that it was in our mutual national security, homeland security, and economic interests to take bold action, and directed the negotiation of the Treaty that would:

  • support joint U.S.-UK military and counterterrorism operations
  • speed U.S.-UK research, development, production, and support of the next generation of interoperable defense technologies;
  • enable development of the most effective countermeasures possible to combat terrorist attacks, at home and against our partners in the war on terror, and
  • leverage each other's experience, and reduce duplication of efforts in research, development, production, and support.

Engaging in an intensely focused process, a small team of U.S. and UK experts negotiated the Treaty, which was signed on June 21 and June 26, 2007 in Washington and London.

The President and Prime Minister's goal was to create the ability for the U.S. and UK militaries and security authorities, and for U.S. and UK companies, to freely exchange information and  technologies. To accomplish this, we have created an entirely new structure for most defense exports.

The Treaty will create a community of the U.S. government and Her Majesty's Government, including the various Ministries, Departments, and Agencies, as well as the defense and security companies and facilities in both countries. Exports of most classified and unclassified U.S. defense goods, technology, and services will be permitted to go into, and to move freely within this community, without the need for government approvals and export licenses, when in support of:

  • Combined military and counterterrorism operations;
  • Cooperative security and defense research, development, production, and support projects;
  • Specific security and defense projects where HMG is the end-user; and
  • USG only end-uses.

This will be a big change from today's export licensing system where numerous government approvals are often necessary for companies to hold discussions about potential projects, to pursue joint activities, to ship hardware and know-how to one another, and even sometimes to move engineers and other personnel within branches of the same company on both sides of the Atlantic. These numerous export licenses and the weeks and months waiting for review and approvals make the task of transatlantic cooperation more difficult.

The treaty framework has been agreed, but many of the implementing details remain to be completed and our governments are working now on these agreements. Although the list of activities and projects that will fall under the Treaty's scope -- and the criteria for adding activities and projects in the future -- is still under discussion, we envision the Treaty will cover the bulk of our efforts. While the details are still being worked out, and we have not yet determined which specific projects will be covered, I believe some good examples include technologies to defeat IED's which our forces face on a daily basis in countries like Iraq and Afghanistan, aspects of U.S.-UK Missile Defense cooperation, U.S.-UK armor cooperation, U.S.-UK surface ship radar development, and the U.S. Joint tactical Radio System-UK BOWMAN radio interoperability project.

Regarding UK only end-use programs, we believe UK programs with significant U.S. content, such as ASTOR, would likely qualify. As with any rule, there will be exceptions to the rule. Exports of some defense items, technologies, and services will be excluded from coverage under the Treaty, however, and we will identify these exclusions as well for the exporting public. Excluded items will still require a State Department license under the current process.

One important highlight of the Treaty is that it will include the ability for both governments to effectively enforce it against violators. For example, in the UK, defense articles exported under the Treaty will be considered "RESTRICTED" in the UK, and the Official Secrets Act will apply to such defense articles. In addition to the Official Secrets Act, UK export control laws may also apply and provide an additional level of protection. The defense articles exported under the Treaty may not be transferred or exported to companies or other entities that are not part of the Treaty's approved community without prior permission from the UK MOD and the USG. A violation of this requirement will, at a minimum, be a violation of the Official Secrets Act, as well as a violation of U.S. export control laws.

Retransfers and re-exports outside the approved community will require an HMG and USG authorization. The Treaty provides for an exception to the requirement for reexport authorizations for exports going outside the Treaty's approved community when such exports are in direct support of UK forces deployed overseas.

We recognize that it is important to create procedures that protect national security interests, but which also are usable by our respective industries. To that end, we will seek industry feedback as we go through the IA development process with HMG. In the U.S., for example, one avenue we will use is the Defense Trade Advisory Group, an established channel through which we will seek industry feedback on proposed procedures.

So how would the treaty work? With apologies to J.K. Rowling, let's consider that the U.S. and UK are each pursuing an independent effort to develop a personal invisibility cloak like that used by Harry Potter. Our DOD and HMG's MOD decide to join forces, hoping to leverage our separate efforts. They negotiate a cooperative MOU to develop the cloak. Our two governments agree to add the invisibility cloak to the list of approved projects, and each government selects its contractor team.

Under the Defense Trade Cooperation Treaty, instead of the U.S. company preparing and seeking U.S. State Department approval of a TAA for this project-which would normally take around 45-60 days -- the contractor will check a U.S. Government website. Thereare three lists to check -- is the UK industry partner on the list of approved companieslfacilities? Check. Is the invisibility project on the list of approved projects? Check. Is the technology on the excluded list? The invisibility cloak technology isn't excluded. Check. With all three boxes checked, the U.S. contractor and UK companies can freely cooperate without export licenses.

The U.S. company will be able to send its technical data to the UK firm to begin work, using the system established to implement the Treaty. Subcontractors can be added later without the need for licenses as is the case today, so long as the subcontractor is also a member of the approved community. No need to wait for an amendment to a TAA to add an additional party like today. A few weeks later the UK contractor team wants to visit the U.S. company to examine and discuss initial samples. This can also be done under the Treaty, and does not require a license.

All of these activities can all be performed without seeking prior authorization from either government, although records will need to be kept. This is a dramatic departure from the way we do things today. The Treaty goes beyond being a new way of doing business-it establishes a unique defense cooperation environment to reinforce our partnership with our most important ally.

We have much more work to do. To paraphrase Sir Winston Churchill, we are not at the beginning of the end of this process on the treaty. Rather, we are closer to the end of the beginning. The 16 Treaty must still be considered and approved by Parliaments on both sides of the Atlantic. Implementing agreements must still be negotiated and signed. And the hard work of implementing and ma king this new arrangement a reality must be accomplished.

Of course, improved defense and security cooperation is not an end in itself. Its value lies in enabling both our countries to develop and field more effective military capabilities, at lower costs, than otherwise would be the case, and to support the ability for our two countries to operate together in pursuit of common security objectives.

But to paraphrase the noted American philosopher and catcher for the New York Yankees Yogi Berra, who once offered this simplistic observation on the need for clear goals, "If you want to get where you're going, it helps to know where you want to be." Both the UK and U.S. governments know where we want to be and are moving toward that goal.

So, in closing, let me thank you for your attention this morning. I hope that I have provided you with useful information about the U.S.-UK Treaty on Defense Trade Cooperation. I would be pleased to take questions.

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