U.S.-Australia Defense Industry

Introduction

Australia and the United States have had a close partnership for over a century, fighting side by side in every major war since World War I. In recent years, as threats have evolved and challenges have multiplied, the U.S.-Australian alliance has become increasingly salient for policymakers in both countries.

Over the past few years, China has become increasingly aggressive with its stated intentions and its actions. There is a growing list of examples of China using economic coercion against those that contradict its specific interests. According to CSIS research, at least “eighteen Western and Asian countries, including Japan, Lithuania, Norway, and Australia, and over 123 private companies, including Walmart and the National Basketball Association, have been targeted, precipitating tens of billions of dollars in economic damage.” China is also increasing its gray zone tactics in the broader Indo-Pacific region, including violating the territorial waters and airspace of other nations. Over the last decade, China has routinely violated Japan’s territorial waters, and in August 2024, a Chinese military airplane entered Japanese airspace for the first time. Chinese actions in the South China Sea regularly violate international laws of the sea, such as deliberately ignoring the 2016 United Nations Arbitral Tribunal ruling, which ruled in favor of the Philippines, and attacking Australian divers with dangerous sonar pulses. China has been quite vocal about its goal of unifying Taiwan with the mainland, which would have profound consequences for regional stability and security.

Concern over China’s posturing is laid out in each nation’s strategic planning documents. In the United States, the National Security Strategy characterizes China as the U.S. military’s pacing challenge, with the People’s Republic of China (PRC) as “the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to advance that objective.” The document highlights the importance of working with allies and partners to maintain a rules-based international order and notes that, “The war in Ukraine highlights the criticality of a vibrant Defense Industrial Base for the United States and its allies and partners.” Australia’s 2024 National Defense Strategy identified Chinese actions in the Indo-Pacific—and especially in the South China Sea—as directly endangering regional stability and Australia’s national security interests, while also emphasizing Australia’s role as an active shaper of the Indo-Pacific strategic environment. This “National Defence” doctrine recognizes Australia’s contribution beyond its national borders and the increasing importance of military and industrial cooperation with the United States to uphold the international rules-based order through enhancing deterrence, strengthening force posture, and increasing production of munitions.

Australia and the United States are well postured to work in partnership against global threats. The two nations first became treaty allies with the passing of the Australia-New Zealand-U.S. (ANZUS) treaty in 1951 and now have multiple other formal relationships, including the Five Eyes intelligence-sharing agreement along with Canada, New Zealand, and the United Kingdom. The U.S. and Australian militaries train together, and U.S. Marines rotate annually through Darwin, in Australia’s Northern Territory.

Formal bilateral arrangements include the Agreement concerning the Status of United States Forces in Australia (SOFA) of 1963, the Logistics Support Agreement (LSA) of 1989, the Acquisition and Cross-Servicing Agreement (ACSA) of 2010, the Treaty concerning Defense Trade Cooperation of 2013, and the Force Posture Agreement of 2015.

Australia is also a key U.S. trade and investment partner. Australia has a Reciprocal Defense Procurement Memorandum of Understanding (RDP-MOU) as well as a Security of Supply Arrangement with the United States. In 2016, the U.S. Congress added Australia to the National Technology Industrial Base (NTIB) arrangement. The Australia–United States Free Trade Agreement (AUSFTA) came into force in 2005. The arrangement that has received the most attention recently is the Australia-United Kingdom-United States (AUKUS) partnership, announced in 2021. AUKUS, which has two pillars, is designed to counter twenty-first-century threats through enhanced technology partnerships. Pillar I is designed to bolster Australia’s military capability with a new fleet of conventionally armed nuclear-powered submarines. Pillar II focuses on developing new technologies in the areas of artificial intelligence and autonomy; quantum technology; hypersonic, undersea, and advanced cyber capabilities; electronic warfare; and innovation.

Many of these arrangements support the goal of stronger economic ties while creating opportunities for business enterprises to grow their markets and build economies of scale by selling in partner nations. Rising defense budgets in both the United States and Australia offer new opportunities, even in a highly competitive international arms market. Australian defense companies have been constrained in their growth by the smaller size of the domestic Australian defense market, which has limited their ability to produce competitively at scale. The local prominence of global defense primes’ subsidiaries has filled some of this gap. The United States’ market presents an opportunity to increase sales, build the scale of production by building systems that both nations use (commonality), and invest in innovation and new product development. Simultaneously, larger U.S. prime contractors might look to increase the market for their products in Australia.

Leaders in both nations have affirmed their goals of enhanced defense industrial cooperation. In the United States, the National Defense Industrial Strategy highlights the goal of “building enduring industrial advantages through a resilient defense ecosystem . . . to include supporting our allies and partners with key capabilities to strengthen integrated deterrence.”

Australia’s Defence Industry Development Strategy focuses on growing the country’s sovereign industrial base and includes engaging with allies and partners as part of the broader strategy. The sovereign industrial base aims to provide sufficient capacity to ensure that Australia is a key stakeholder in a short list of pivotal domains while also enjoying the benefits of being incorporated into a larger web of production. The strategy aims to avoid the trap of trying to autarkically produce all its defense needs locally. As the strategy details:

Co-design, co-development, co-production and co-sustainment of capability will make effective use of combined resources, strengthening collective defence industrial capacity, enhancing interoperability, and accelerating technology development. The goal is to build capable, resilient, competitive, and secure supply chains that include Australian businesses, and create economies of scale for the security and stability of the Indo-Pacific.

Both countries’ visions recognize the importance of a strong industrial base and how working with allies and partners can contribute to this goal. Turning these ideas into action will require time and attention from senior policymakers to translate the strategic vision into tactical-level steps to identify and fund requirements and overcome existing barriers. Necessary actions include facilitating critical technology transfers, allowing for the sharing of classified and sensitive information, and providing opportunities for defense firms to enter each other’s markets.

There have been important recent steps to address some of the policy challenges, such as changes to the International Traffic in Arms Regulations (ITAR) regime, which is designed to limit the proliferation of advanced technology to problematic actors. On September 1, 2024, the AUKUS exemptions to ITAR went into effect, granting Australia and the United Kingdom the same privileged status within the U.S. defense industrial base (DIB) as Canada, after the State Department determined that the export control systems of both countries are “comparable” to those of the United States. The reforms add an expedited licensing process for exporting some defense articles to AUKUS partners and increase the scope of exemptions for transferring defense articles to some dual nationals who have security clearances from Australia and the United Kingdom.

However, there has been less research on the experiences that private enterprises face when trying to do business in the partner nation. If the U.S. and Australian governments truly want to encourage defense industrial cooperation, they should address the full spectrum of challenges and adjust policies accordingly. The research analyzed in this report aims to support this goal by providing a framework to better understand barriers and catalysts to cooperation. This framework builds off existing research by diving deeper into the defense industrial cooperation component of security cooperation, assessing the challenges faced by industry, and providing recommendations to both government and industry.

Methodology and Report Outline

Drawing on research, interviews, and workshops, this paper gives an overview of the goals of the U.S.-Australia alliance, with a focus on strengthening the entire defense industrial ecosystem. The project team reviewed policy documents focused on the strategic goals of the partnership—the “demand” signal for enhanced collaboration—as well as documents describing the breadth and depth of defense industrial ties between Australia and the United States. The research also touched on the laws, policies, and cultural barriers that limit these ties, including the export control regimes of both countries.

Interviews included discussions with government personnel on both sides of the Pacific. The team gathered data from engagements with government representatives at the working and senior levels. These engagements included a conference in Canberra, Australia, with a public keynote by Hugh Jeffrey, deputy secretary of strategy, policy, and industry at Australia’s Department of Defence, and a follow-on conference in Washington, D.C., with a public keynote panel featuring Brian Burton, senior advisor for international and industry engagement with the Office of the U.S. Assistant Secretary of Defense for Industrial Base Policy, and Graham Chynoweth, former director of international policy and global investments with Office of Strategic Capital at the U.S. Department of Defense. The panel discussion in Washington began with opening remarks from Paul Myler, former deputy head of mission at the Embassy of Australia in Washington, D.C. Each conference included private track 1.5 dialogues to establish space for forthright discussion, and the twin conferences allowed both Australian and U.S. stakeholders to have the opportunity to take center stage. Some of the industry executives interviewed for the project had previously worked in government, allowing them to offer perspectives from both viewpoints.

The team also conducted interviews with business leaders from Australian and U.S. companies on their experiences doing business in the partner nation. The interviews were structured around three questions: What are the catalysts for defense industrial cooperation? What are the barriers to this cooperation? What are your recommendations for overcoming these barriers?

The interviewees included representatives from 9 large U.S. defense contractors, 8 of which are doing business with Australia. The team also spoke with representatives from 19 Australian companies. Only one of these had decided not to pursue business with the United States because of perceived challenges. The other 18 are either doing business with the United States or are trying to break into the market. These companies were identified through two means. The Austrade representative in the Australian embassy in Washington offered a list of companies that they worked with on marketing to U.S. and global industry. To avoid any bias by using a sample defined by the Australian government, the study team also worked with a Washington-based consultant who advised Australian companies more generally, including those trying to break into the U.S. market. While the challenges offered by the two groups were not notably different, the second group did include an enterprise that viewed the challenges as too daunting to even explore.

Following this introductory chapter, Chapter 2 gives an overview of the history and strategic vision of the U.S.-Australia alliance. Chapter 3 describes a framework for defense industrial cooperation. Chapter 4 puts the experience of the interviewees into the context of this framework. Chapter 5 looks at catalysts for cooperation and the larger ecosystem challenges. Chapter 6 summarizes the report, offers recommendations, and concludes the work.

Strategic History and Vision

Current Strategic Challenge

While the United States and Australia share a long history of deep cooperation, the contemporary strategic environment is propelling both countries to pursue a significantly expanded and deepening set of initiatives. The rapidly deteriorating strategic environment has been a key driver in strengthening the U.S.-Australia alliance in recent years, with an increasingly assertive China, and its ever-more-aligned partner Russia, standing at the forefront of this challenge. Not only has Beijing undertaken an unprecedented buildup of its military power, it also has increasingly used that power to rewrite the international rules-based order to favor its autocratic view of the world. China’s malign actions in the South China Sea, weaponization of trade, aggressive activities in cyberspace, confrontational posturing toward Taiwan, and tacit support for Russia’s illegal invasion of Ukraine have reinforced the critical role that allies and partners play in countering these destabilizing actions and working together to reinforce the rules-based international order.

However, efforts to counter these threats to security have only grown more complex as cyber capabilities have proliferated, potent technologies such as artificial intelligence (AI) and quantum computing have emerged, and warfare has quickly evolved to include the widespread use of unmanned systems. These new capabilities have enabled China’s and Russia’s increasingly bold activities, whether by exploiting gray zone tactics to meddle with critical infrastructure like undersea cables, employing unprecedented force to bully smaller nations in their own exclusive economic zones (EEZs), or threatening stability across the Taiwan Strait.

The size and scale of these challenges demand collective action. In many respects, deterrence is a numbers game counted in production capability. This is especially true in conflicts that demand large quantities of munitions and platforms. Here, China and Russia have surged ahead, putting their defense industrial bases on a wartime footing. On their own, nations that value a free and open international rules-based system will struggle to match Chinese and Russian production capacity and deter destabilizing activities. This is a fight the United States and its like-minded partners and allies can win—or, better yet, can avoid through deterrence. In this new age of partnerships and alliances, deterrence must become a collective endeavor, and this endeavor demands integration and alignment of defense systems and industries in ways never seen before. There is no place more promising to start than by revamping the U.S.-Australia alliance to ensure that it can both align national strategic visions and also produce the vital defense equipment needed.

History of the Strategic Partnership

The 2023 U.S.-Australia Joint Leaders’ Statement presented an alliance at historic heights—aligned in global outlook and committed to partnering to address the most pressing threats of the twenty-first century. This statement was not a sudden anomaly of foreign policy; the U.S.-Australia relationship has over a century of cooperation upon which a deep-seated foundation of trust has been built. The two countries celebrated the 80th anniversary of diplomatic ties in 2020, but defense relations go back even further, with the United States and Australia having fought side by side in every conflict since World War I. The alliance has defined the relationship almost as long, with 2021 marking the 70th anniversary of the ANZUS treaty.

In more recent times, Australia’s participation in the Gulf War (1990–1991), Iraq War (2003–2011), and War in Afghanistan (2001–2021) has endured and loomed in the minds of politicians and the public alike. During the Gulf War, Australia committed over 1,800 Australian Defence Force (ADF) personnel, three frigates, a destroyer, and two supply ships as part of a wider international coalition under directive of the United Nations. In 2003, Australia contributed a significant military force for the initial invasion of Iraq.

Australia was one of the first nations to join the coalition force for Afghanistan, consisting of the United States, the United Kingdom, and Canada, with forces numbering 1,550 ADF personnel. Prime Minister John Howard invoked Article IV of the ANZUS Treaty in support of Australia’s involvement—the only time the treaty has been invoked. The Australian parliament supported the commitment on September 17, 2001, and Canberra committed forces to Afghanistan in October 2001 after the 9/11 attacks.

Fighting side by side over decades has forged increasingly strong defense and security ties, as exemplified by the establishment of the annual U.S. Marine Rotational Forces to Darwin (MRF-D), increased U.S. Air Force deployments to Australia, and the U.S.-Australia Force Posture Agreement in 2015. The Joint Statement on Defense Cooperation, signed in October 2015, was put in place to further bolster security collaboration, with an eye to a changing strategic environment. And, of course, the 2021 signing of AUKUS demonstrated an unprecedented leap for the alliance.

Evolution of U.S.-Australia Alignment

Enhanced security ties such as MRF-D evolved out of the United States’ initial “pivot” toward Asia, which began in 2011. This pivot was a result of a growing realization within the U.S. government that Asia—subsequently broadened in linguistic and geographic scope to the Indo-Pacific—would be the center of gravity for economic and geopolitical developments over the next several decades. Concurrent with this realization was the understanding of the threat China posed to not just the international rules-based order, but the United States’ position as a global and regional leader.

It is clear that no single country can alone meet the global challenge posed by China. As stated in the most recent U.S. National Security Strategy, “shared challenges that impact people everywhere demand increased global cooperation and nations stepping up to their responsibilities at a moment when this has become more difficult.” The role of allies and partners has taken center stage in U.S. national security thinking, and nowhere is this more apparent than in the Indo-Pacific, where “a free and open Indo-Pacific can only be achieved if we build collective capacity for a new age; common action is now a strategic necessity.”

The past decade has also seen a dramatic shift in Australia’s perception of China as a growing threat, and with this shift has come a converging alignment of U.S. and Australian outlooks.

Australia’s 2016 Defence White Paper recognized that the country’s “strategic planning is not limited to defending [Australia’s] borders,” and that part of Australia’s strategic defense interest was “in a stable Indo-Pacific region and rules-based global order which supports our interests.” However, the report avoids direct reference to China’s role in challenging this rules-based order, instead noting that Australia’s strategic environment faced “uncertainty” due to the evolving U.S.-China relationship. It states that a key “driver” of (not threat to) the strategic environment is the competition between the United States and China but does not single out China’s actions in and of themselves.

The 2016 white paper was the product of an Australia that in many ways framed itself as a passive recipient of its proximate strategic environment. It aimed to protect the homeland and its immediate interests through maintaining relationships and procuring appropriate defense equipment. The white paper deemed the alliance with the United States of primary importance for Australia, but mainly from the perspective of the United States as the global power through which the rules-based order could best be maintained. In fact, the paper even referenced a continuing defense relationship with China: “The Government will seek to deepen and broaden our important defence relationship with China while recognising that our strategic interests may differ in relation to some regional and global security issues.”

Australia’s 2020 Defence Strategic Update represented a marked shift in the framing of the country’s role in the region as one that had both agency and responsibility to proactively shape the regional environment. The update presented three new strategic objectives: to shape Australia’s strategic environment, to deter actions against Australia’s interests, and to respond with credible military force when required. It noted that the “drivers of change” from the 2016 review had “accelerated faster than anticipated,” requiring a relook at defense priorities. The update stated bluntly that the reason it was written was that “the Government has directed Defence to implement a new strategic policy framework that signals Australia’s ability—and willingness—to project military power and deter actions against us.”

This update pointed to “grey-zone activities” and coercive behavior to alter the rules-based order (although not directly attributed to China) as primary threats to Australia’s security, rather than just two of many challenges. It continued to hold up the U.S.-Australia alliance as central to Australian strategic planning, but here Australia’s role was framed as one of a capable partner that must work alongside the United States to “build defence cooperation in the region to meet security challenges,” and “should be most capable of military cooperation with the United States” in the immediate Indo-Pacific region.

The 2023 Defence Strategic Review (DSR) further underscored an evolving strategic perspective in Canberra, laying out the argument that Chinese actions in the South China Sea and Australia’s “near neighborhood” directly threatened Australian security and national interests, and further stating that Australia has the responsibility to directly contribute to the collective security of the region and the maintenance of the international rules-based order. The review recommended a shift in focus from a “defence of Australia” doctrine, which it stated was “no longer fit for purpose,” to one of “National Defence.” Accomplishing this, according to the DSR, would require a whole-of-nation and whole-of-government approach that recognizes the integral role Australia must play in the region. This sentiment is echoed in the 2024 National Defence Strategy (NDS), which emphasizes that “Australia [has] a vital role and interest in maintaining a region where state sovereignty is protected, international law is followed, and all nations can make decisions free from coercion.” The NDS reinforces the centrality of the U.S.-Australia alliance to Australia’s national security and specifically calls out AUKUS for its role within the larger architecture of critical security arrangements.

The Goal of a Stronger U.S.-Australia Defense Industrial Cooperative Ecosystem

Bold initiatives require actualization. Maximizing the potential of the U.S.-Australia alliance requires alignment among relevant policymakers, political leadership, and industry. The 2023 DSR astutely recognized that the “current approach to capability acquisition is not fit for purpose.” The entirety of the review sets out commitments that knit together a system more willing and able than ever before to support greater defense industry integration with the United States and other partners.

Achieving defense integration presents several difficult challenges, including facilitating critical technology transfers, allowing for sharing of classified and sensitive information, and providing opportunities for defense firms to enter each other’s markets. There have been previous efforts to facilitate greater defense industry collaboration and lower the barriers to such collaboration, but these efforts have largely stalled due to the complexity of the task overshadowing the possibility of success. The drivers of action, however, have now changed. The strategic imperative of the day and direction from the highest levels of the U.S. and Australian governments demand renewed effort toward the goal of a truly cooperative ecosystem.

Fortunately, there is already a strong history of alignment upon which to build. Australia’s close strategic relationship with the United States has translated into support in the U.S. Congress and from the president for closer industrial relationships. This was shown in 2017 with the expansion of the U.S. National Technological and Industrial Base (NTIB) to include Australia and the United Kingdom. That unilateral legislative act extended many of the benefits enjoyed in the close U.S.-Canada partnership to two more of the United States’ closest allies (but crucially a partial ITAR exemption like that enjoyed by Canada would only come years later). In theory, NTIB membership means that, for many purposes, U.S. purchases from Australia and the United Kingdom count as domestic. In practice, however, this status often falls short. For example, U.S. acquisition officials and those in industry will often apply “No Foreign” restrictions or other limitations that undercut the meaning of this designation.

All three countries hold a bilateral Reciprocal Defense Procurement Agreement (RDP-A) with the United States, which means that “Buy American” provisions do not apply to U.S. Department of Defense (DOD) purchases from those nations. Along with New Zealand, these countries also enjoy a close intelligence-sharing relationship with the United States through the Five Eyes arrangement.

The arrangement that has received the most attention recently is the AUKUS partnership, announced in 2021. AUKUS, including its two pillars, is designed to counter twenty-first-century threats through enhanced technology partnerships. Pillar I is designed to enhance Australia’s military capability with a new fleet of conventionally armed nuclear-powered submarines. The Pillar II technology partnership focuses on new technologies, including artificial intelligence and autonomy; quantum technologies; hypersonic, undersea, and advanced cyber capabilities; electronic warfare; and innovation.

▲ Figure 2.1: Australian Imports and Exports of Major Arms Systems, 1990–2023. Source: “SIPRI Arms Transfers Database,” Stockholm International Peace Research Institute, May 2024; and CSIS analysis.

Throughout its modern history, Australia has primarily been an arms importer, albeit one whose largest projects tend to have an aspect of local production. The United States has been its largest supplier, as seen in Figure 2.1, with the United Kingdom being the second-largest supplier since the 1950s, though that flow has weakened in the post–Cold War period. Australia’s largest purchases from the United States have been in the aviation sector, including fighter aircraft—the F-35A and F-18A—as well as the E-7A Wedgetail airborne early warning and control aircraft and the P-8A maritime patrol aircraft. Australia has exported to the United States, most prominently the expeditionary fast transport (EPF), which had a major role for Australian domestic production. The United Kingdom and France have provided aircraft to Australia as well, predominantly the Hawk-100 trainer and the A-330 MRTT tanker and transport, respectively. Spain’s and Germany’s biggest transfers have been ships, Hobart destroyers and MEKO-200ANZ frigates, respectively.

Bilateral cooperation between Australia and the United States has been strong and enduring. It has also been influenced by the relative size of the two nations’ economies and defense budgets. The United States has built up a world-leading industrial base, supported both by national acquisition programs and strong exports to allies and partners. U.S. firms have set up subsidiaries in many allied nations, selling advanced technologies to those governments. Thus, the present push toward greater Australian cooperation with the United States builds on an Australian defense industrial base that is already highly internationalized, with local representation from the United States and other nations.

▲ Figure 2.2: U.S. Arms Trade with Australia, Canada, and the United Kingdom, 1990–2023. Source: “DataWeb,” U.S. International Trade Commission, May 18, 2024; and CSIS analysis.

There has been ownership turnover of several Australian firms in recent decades. Government-owned prime Australian Defense Industries (ADI) was first sold to a mix of international owners in 1999. In 2006, ADI, the largest Australian defense firm, was granted permission to become a fully owned subsidiary of Thales. In that same year, the third-, fourth-, and fifth-largest Australian firms were BAE Systems Australia, Raytheon Australia, and Boeing Australia, respectively, all of which are international subsidiaries. The second-largest Australian prime in 2006, Tenix Defence, similarly became a subsidiary of BAE Systems in January 2008.

Trade data is a useful supplement to the major weapon systems tracked by the Stockholm International Peace Research Institute (SIPRI) because trade data can capture the back-and-forth flow of components as well as completed systems. The bilateral trade data for Australia, Canada, and the United Kingdom, as seen in Figure 2.2, reveals that the underlying U.S.-Australia trade relationship remains rather one sided and lacks the full extent of industrial integration that exists with the other large U.S. NTIB partners. Geography is one factor here, as the United States and Canada share a major land border and have been integrating their defense industrial bases for decades, including the United States’ first partial exemption to arms control regulations. The Australia-to-U.S. export relationship has been growing, and for the reasons discussed above, trade flows in both directions are likely to further deepen.

▲ Figure 2.3: U.S. DOD Prime Contracts with Australia, Canada, and the United Kingdom. Source: Federal Procurement Data System (FPDS) and CSIS analysis.

Given the size of the U.S. defense enterprise, prime contracts by the DOD provide another illuminating angle on U.S.-Australia cooperation, with U.S. relationships with Canada and the United Kingdom adding further context. Figures 2.3, 5.4, and 5.5 have an NTIB-4 or Australia-specific aspect, indicating an international (non-U.S.) origin, international vendor headquarters or nationality, or place of performance outside of the United States. In a striking contrast to Figure 2.2, the magnitude of acquisition is roughly comparable in this time period to that between Canada and Australia. When looking at the structure of prime contractors, Australia resembles the United Kingdom, with the bulk of its market share being taken by U.S. subsidiaries of international firms; in Australia’s case, this is largely due to work by the U.S. subsidiary of Australian shipbuilder Austal on the aforementioned EPF.

The Way Forward

Along with formal treaties and the variety of strategic frameworks supporting a strong relationship between Australia and the United States, both nations have recently published strategies focusing on strengthening their defense industrial bases.

In early 2024, the U.S. Office of Industrial Base Policy within the DOD’s Office of the Under Secretary of Defense for Acquisition and Sustainment put forth a National Defense Industrial Strategy (NDIS) designed to “catalyze generational change from the existing defense industrial base to a more robust, resilient, and dynamic modernized defense industrial ecosystem.” The strategy has four strategic priorities: resilient supply chains, workforce readiness, flexible acquisition, and economic deterrence. Economic deterrence specifically recognizes the role of working with allies and partners to strengthen capabilities and deter adversaries. The strategy’s June 2024 implementation report highlighted that Australia has been designated as a domestic source for U.S. Defense Production Act funds in the FY 2024 National Defense Authorization Act.

The DOD also published a new Regional Sustainment Framework in 2024 that recognizes the important role of partner nations in conducting maintenance, repair, and overhaul (MRO) on U.S. systems, especially if there is a conflict. Australia’s location in the Pacific will help reduce the transportation of systems from the Pacific area of responsibility (AOR) that need repair, especially useful given concerns about increasingly contested logistics.

In 2024, Australia released a Defence Industry Development Strategy (DIDS) that also highlights international industrial partnerships, described as:

Close industrial collaboration with trusted international partners [that] will help build the strategic weight Australia needs to shape the future, making the nation less vulnerable to coercion and helping to deter conflict by increasing the cost of aggression against Australia and its interests.

Co-design, co-development, co-production and co-sustainment of capability will make effective use of combined resources, strengthening collective defence industrial capacity, enhancing interoperability, and accelerating technology development. The goal is to build capable, resilient, competitive, and secure supply chains that include Australian businesses, and create economies of scale for the security and stability of the Indo-Pacific

This alignment in strategies offers a promising foundation for further defense industrial cooperation as part of a larger framework. The next chapter offers a more detailed discussion of defense industrial cooperation.

Defense Cooperation and Defense Industrial Cooperation

Understanding Defense Cooperation

A variety of public statements and formal policies affirm the strength and endurance of the defense relationship between Australia and the United States. This relationship fits into a broader frame of U.S. defense cooperation, which the DOD defines as:

a generic term for the range of activity undertaken by DoD with its allies and other friendly nations to promote international security. Such activity includes, but need not be confined to, security assistance, industrial cooperation, armaments cooperation, Foreign Military Sales (FMS), training, logistics cooperation, cooperative research and development (R&D), Foreign Comparative Testing (FCT), and Host-Nation Support (HNS).

One highlighted approach is industrial cooperation, which can take a variety of forms. McGinn’s 2023 study highlights five pathways for a “Build Allied” approach to defense industrial cooperation:

1. an increase in the number of U.S. subsidiaries of foreign defense companies,

2. co-development of systems or subsystems across two or more countries,

3. co-production of defense systems across two or more countries,

4. second-sourcing or licensed production to qualify multiple producers for the same part or system, and

5. foreign sustainment (maintenance, repair, or overhaul) of existing systems.

While policy statements highlight the role of government, the specific pathways above require the participation of industry at the tactical level to execute the strategic vision. (Specific catalysts and barriers to industrial participation are the subject of this research and are covered in more detail later in the report.)

The literature highlights numerous benefits that drive governments and industry to pursue defense industrial cooperation. Big picture benefits include strengthened ties between nations and national militaries through the enhanced interoperability and interchangeability that common systems may yield. From an economic perspective, defense industrial cooperation brings a range of advantages that mirror benefits of non-defense trade. Supply chains that cross national lines mean that complex modern systems can access a wider range of ideas, technologies, parts, and raw materials. Technological alliances between private firms, which provide access to information from partners, bolster these firms’ performance in innovating within high-tech industries such as aerospace and defense. Systems can be produced with greater economies of scale, moving down learning curves to lower unit prices and reducing fixed costs such as research and development (R&D), facilities, and advanced machinery as a proportion of production costs. Scholars have long noted that firms, and indeed nations, can specialize and take advantage of comparative advantage. Even if the United States were the leading allied producer across all categories of systems, allied capacity would be increased at the margins by firms and countries focusing on their relative strengths rather than seeking to do it all.

The specific economics of the defense sector also make international defense cooperation attractive to governments interested in lowering costs, fostering innovation, and building production capacity. The barriers to entry into the secretive and complicated sector of weapon system production are high, making competition—which can lower unit costs to the government and foster innovation—difficult to foster. This is particularly true if a nation’s addressable defense market is small. Integration across national lines brings the possibility of new competition, often provided by domestic subsidiaries of international firms or through joint international ventures. Integration may also help solve challenges in the industrial base (e.g., labor shortages) if nations are able to engage those capacities in other nations.

Despite the benefits of industrial cooperation, which are based on well-established and demonstrated economic principles, there are a variety of concerns. The cooperative production or transfer of weapons brings with it humanitarian, destabilization, and other foreign policy concerns. Nations cooperating on defense manufacturing can be reluctant to embrace production specialization, as it can cause the loss of a full range of domestic military supply. That loss of supply brings sovereignty concerns and may make it harder to address the needs of individual militaries because partner nations may have imperfectly shared national military objectives. Insufficient controls on the spread of technical information by partner government or industry actors can diminish a nation’s advantage in military technologies. Finally, even when fighting wars together, nations may be tempted to put their own military requirements at the front of the line ahead of equipment ordered by allies.

Further, the politics of justifying military or civil acquisition spending often intersects with job benefits in the producing countries. Cooperation may raise concerns about exporting jobs, which will affect the calculus of elected leaders. Research shows that it is possible for the economic benefits of cooperation to overcome political opposition and even generate new vested business interests and defense communities of trust to accelerate further cooperation. However, that requires a long-term political and strategic view.

Another major challenge to defense industrial cooperation is managing the inherent complexity of working across multiple industrial and acquisition systems. Research has highlighted management complexity as a compounding program risk factor on top of technical complexity—the difficulty of producing systems due to their technological needs—given that the scale and expense of major weapons systems frequently exceeds the capacity of individual firms and nation-states. One response to both management and technical complexity is adopting a minimalist approach to international cooperation which avoids cooperation on large or critical systems, favors co-production or modification over co-development of systems, and prioritizes maintenance and sustainment cooperation above R&D and procurement cooperation. These challenges—humanitarian concerns, proliferation, trust, politics, and management and technical complexity—are all long recognized and addressed by a mix of laws, regulations, and policy approaches, but these approaches in turn can become barriers to production.

Categorizing Catalysts for and Barriers to Defense Industrial Cooperation

Defense industrial cooperation across national borders requires catalysts—reasons for action—as well as deliberate efforts to overcome barriers. The challenges described above tend to be more abstract than the experiences of government and industry personnel who are working to make cooperation happen.

One approach to specify barriers is offered by Jennifer D. P. Moroney et al. in a 2023 report on U.S. security cooperation, which provides a typology of barriers that impede U.S. security cooperation with highly capable allies and partners in the air, space, and cyber domains. The authors examine defense industrial cooperation as part of the broader framework and note that it is subject to numerous barriers. The author’s research and framework focus on security cooperation, which is led by government actors. Adding information derived from CSIS interviews with industry conducted as part of this research, this report expands the framework to include a broader range of issues which government policies may help resolve.

Table 3.1 includes an overview of barriers and is an extension of the framework offered in the work of Moroney et al. The figure includes the addition of the economic barriers experienced by industry, as derived from the literature and informed by this project’s interviews.

▲ Table 3.1: Barriers to Security Cooperation. Source: CSIS modification of Jennifer D. P. Moroney et al., Overcoming Barriers to Working with Highly Capable Allies and Partners in the Air, Space, and Cyber Domains: An Exploratory Analysis (Santa Monica, CA: RAND Corporation, July 2023).

CSIS expanded Moroney’s framework by including an “economic” barrier category with three representative examples. The first is an insufficient business case to incentivize industry to conduct international cooperation activities. The second identifies the costs—both financial and the opportunity cost of personnel time—associated with learning a new acquisition system in the partner country or the cost of acquiring or establishing a subsidiary company and offices in the partner nation. The third is the potential misalignment of corporate strategies between defense firms which prioritize different end markets and products, thereby hampering their ability to effectively cooperate with each other.

Pathways for U.S.-Australia Defense Industrial Connections

Industrial cooperation requires the support of governments to set the vision, define the policies, and provide the funding. Most defense industrial cooperation requires the participation of industry, which employs the wide range of skills required to develop and produce systems, run the factories, and manage the supply chains. Industrial organizations may appreciate that defense cooperation supports the foundation of a peaceful and stable society, but they are also profit-seeking organizations looking for customers.

Identifying recommendations to overcome barriers to industrial cooperation must start with an overview of how that cooperation happens. Interviews with Australian and U.S. government officials and industry leaders revealed a complex system of integration across the two nations’ defense ecosystems. These included industry in one nation selling systems to the other government, a company supplying components to government or industry, or firms developing programs and technologies together in various forms of partnership. This web of corporate relationships is further complicated by the fact that industries may establish subsidiaries within the partner nation and that companies may sell to the partner government via both their main business units and their partner-nation subsidiaries.

Industry-to-government relationships can include Direct Commercial Sales (DCS) from U.S.-based primes to the Australian government. Sales from Australian firms to the DOD employ a variety of pathways, from direct contracts, routing contracts through their U.S.-based subsidiaries, selling subsystems or components to U.S. primes, or even selling to the Australian subsidiaries of U.S. primes for later resale. Government-to-government relations add another layer, revolving around Foreign Military Sales (FMS) agreements and co-development and co-production efforts. Table 3.2 summarizes these from a market (buyer/seller) construct.

▲ Table 3.2: Types of Industrial Connection. Source: CSIS analysis.

Australian firms reported four primary pathways to sell to the DOD:

• Contracts via a U.S. subsidiary that they have established

• Direct contracts from their Australian entity

• Selling systems or components to a U.S. prime that then resells or passes them through to the DOD

• Selling systems or components to the Australian subsidiaries of global defense primes, which then sell products with Australian content to the DOD

Adding complexity to these four main pathways are two further interlinkages between them: U.S. subsidiaries of Australian firms could sell products to U.S. primes that then were resold to the U.S. government, or Australian products sold to U.S. primes could be transferred to that prime’s Australian entity for integration into a system before being sold to the DOD.

Conversely, there are several pathways of connection whereby U.S. firms interface with the Australian Department of Defence (ADOD):

• U.S. arms sold to Australia, with the U.S. government facilitating via the FMS process

• U.S. prime contractors selling systems to Australia via DCS

• Australian subsidiaries of U.S. defense primes selling products to the ADOD

  • some developed independently in Australia with Australian suppliers

  • some all or partially based on content from the United States

• Australian firms selling systems to the ADOD that include U.S. content in the supply chain or place of performance content from their U.S. subsidiaries

Co-development and co-production efforts are additional, government-enabled frameworks for cooperation which can occur between firms with varying degrees of government intermediation.

Note that the two lists are not the same, which can be explained in large part by the fact that the DOD has a significantly larger budget than the ADOD, which has led to a larger and more capable U.S. defense industry.

▲ Figure 3.1: Pathways to Connection. Source: CSIS analysis.

Understanding the pathways is a critical step toward enhanced and increased cooperation. The next step is identifying and assessing the existing barriers. CSIS interviews with Australian firms and DOD officials indicated that direct sales to partner governments are difficult due to complexities in information sharing and U.S. acquisition processes. Interviewees revealed that easier pathways to defense industry cooperation were via their own U.S. subsidiaries, U.S. defense primes, or the Australian subsidiaries of U.S. defense primes, even if these routes were less direct. In Figure 3.1, the pathways of cooperation are portrayed to clarify the various interactions in the cross-Pacific defense industry ecosystem. Chapter 4 will discuss barriers encountered on each pathway, and Chapter 5 includes a version of Figure 3.1: Pathways to Connection with the lines colored by reported difficulty.

The Industry Perspective

Barriers to Cooperation

The policy benefits of defense industrial cooperation between Australia and the United States are well understood and have led to the many cooperation agreements, mentioned in previous chapters. Despite those agreements, however, the interviews conducted for this project revealed numerous tactical-level barriers to cooperation, with roots both in the government and within industry itself. This chapter summarizes this project’s research on those challenges, with a deliberate focus on the industry experience of business enterprises that work in Australia and the United States. This chapter is organized using the framework discussed in Chapter 3 and captures data from the interviews in each of the framework categories.

Throughout the data analysis, it became clear that the categories are not independent. Regulatory barriers on export controls create cultural barriers of risk avoidance. The budgetary challenges of limited government funding diminish the business case for investing in cooperation. Many of these challenges could be placed in more than one category and, therefore, will be highlighted where they are particularly pertinent. This supports the finding that the challenge of cooperation is a broader ecosystem issue, one that requires simultaneous changes across multiple levels instead of narrow policies focused on one challenge. This chapter will lay out the tactical challenges presented by individual barriers to cooperation, and Chapter 5 will discuss an ecosystem approach to these barriers.

▲ Table 4.1: Barrier Types. Source: CSIS modification of Moroney et al., Overcoming Barriers.

Budgetary: Getting the Money, from Budgets to Contracts

Business organizations must continually consider their financial picture, and interviewees frequently mentioned budget concerns when working with both the United States and Australia. These concerns related both to budgets on the national level (making this a political issue as well) along with the timely and long-term funding of projects (overlapping with bureaucratic acquisition concerns).

For Australia, businesses’ budgetary concerns centered on how government funding levels impacted the extent of what the government of Australia was able to invest in. For example, one U.S. company speculated that a large project was terminated because the Australian government wanted to put those resources toward AUKUS Pillar I nuclear-powered submarines instead. Another issue raised was a lack of consistent funding across governments, without which industry is less able to access the resources necessary to invest in production to scale and sustain production over time. One interviewee summarized this as “lots of promises are being made and not a lot of money is flowing.” This impacts both Australian and U.S. companies working to do business in Australia.

For the most part, the U.S. government does not face the same overall funding issues. Funding stability is mostly ensured once new requirements become programs of record, with the caveat that frequent continual resolutions limit new program starts. However, the delays caused by the budget process are seen as a barrier by both Australian and U.S. industry when doing business with the U.S. government, indicating that some of the challenges identified by industry when considering international cooperation projects are in fact generic challenges endemic to working in the defense industrial base.

It can also be difficult for companies to get longer-term, multiyear funding. More complex projects benefit from firm commitments for funding across multiple years. Companies may be eager to work together across national lines, but as the U.S. subsidiary of an Australian firm noted, “both governments struggle to give long-term contracts” which would enable this cooperation. Ramping up a supply chain and the workforce requires a multiyear commitment to be economically worthwhile, but those longer-term commitments are difficult to extract and run into political barriers within both nations.

There are solutions to all these issues, but they are challenging to enact. The Australia budget challenge could be addressed by the government consistently funding defense over time, but this is a policy that will depend on national government decisions. Another approach for the Australian government is to deliberately help Australian industry strengthen its export market to ensure a more consistent customer base over time. In fact, this is the approach being taken in the Guided Weapons Explosive Ammunition (GWEO) enterprise, which is focused on munitions production. An export-focused approach could build upon Australia’s 2018 Defence Export Strategy, which advocated for Australia to become a top 10 defense exporter.

Another challenge links budgeting and contracting processes. For small businesses, delays in finalizing a contract, which can relate to the government’s availability of funds, can mean that they do not have the resources to pay their employees and, moreover, will otherwise interfere with the longer-term viability of the enterprise itself. Small enterprises frequently noted that “the government does not understand cash flow.” Payment delays are disruptive to any business, but small and medium-sized enterprises (SMEs) may be particularly vulnerable. Furthermore, Australian firms often complain that banks and venture capital groups in Australia lack sufficient capital supply because of reliance on foreign sources, exacerbating critical balance-of-payment issues for Australian SMEs.

Finally, one DOD interviewee suggested that the United States has more funding streams available than Australia does to bring projects from early-stage science and technology into more advanced stages of development, using vehicles such as the Defense Innovation Unit or the Defense Advanced Research Projects Agency (DARPA). The individual recommended creating a dedicated pot of funds in Australia for investing in these early-stage efforts.

Other discussions raised the specifics of getting paid. One Australian company highlighted that a U.S. defense innovation organization’s default payment method was via check, and that it cost more to get them to wire funds. Another complained that the aforementioned organization did not know what a SWIFT key was, delaying payment by eight months. This was reported to create months-long delays before the DOD could find the correct form to process the payments.

The challenge of industry being able to access stable funding with enough certainty to grow production to scale and scope is by no means unique to the international cooperation context, and it represents a challenge for business enterprises doing business for their own national governments as well as for those of partner nations. While strengthening relations with partner nations via defense industrial ties is not the main goal of any nation’s budget process, the negative impacts on partners of budget perturbations are real and should be a consideration in deciding if industrial cooperation with allies is a true priority.

Bureaucratic: Navigating Complex Acquisition Systems

The U.S. defense acquisition system can be difficult to navigate, even for U.S. firms. This difficulty is magnified for small Australian firms and amplified by the lack of personal connections with decisionmakers, societal and cultural differences, and the tyranny of distance and tight travel budgets. Australian firms report finding it hard to understand who U.S. decisionmakers are and how to connect with them, a challenge also shared by small U.S. businesses. Interviews with Australian industry often noted that “if Australian companies don’t understand the U.S. procurement system, they can’t sell.” Many of these Australian firms added that hiring U.S. advisers as guides to understanding the system is expensive, which serves as a deterrent for trying to make the jump into the U.S. defense ecosystem.

U.S. government organizations need a contract vehicle as a pathway to get funds to performers. Many Australian SMEs reported that U.S. contracting vehicles are difficult for them to use, requiring them to go through larger U.S. companies as resellers, which reduces the SMEs’ profit margins and, therefore, their incentive to cooperate across the Pacific. The issue of the reseller dynamic arose several times as a complicating factor in Australian firms closing deals. An Australian firm going through a U.S.-based reseller is going to have longer lead times for contracts and may miss out on business opportunities due to speed (or lack thereof ) rather than capability—an issue complicated and magnified by the already long lead times for export control licenses and security clearance processes. Another complicating factor is the U.S. acquisition workforce’s unfamiliarity with acquisition processes for foreign firms, which leads some DOD acquisition staff to encourage Australian firms to work with resellers. This well-meaning advice may be given without fully considering the impact it could have on the speed of the Australian firm’s subsequent contract and therefore the firm’s business case for working with the DOD.

Australia does have a dedicated agency called Austrade whose mission includes helping Australian exporting companies grow their business. Austrade has representatives stationed in the United States, and according to this project’s interviewees, the agency has provided useful guidance in navigating U.S. processes and providing information about tenders. One company noted that “We would not have been able to do what we did without Austrade.” Another offered, “Austrade has been incredibly helpful—[they help companies] plug into shows and be part of delegations and make it easier to go to [conferences] like SeaAirSpace.” On the other hand, other companies noted that Austrade has provided briefings on a less detailed (and therefore less useful) level and has not helped them navigate the U.S. market, largely due to Austrade lacking the necessary contacts with customers. Smaller businesses interested in exporting did not always know how to access Austrade’s tools. Policymakers should consider providing additional support for the agency so that it could more effectively reach out to new defense companies interested in exporting. A throughline in Australian interviews was the necessity of education both for industry and the government in terms of the opportunities for partnership and the specific bureaucratic challenges that need to be overcome.

Cultural: Two Nations Divided by a Common Language and an Ocean

Cultural barriers were among the most common types of impediments mentioned by the interviewees and spanned across most of the pathways of connection in the defense industrial relationship. One challenge centers on the differences between corporate culture in Australia and the United States regarding considerations like self-promotion and seeking legal advice from counsel. According to both Australian and U.S. interviewees, Australian firms tend to be much less self-promoting when discussing their products with U.S. officials or businesspeople than Americans are used to, leading to occasional moments of mismatched expectations and underappreciated offerings from Australia. One interviewee noted that “Australians are not pushy. . . . They don’t puff themselves up.” Furthermore, Australian firms are much less likely than their U.S. counterparts to seek legal recourse or the advice of counsel when encountering regulatory difficulties in U.S. acquisition efforts or business-to-business (B2B) engagements, such as with export controls restrictions. This can hamper the ability of Australian firms to get contracts compared to U.S. entities.

“Cultural differences get overlooked between the U.S. and Australia. . . . We like to believe that they are very similar, but the cultures are very dissimilar. The similarities outweigh the dissimilarities, but they are very different cultures.”

— U.S. firm

Another cultural barrier identified by interviewees relates to bureaucratic and regulatory issues. Both nations prefer local suppliers, which affects the relationship on both sides of the Pacific and limits cooperation. Even as the countries align closer on defense cooperation, and senior officials make statements and policies about the essential nature of AUKUS and U.S.-Australia cooperation, interviewees noted persistent parochial favoritism from mid-level officials in acquisition and business decisionmaking processes. This was pervasive in the United States, including with the DOD acquisition workforce and when partnering with U.S. companies. One Australian company noted, “Americans like things made in America, a culture which flows through to procurement people from corporate leadership.” Government and industry preference for local suppliers is a known factor across global procurement, with the literature highlighting an even greater local preference by government than industry actors.

Risk aversion is a persistent cultural challenge across the defense cooperation space, one often linked to other barriers, including regulatory ones. Australian interviewees noted that U.S. government officials are hesitant to green-light cooperation with Australia, even if they have the authority to do so. Working-level officials are perceived as adhering to the status quo, even as senior leaders advance new visions of cooperation. This is mirrored in industry, where companies are sometimes overly cautious despite encouragement from government officials with regulatory authority. This occurs even when considering sharing information already publicly available on corporate websites. One Australian company offered an example where a U.S. government agency approved the use of their products, but then lawyers at the prime contractor directed an additional review out of an excess of caution.

One interviewee highlighted risk aversion as a serious problem when thinking about the competitive global landscape, which links cultural factors to political ones:

If China is our pacing threat, [we should] find things we can go jointly after. Not in the 50 people in a room, hierarchical setup, 18 months to deliver first article, another 18 for testing. Time is our enemy; we’re squandering opportunity. Only so long we can say PRC won’t catch up with us; they have smart people too. Creativity and adaptability only go so far. $50 million and fail on the prototype, that’s acceptable. Accept some amount of failure. There’s chatter on working an innovative way, but hard if afraid of failure/losing job. [Requires] more of a culture shift.

An increased recognition of the strategic challenge may help the U.S. government embrace a global supply chain. Policies like the National Defense Industrial Strategy highlight the importance of allies and partners as part of an economic deterrence strategy. Consistent messaging across administrations in both nations (which demands strong leadership support) is required to evolve government and industry cultures over time—though this alone may not be sufficient.

Political: Moving from Policy Announcements to Tactical Support

Industry in both nations observed that even with the necessary political support, translating policymaker intent into action has proven difficult. One interviewee observed that all politicians “love announceables” but that moving from the policy level into tactical execution was more of a problem. In spite of pronouncements, there was some cynicism as to whether national governments were truly behind cooperation. In general, businesses did not always see the next steps necessary to move the vision into action even though they thought the governments believed what they were saying.

One U.S. prime interviewee argued that the most likely business successes came from U.S. companies selling systems to Australia but getting beyond that was difficult, observing that the goals of highly publicized agreements like “AUKUS . . . [don’t] trickle down to the small companies.”

“The ambiguity around how these high-level strategic agreements translate into business opportunities is harmful to the Australian business community because they are making assumptions on how to export and if they lose money they may exit the business.”

— Australian firm

Several Australian interviewees expressed frustration with inconsistent signals from the United States, where government policies seemed to support cooperation but failed to result in business opportunities for Australian companies. One employee stated that “If the U.S. is just saying no to Australian products, that’s fine. . . . The problem is unclear messaging. [When] he talks to other defense companies . . . they all don’t have clarity.” The offered solution was that the ADOD “needs to be more direct about the need for the United States to understand and support Australia business,” which would depend on the DOD listening to and valuing this message from the ADOD over its other priorities.

There are government efforts in support of industrial cooperation, such as Australia’s investment in the Global Supply Chain (GSC) Program and Austrade (covered above). The GSC Program is an export initiative aiming to give Australian companies better opportunities to enter the supply chains of global defense primes by providing funding to “establish a team within their company dedicated to identifying export opportunities leading to contract award for Australian suppliers in both Civil and Defence businesses of the Prime.” Not every interviewee at the U.S. primes mentioned the GSC Program, but at least one found it to be a very useful support for bringing Australian firms into their supply chain. That said, in the interviews, many Australian SMEs expressed distrust of the commitment of the major U.S. primes—or their Australian subsidiaries—to incorporating Australian companies into their supply chains. The SMEs were concerned that U.S. primes use Australian SMEs as “window dressing” for their Australian government bids to comply with local preference regulations, only to squeeze the Australian SMEs out of these contracts later. One colorful Australian interviewee, describing the defense system in Australia, said that the “organ grinder is the [U.S.] primes, and the monkey varies between the government and the Australian industry.”

One U.S.-based Australian interviewee was a former employee at a U.S. prime contractor and had also spent time working in the U.S. government. They suggested that that while the United States says it wants cooperation, what it really wants is “U.S. companies to split off units and do business for Australia. We are much less interested in building up native Australia companies—don’t want them to be too competitive.” Nevertheless, other U.S. defense prime figures repeatedly stressed their commitment to the GSC Program and noted the successes they had seen under it. U.S. industry individuals did note that the GSC Program was more effective when the Australian government had previously provided funding for Australian SMEs to qualify as subcontractors under the program, an initiative that could be revitalized.

Regulatory: Policy Underpins Many Cooperation Challenges

Government regulatory policy, including national export control regimes, shapes and limits defense industrial cooperation. Export controls have multiple goals, including limiting the export of sensitive military technologies that could find their way into the hands of adversaries. The challenge that export controls create is extensively highlighted in the literature on cooperation, but changes are being instituted to support AUKUS. In the U.S. system, there are at least 37 departments, agencies, and commissions with export control authority, including the Departments of State, Commerce, and the Treasury. The State Department handles International Traffic in Arms Regulations (ITAR) compliance and the U.S. Munitions List for traditional military capabilities, and the Commerce Department enforces the Export Administration Regulations (EAR) and the Commerce Control List for dual-use technology. The Defence Export Controls (DEC), part of ADOD, oversees military and dual-use export controls through the Defence Trade Controls Act 2012, Defence Trade Controls Regulations 2013, and the Defence and Strategic Goods List. In March 2024, Australia changed legislation to place controls on the re-export of articles originally from Australia, information sharing on controlled technology areas to certain foreign persons in Australia, and various defense services, which went into effect on September 1, 2024. Following changes approved to Australian export controls, the U.S. State Department amended ITAR to provide licensing exemptions for Australia in technology areas not included on the Excluded Technology List, which also went into effect on September 1, 2024. The U.S. Commerce Department implemented EAR changes as well, proposed and in effect by April 2024, enabling Australia to be treated in the same manner as Canada.

The U.S. State Department’s goal for export controls is to “mitigate diversion and proliferation risks, which both bolsters U.S. national security and contributes to regional and international security and stability.” Interviewees universally understood and supported the goals for ITAR and other methods of information and export control regulation, but they highlighted that these regulations also create delays and other challenges for industrial cooperation. One U.S. prime specifically noted that the pace of the regulatory review did not match the pace of the acquisition cycle. Australian export controls are simpler, but export controls from each country are not the only regulatory barrier.

For Australian companies, fear of U.S. export control penalties can affect their business dealings with the United States. One U.S. company stated that “if they violate ITAR . . . [Australian firms] are worried about getting put out of business by a foreign regulator.” Smaller vendors fear that they will be put out of business if they receive a penalty for violating ITAR. On the other hand, one larger Australian firm noted that the concern is often misplaced: “People think ‘I am at the risk of going to jail,’ but if they follow the process then that’s just not going to happen.” The small scale of many Australian firms amplifies the stifling effects of information security regulations, as their compliance teams and their financial margins for error are much smaller.

Protracted wait times can also be barriers to business. A U.S. prime interviewee indicated that if they wanted to work with an Australian SME, they could face production delays of up to 90 days while waiting for a license. They noted that “oftentimes those opportunities come and go within 90 days.” There can also be holdups if a firm changes suppliers, and delays can be detrimental to smaller companies. One U.S. firm argued that “Regulation shouldn’t be easier [to navigate] for those with resources.” Australian regulators have their own resource limitations and likely will need additional resources and funding following the enactment of new export controls to successfully implement these changes.

Information sharing is another barrier for foreign suppliers interacting with U.S. primes, as foreign suppliers can face hurdles that in-country business dealings will never encounter. From the very start, conversations between a U.S. company and a foreign partner on sensitive topics can require ITAR approval—and the line between the two can be unclear, causing delays while this is determined. If the Department of State issues approvals only for a portion of the conversations needed, that is insufficient for building international cooperation. While some State Department personnel interviewed noted their progress in approving thousands of these approvals, a U.S. industry figure argued that the department needs “to approve millions to cover all the potential conversations—or else to change policy.” The September 1, 2024, ITAR reforms between the United States and Australia may be able to abate this problem once companies become part of the “authorized user list,” although there is still a range of excluded technologies which remain a concern.

The U.S. export and information control apparatus has led participants in the U.S. defense sector to proceed with caution when dealing with foreign actors, even if allies. For the United States, “they’re built to never engage with a foreigner.” While export control reforms have taken place in both Australia and the United States, there will likely be questions over who can operate license-free. Moreover, if businesses expect to need licenses and face delays, they could avoid certain suppliers or partners. Stakeholders need to allow time for industry to understand these changes and feel safe operating under the greater flexibility of a new export control policy. The regulatory barrier posed by export controls is therefore intertwined with the cultural barriers of risk aversion and resistance to change within the U.S. acquisition workforce and compliance departments in U.S. defense primes.

“ITAR/export controls focus on a thing or a defense article. Even if all of these are removed [after reforms], we need to accept that it will take time for folks to understand what it means and to execute it. The real barrier, when that’s gone, there will be a hesitation/blockage of the systems. It will be ok if it takes 3 to 6 months. But if it takes years…”

— U.S. firm

Another regulatory barrier relates to limitations on sharing information, including classification and controlled unclassified information (CUI). Classification of information is meant to prevent damage to national security by controlling information release. The challenge this presents is not always visible to Australian companies, but their employees with military experience sometimes remarked that it is much easier to share information between the partner militaries than it is to access classified information on the industry side. This creates challenges for partnering on some national security projects and also sometimes limits Australian access to marketing opportunities in cases where tenders are classified. Even though it notionally presents less of a danger to national security, CUI was described as sometimes more difficult to handle than classified information because, while there are carefully established channels for classified information, the way to properly handle CUI is not as clear-cut. Interviewees also raised concerns about NOFORN markings prohibiting access to non-U.S. persons, which creates similar difficulties for access and also lacks a clear-cut and expeditious process for removal. One industry representative suggested that to enhance cooperation “YESFORN is the objective, NOFORN is the barrier.” Interviewees suspected that NOFORN labels are sometimes simply the default habit of an overly cautious acquisition and industrial workforce, rather than reflective of the contents.

Strategic: The Need for a Common View of the Challenge

The U.S. and Australian governments are closely aligned on their strategic outlooks, with both seeing China as the main strategic concern. However, one area where the United States and Australia have been reported not to see eye-to-eye on strategic issues is the ability of Australia to acquire certain U.S. systems. Interviewees noted that Australia often wants to purchase advanced U.S. technology that is still in the early R&D phase using the Foreign Military Sales (FMS) approach. The U.S. government, however, does not like to sell equipment that is still in early-stage R&D because, as one U.S. government official noted, “we don’t sell systems that won’t meet the requirements. . . . This is the problem with FMS, which is transactional, not meant to be flexible and have vision and work with different strategies and designs.” U.S. caution on FMS sales processes has occasionally clashed with Australian eagerness to acquire cutting-edge U.S. tech, a downstream problem from slight misalignments on strategy and timing of acquisitions.

Technical: Aligning Engineering Details

An ongoing challenge to cooperation is the existence of different technical standards and varying technical standards regimes. These differences may be physical incompatibilities, or there may be regulations that impose specific policies depending on the source. Differing standards can impede the ability of companies to work together and limit their ability to sell to partner governments or participate in partner supply chains. This issue was raised in several of the interviews as one of the tactical challenges that the interviewees did not see being addressed in policy statements: “People want to get technology as fast as possible, [but] a company will have to produce a completely different variant for different [customers].” This challenge demonstrates that strategic vision in support of partnership cannot drive industrial cooperation without the identification and solving of specific challenges.

One of the examples raised during the interviews is the fact that the two nations have different regimes for the non-destructive testing of defense articles. Australia has the National Australian Testing Authority (NATA), but this authority is not recognized by the United States. Meanwhile, the United States has the National Aerospace and Defense Contractors Accreditation Program (Nadcap), an industry-led cooperative accreditation program for aerospace and defense industries. These two programs have different training of test operators and different standards for test success. Companies can put their articles through the other nation’s test regimes, but this duplication of testing adds time and additional costs. One interviewee argued that standards could be assessed to see if they are close to those of the other nation; if they were, companies could then be permitted to test in only one nation while being certified in both.

“Standards is a small thing but could be impactful moving forward. Under AUKUS, there are working groups at technology levels, [but they have] not extended into standards . . . those are the big barriers.”

— Australian firm

Any deviation in standards also means that when technical details or parts need to be changed, even slightly, the part may need to be recertified. This increases the costs of non-recurring engineering, which can then increase the average cost of a part. One company raised the issue of different voltage standards as a source of recertification requirements (standard voltage in the United States is 120 V, Australia’s is 240 V): “We meet a higher standard, but we don’t meet the U.S. standard. Because the standard is slightly different, we have to recertify.”

One interviewee noted that there is an AUKUS working group to address technical standards, but this challenge is complex and cross-cutting from the defense industrial base to the broader national manufacturing industrial base. To fully tackle this long-term challenge, the interviewee recommended that the working group should have the authority to create an action plan to address different standards, with the goal of continually identifying and addressing differences that create challenges for cooperation and cross-border sales. Other frameworks and organizations have found ways to establish common standards. One interviewee pointed out that NATO has a common standard, demonstrating that a solution across national borders is possible.

Finally, one interviewee raised a complication to overcoming this barrier: there may be benefits for incumbents in maintaining different standards, as it limits competition: “The primes developed this and don’t allow outsiders in.”

Economic: Making It Worthwhile to Invest

Economic challenges for industry are intertwined with their access to capital, the scale of their firm, and their corporate aspirations

Companies mentioned the challenge of finding funding, which plays out differently in the two economies. It is perceived to be easier to raise funds in the United States because of the size and strength of the venture capital community. In Australia, there is “skepticism in their own market,” and the “investment community [is] skeptical about the U.S. market.” Better funding from government could bridge this funding gap. One company argued that we “need to unlock funding . . . quickly to win opportunity—look at process, what Australia does well and what [the] U.S. does well, look at convergence of how we do funding and financing for small business.” In the United States, the DOD’s Office of Strategic Capital has been set up to try to “crowd in” private capital for defense and dual-use technologies, a model that could be adopted in Australia.

“We haven’t seen a lot of actionable things come to market about workforce problems, and how we will share knowledge and skills across the two continents. . . . The broader population is completely unaware of what all the jobs and job opportunities will be. Joe plumber doesn’t know about this. There is available talent that is disconnected from the demand.”

— Australian firm

Another issue highlighted was the challenge of scale, especially when partnering with, selling to, or competing with U.S. firms. Australian companies are often much smaller than their U.S. partners, and a deal that is a matter of survival for an Australian company may be relatively unimportant for their U.S. partner. One Australian firm noted that they “have to partner with U.S. companies and then [work] at the whim of their creative ambitions. [U.S.] companies were making huge gains in passing through the work.” For a small company, the costs of the procurement process can be overwhelming: “How do I compete with a 10-person team at IBM focused on this Request for Proposal (RFP) when I’m three people and a cat.” Industry as a whole faces strong government pressure to manage costs, but the customer can be oblivious to the economic repercussions of delays and other bureaucracy. One U.S. firm noted that “government regulators on both sides don’t seem to be concerned about the economic impacts. They are focused on national security. . . . The Hill underestimates the scale of these transaction costs. Industry doesn’t make the case effectively about the impact of delays.” Small companies feel these burdens acutely.

Some Australian SMEs noted that small firms occasionally hold unrealistic expectations about what their role in U.S.-Australian business-to-business cooperation could look like given their size and production capacity. As a recent Australian Strategic Policy Institute report on AUKUS Pillar II cooperation notes, “size matters” in defense cooperation. Medium or large enterprises have greater scale than small ones, which allows them to more easily upscale their production when needed and to navigate complex bureaucratic tasks like export controls or acquisition. An Australian firm noted that being a “perennial smaller company working with larger companies,” their firm faces the “challenge of being treated as a peer or equal. Larger or established companies, [find it hard] to take the reputational risk of partnering with a start up.” Multiple Australian SMEs noted that they had more success working with small U.S. firms than with the primes. One ADOD official similarly commented that companies needed to find firms of similar sizes with which to match up. U.S. firms stated that they believe Australian companies are less willing than U.S. ones to partner up in order to conquer new, non-U.S. markets and are naive about what technology is required to compete globally.

Another barrier is a lack of industry alignment between Australia and the United States regarding the form and focus of possible future industrial collaboration. Indeed, some of the aforementioned Australian SMEs’ lack of trust in U.S. primes and their frustration with the GSC Program may stem from misaligned expectations of what Australian firms and U.S. firms can productively partner on. The GSC Program identified second sourcing and exploiting innovative technology as potential inroads for Australian firms into prime supply chains, with success seeming to have been found more in the latter than the former. Interviewed companies reported that it is very difficult to bring in Australian firms as new second-source suppliers due to non-recurring engineering costs, the difficulties of technology transfer, and a high learning curve leading to a production cost well above target price. In short, Australian firms struggle to compete against entrenched, typically U.S., firms. In DOD contracting, even when second sources of products or systems are identified, there is no guarantee they will be cost competitive, and those which are competitive are often U.S. firms that do not face the same challenges as Australian SMEs.

In connection with the cultural barrier of parochialism, more than one Australian company highlighted the necessity of being both aggressive and sensitive to local issues to successfully enter the U.S. market. Simple steps such as registering a website with a “.com” address instead of a “.com.au” address may overcome initial U.S. suspicion about working with foreign suppliers and lead to companies getting past an initial screen. Australian businesspeople will need to travel to the United States and do their own marketing. Another Australian firm stated that “they [Austrade] won’t do business for you—you have to knock on doors, build [your] own pipeline [and sell] into [your] own market. . . . I look for what events are happening and go to as many as possible to meet in person.” Oftentimes, success relies on the personal determination of entrepreneurs.

A Final Challenge and Concluding Thoughts

One last barrier, mentioned in almost every interview, is the “tyranny of distance.” Australia and the United States are half a world away from each other. Vastly different time zones mean that connecting on the phone during business hours is a challenge, and the flights take almost a day in both directions and cross the International Date Line. There is no easy solution for this. The fact that industry continues to press to cooperate despite this challenge is a signal of a broad commitment to cooperation.

One company offered this bottom line: “It’s hard to break into the U.S. market as an innovative Australian firm (just as it is for an innovative U.S. firm). Partnering with U.S. companies can help. However, it takes time to meet people and understand the market space. The Australian government can invest in this kind of education, bringing people to the U.S., helping them identify partners. It won’t happen all at once.”

The United States can encourage these efforts and lessen barriers where possible. Continual problem-solving can occur if the right spaces are available to bring together industry and government to tackle challenges. One interviewee suggested “forums for capturing and progressing innovative ideas” in support of AUKUS with sufficient “industry submissions.” This could be a path forward for quickly fixing barriers as they arise, especially with recent export control changes in each country and a new regulatory operating environment for companies.

Ecosystem Dynamics

Understanding and resolving the challenges that industry faces when working in partner economies is a necessary step toward enhancing cooperation. As the experiences reported in the last chapter indicate, barriers to cooperation are pervasive and complex. Furthermore, many of the individual challenges have broader implications. Regulatory issues contribute to cultural challenges. Government budget churn can harm companies, and instability can drive companies out of business. This chapter will examine the implications of these specific challenges to the broader ecosystem of defense industrial cooperation, looking for lessons on cooperation, including positive catalysts and cross-cutting barriers. Fixing individual challenges is a critical part of the solution, but experience shows that getting the right stakeholders aligned with the proper incentives across the entire ecosystem is also necessary.

Cooperation can start with government-to-government initiatives such as those included in the AUKUS initiatives, referred to here as the “G2G” pathway. Governments can purchase goods from a partner nation’s defense industries, a business-to-government or “B2G” approach. Efforts to foster industrial cooperation should also focus on international business-to-business cooperation between defense companies, or “B2B.” The G2G and B2G relationships are foundational for defense industrial cooperation, but the B2B relationship can lead to a market-driven form of cooperation. Lasting bottom-up cooperation occurs when companies integrate across national lines into each other’s individual ecosystems: becoming part of each other’s supply chains, co-developing products, and competing against each other to sell to the same corporate and government customers.

After surveying cross-cutting barriers in the ecosystem, this chapter will examine the three types of relationships shaping the ecosystem. It starts by surveying the G2G policy space and incentives. This chapter will then examine some aspects of the U.S. acquisition system relating to international defense procurement, which can be a B2G challenge for Australian firms working to grow their defense businesses in the United States. Lastly, the chapter will examine B2B dynamics between the United States and Australia and identify current and future catalysts to cooperation.

Identifying Systemic Challenges and Opportunities

The barriers highlighted in Chapter 4 represent specific challenges industry experienced when doing business with the partner nation. Industry shared several pathways to cooperation, including directly selling to the partner government through one of the avenues for defense acquisition, getting incorporated into a partner industry’s supply chain, or setting up a local subsidiary. The barriers to cooperation differed across each pathway and are denoted in Table 5.1 with an X if reported for that pathway in the interviews conducted for the study. (For example, the second row denotes which kinds of barriers were reported during interviews with Australian firms which have direct contracts with the U.S. government.)

▲ Table 5.1: Barrier Crosswalk Across Pathways of Connection. Source: CSIS analysis.

Mapping these barriers as they relate to the pathways for cooperation reveals two insights. The first is that some of the barriers are cross-pathway, meaning that they are pervasive across multiple paths. For example, cultural challenges are present across most pathways of defense industrial cooperation. The second insight is that some pathways encounter multifaceted barriers, where many barriers in one pathway reinforce each other, increasing the difficulty of using that pathway. Notably, Australian firms working to sell directly to the U.S. government face multiple interlinked barriers. On the other hand, U.S.-based subsidiaries of Australian companies working with U.S. prime contractors face far fewer of these same barriers.

Table 5.1 reveals the complexity of these often-interrelated barriers. More specifically, cross-pathway barriers include cultural barriers such as risk aversion within industry and parochialism within government, which is a reported factor across all actors and pathways (except those within a single nation). Regulatory barriers, especially export controls and compliance requirements for the DOD, pervade many pathways. Two types of bureaucratic barriers are endemic across different pathway types: (1) Australian entities interacting with U.S. ones indicated that overuse of NOFORN markings limited the information they could see; and (2) both U.S. and Australian entities selling to the U.S. government reported that the U.S. acquisition workforce suffers from personnel shortages and lack of training on working with foreign businesses. Economic barriers, especially funding uncertainty, appeared across many pathways and were often linked to budgetary barriers in government and to regulatory barriers in industry, both slowing funding.

Multifaceted barriers afflict certain pathways more than others, leading these pathways to be even more difficult. This dynamic is visualized in Figure 5.1. This chart takes the connections presented in Figure 3.1—the original pathway wire chart—and colors them by the reported difficulty of overcoming the barriers endemic to each pathway noted in Table 5.1. The “reported difficulty” assessment is informed by interviews with both industry and government figures. Note that Figure 5.1 does not offer a measure of the desirability of different paths, as a difficult path may offer a good risk-reward balance as long as the challenges can be overcome.

▲ Figure 5.1: Pathways of Connection by Difficulty. Source: CSIS analysis.

Australian firms selling directly to U.S. primes face a variety of multifaceted obstacles, including bureaucratic, cultural, regulatory, strategic, technical, and economic barriers. A hypothetical example of an Australian firm trying to sell product to a U.S. prime can be used to illustrate how barriers can reinforce each other within a given pathway. In this example, a U.S. prime considering buying an Australian firm’s product might find that it is unable to freely discuss product requirements and capabilities due to how its culturally cautious legal department interprets complex U.S. export control regulations. This hurdle is worsened by the Australian firm’s cultural reluctance to seek legal counsel to push back on this interpretation of ITAR rules, either with the U.S. prime or either government. Even if the U.S. firm applies for the export control license requested by its compliance department to show its own systems or discuss its requirements with the Australian firm, bureaucratic delays in the processing of these licenses could delay the process by months—and the same delay would happen if the Australian firm ever wanted to export its product to the United States. The potential sale is then further afflicted by the U.S. prime’s reported cultural disinclination to buy from non-U.S. suppliers, which is only heightened by the technical challenge of non-reciprocal testing and certification regimes requiring the product to be recertified under U.S. systems—yet another expense and time cost. Furthermore, if the U.S. prime is seeking to replace an existing inferior supplier with a superior Australian offering, the cost and challenge of reworking supply chains would be an additional economic barrier. These kinds of multifaceted challenges present wicked problems which can be overcome—but only with sufficient catalysts for cooperation. And the solutions must go beyond simplistic diagnosis and simple recommendations to make a difference. Addressing the export control regime alone is insufficient to catalyze cooperation.

This analysis of cooperation is not entirely bad news. In addition to showing current barriers, Figure 5.1 also highlights easier pathways in the ecosystem. For example, the interviews showed that bilateral cooperation is taking place in lower-resistance pathways such as the creation of U.S.-incorporated subsidiaries of Australian firms, which are displayed in green. The next part of this chapter discusses current catalysts to cooperation within G2G, B2G, and B2B interactions.

Government-to-Government Dynamics

Australia and the United States have long been strategic partners. The main catalyst for a new emphasis on cooperation between Australia and the United States is the shared view of the changing threat picture, as described in Chapter 2. Policymakers in the United States and Australia have made concerted efforts to align their countries’ security efforts. Agreements such as AUKUS and GWEO are major political efforts and are representative of an increased strategic emphasis on the importance of direct industrial cooperation. During public events conducted for this project, Australian government figures have offered strong statements in support of cooperation. Hugh Jeffrey, Australia’s deputy secretary of strategy, policy, and industry, has said that “we can no longer afford to really have our cooperation exist only at the rhetorical domain. It’s got to actually exist at the operational domain.” Paul Myler, then deputy head of mission for the Embassy of Australia in Washington, D.C., stated that “never has it been more important for Australia and the U.S. to work together to ensure our collective deterrence efforts are sufficient to prevent escalation into regional conflict.”

G2G arrangements within the acquisition realm include supporting co-development, co-production, co-sustainment, and exports via foreign military sales which employ the U.S. acquisition system to deliver a product or service to the recipient government. G2G arrangements fall into the broader category of security cooperation, a topic which has been the subject of extensive research and is the source of the Moroney et al. framework which this research expanded to include business issues. With the exceptions of the organic industrial base and the transfer of systems already in inventory, G2G activities to support security cooperation in the acquisition realm almost inherently imply additional B2G relationships both within and across national borders. To better understand defense industrial integration, this report draws out the B2G and B2B pathways that may be embedded within or overlooked by analyses that focus only on government actors.

G2G agreements are critical enablers of defense industries working together, and government actors seek a range of benefits from cooperation, such as innovation, cost savings, economies of scale, enhanced operational interoperability and interchangeability, and support for industry and jobs in their own country.

However, as many interviewees noted, while policymakers on both sides of the Pacific have offered strong public support for cooperation, both governments have struggled to convert policy pronouncements into concrete actions and funding. Government actors collectively face conflicting incentives due to the difficulties inherent in issuing new policy, along with a lack of direct rewards for the hard effort of making cooperation happen. According to William Greenwalt and Tom Corben, these conflicting impulses contributed to the lack of success of at least one previous major effort at defense industry integration between the two nations, the United States-Australia Defence Trade Cooperation Treaty. The researchers report that many in industry found this treaty ineffective due to its slow implementation and a lack of support among dedicated pockets of the U.S. export control workforce.

Industry also faces conflicting impulses when considering international integration and benefits from G2G efforts as a signal to act. In the defense production realm, integrating new foreign suppliers or forming international joint ventures will often bring into play obstacles that do not exist when working with domestic partners. These more difficult forms of corporate activity are more likely to be undertaken when industry is responding to a clear government demand signal, especially when otherwise easier options exist domestically. Nonetheless, government actors typically do not experience the same urgency or incentives to act as industry figures, who are driven to international buyers by the pursuit of profits. While government action can create a strong demand signal for actors in industry to cooperate across the Pacific, the independent push from industry to expand their business is a vital driver of defense industrial integration.

Business-to-Government Dynamics

The desire for profit and for the capital needed to invest in and expand business operations is a significant catalyst driving industry interest in working with partner governments. The vastly larger defense budget of the DOD compared to the ADOD means that the U.S. market represents a significant opportunity for Australian firms. U.S. and international defense primes already sell to the Australian government, often through local subsidiaries. They have personnel dedicated to understanding international markets and working with local governments. Discussions with government officials for this project confirmed that the Australian defense industry has fewer prime contractors and a greater emphasis on small and medium-sized enterprises. The relative purchasing power and budget of the DOD compared to the ADOD means that U.S. government purchases from Australian industry offer a stronger opportunity for cooperation than the inverse. The DOD’s role as one of the institutions with oversight of defense cooperation efforts also gives it a leading role in promoting and facilitating cooperation.

Given the purchasing power of the DOD and the productive and innovative capacity of the Australian defense industry, there is much latent potential to be catalyzed upon via a closer cross-Pacific relationship. Several specific incentives emerged from CSIS’s research and interviews that have the potential to build an even deeper DOD relationship with Australian producers. These included growing government demand—both in the United States and in Australia—for military products and services, as well as efforts within the United States to change acquisition workforce culture to build willingness and capacity for contracting with foreign firms. (An overarching consideration for the DOD is an increased emphasis on supply chain resilience and economic deterrence. While a driver for cooperation, this may not be as evident to Australian industry.)

STRATEGIC AND BUDGETARY CATALYST TO COOPERATION: GROWING GOVERNMENT DEMAND

The first catalyst to cooperation is the growing and unmet government demand for military-industrial capacity, particularly from the U.S. government. A confluence of factors—wars in Ukraine and the Middle East coupled with growing concern over China’s increasing military investments and economic warfare—has increased the U.S. demand for military goods, and revealed challenges surrounding the strength of the U.S. defense industrial base and its ability to surge production. The United States has begun considering a variety of solutions, many of which involve working closely with allies and partners to bolster production. Specific to Australia, the Joint Statement on the Australia–United States Ministerial Consultation (AUSMIN) 2024 reaffirmed the importance of Australia’s Guided Weapons and Explosive Ordinance initiative, as it “provides a pathway for the co-development, co-production, and co-sustainment of critical long-range fires and their component supply chains for both nations.” Policymaker energy and attention in the United States is focused on working with allies and partners to expand defense production capacity. As shown earlier in Figure 2.3, there is an existing foundation of Australian work for the DOD that shows that this is possible and offers a springboard upon which Australian firms can build.

▲ Figure 5.2: DOD Prime Contract Obligations by Origin of Good or Service and Region of Performance. Source: FPDS; and CSIS analysis.

Australian companies are clear-eyed about the market benefits of selling to the DOD. As the left graph in Figure 5.2 shows, operational priorities such as the War in Afghanistan can dramatically shape contract trends. As seen in the right graph in Figure 5.2, even with the drawdown and eventual end of the conflict, defense contract spending has increased dramatically from the low point in FY 2015. In recent years, this has translated into a greater willingness by the DOD to buy international products and services.

As depicted in Figure 5.3 below, there is a strong foundation of existing Australian work with the DOD for Australian firms to build upon. Furthermore, as one Australian interviewee offered, the United States has an “appetite for adoption [of new technology] that is more conducive” to scaling innovation than the Australian market. Another Australian manufacturing firm noted that the U.S. market is the largest on the planet and that any company interested in growing needs to take advantage of these opportunities. U.S. technology companies also noted the “hyperscale” platform of the DOD, which “becomes the enabler for everyone to use it to design, develop, test, and deploy software.” A powerful catalyst to cooperation is therefore simply the size of the DOD market, as the scale of DOD platforms is very attractive to innovative Australian firms.

▲ Figure 5.3: DOD Prime Contract Obligations with an Australian Aspect. Source: FPDS; and CSIS analysis.

In addition to a growing U.S. government demand for military goods, Australia is also experiencing an increasing desire for sustainable sovereign production capacity. As mentioned in Chapter 2, Australia’s Defense Industry Development Strategy (DIDS) identified seven Sovereign Defence Industrial Priorities (SDIPs), that is, areas of particular focus for its sovereign industry capabilities. This prioritization scheme is not only useful for concentrating the focus of domestic industry but also serves to further close industrial collaboration with trusted international partners, another stated aim of the DIDS. Australia’s emphasis on becoming a key stakeholder in selected pivotal domains as part of an alliance web of production is part of the intragovernmental push for cooperation. Australia’s sovereign capacity concept—which places Australia within a web of allied production—has not only led to G2G initiatives like AUKUS and GWEO but is also based upon Australia’s history of acquisitions from the Australian subsidiaries of U.S. defense primes, another key form of international cooperation.

A striking finding from the interviews is that one catalyst for international cooperation is Australian firms’ desire to raise their standing with the Australian government. Winning a contract in the United States or the United Kingdom establishes the bona fides of an Australian firm that may otherwise be overlooked, should they attempt to sell directly to their own government.

CULTURAL CATALYST TO COOPERATION: CHANGE WITHIN THE DOD

U.S. strategic documents have increasingly highlighted the importance of industrial cooperation with allies and partners, demonstrating the senior leadership support essential for innovative change. The 2024 National Defense Industrial Strategy (NDIS) places significant emphasis on two vectors of international security cooperation and defense industrial base integration: first, arms exports using the U.S. acquisition system, namely the foreign military sales process, and second, building a network of cooperation with allies and partners as part of an overarching concept of “production diplomacy.” Greater integration would come through NDIS section 2.1.2.6, which seeks to boost production and resilience by “incorporating allies and partners into a more networked or web-like production chain,” reinforced by both foreign production through licensing and domestic production via foreign subsidiaries. NDIS section 2.3.2.1 also notes the importance of “standards, modularity, and interoperability” for international collaboration.

The NDIS’s emphasis on incorporating allies into the U.S. production chain provides a strong signal to the U.S. acquisition workforce that working with allied firms is not just permitted, but desired. Along with strong leadership guidance, Assistant Secretary of the Army for Acquisition, Logistics, and Technology Doug Bush has stressed the importance of education via training and support of personnel as well as rewarding reasonable, thoughtful risk-taking as foundational to creating cultural change. The availability of business process improvements like the Adaptive Acquisition Framework can also help drive this shift toward incorporating allied firms into DOD acquisitions.

Business-to-Business Dynamics

The desires to increase sales, build market share, and gain capital for investment and expansion are major drivers for industry-to-industry cooperation. A key element of international defense cooperation between the United States and Australia is building connections between the defense industries of the two nations. Industry-to-industry cooperation has the potential to integrate supply chains, build manufacturing capacity resilience, and deepen cross-border security relationships.

An active and fluid business environment between the two nations’ defense industries is critical to ensuring the success of U.S.-Australian defense initiatives, including AUKUS. The U.S. defense industrial base is heavily integrated with global supply chains, especially those involving its allies and partners, and reducing barriers to cooperation for U.S. and Australian industry will spur further cooperative initiatives—especially those that require less government attention and direction than full co-development initiatives like the F-35 program.

Defense industrial cooperation occurs because of a spur to action—be it a strong business case on the industry side or strategic guidance as a precursor to orders from the government. Given the flurry of policymaking in recent years, both currently exist. Both governments’ strategic visions encourage industry to create strategic partnerships in anticipation of funding in both the present and future. Given the expansion of U.S.-Australian security ties, industry-to-industry relationships have been increasing and, if AUKUS and GWEO succeed, will continue to grow.

If the U.S. and Australian governments take action to amplify these catalysts with decisive policies, there is the potential for a rapid growth in both the breadth and depth of this bilateral relationship. The two primary catalysts to cooperation identified in CSIS’s interviews and research are the growing U.S. demand for military industrial capacity across the globe and the greater use of U.S. subsidiaries of Australian firms as a pathway to supplying U.S. defense primes or the DOD itself.

ECONOMIC AND BUDGETARY CATALYSTS TO COOPERATION: THE GROWING BUSINESS CASE DUE TO U.S. INDUSTRY DEMAND

Allied support for Ukraine in its self-defense against Russia’s invasion has led to the realization that U.S. defense industry surge capacity is limited. The greater need for capacity is a catalyst for cooperation as the United States looks to enhance its industrial base. The U.S. government’s demand for military industrial goods has translated into a greater need for capacity from overstretched U.S. defense firms—as well as from the second-, third-, and lower-tier suppliers in their supply chains. Second-source suppliers for materials and technology can help fill this gap if enabling contracts are in place.

Australia is well positioned to take advantage of this growing U.S. defense industry need. Australia can provide technological and engineering excellence in areas of interest to the defense industry. The recent AUSMIN 2024 joint statement stressed “the important role that Australian critical minerals will play in supporting defense and wider economic supply chains,” highlighting Australia’s role as a reliable and strategically aligned source of these key inputs. One major Australian defense manufacturing company noted that they are “seeing more engagement now with the U.S. defense primes, specifically in the last twelve months, than ever before,” implying a “far greater willingness to work with Australia.” The firm attributed this to a combination of the DOD supply chain report highlighting the need for more resilient sources of supply and the AUKUS and GWEO initiatives.

ECONOMIC AND REGULATORY CATALYSTS TO COOPERATION: AUSTRALIAN FIRMS ARE MAKING GREATER USE OF U.S. SUBSIDIARIES

Australian firms have been establishing subsidiary companies in the United States to facilitate partnerships with and sales to the DOD and defense primes in attempts to overcome barriers to cooperation. Responding in part to greater demand from U.S. primes and the U.S. government itself, Australian firms have created relationships with subsidiary firms to facilitate trade. As Figure 5.4 illustrates, most of the funding from DOD contracts with Australian firms for the past two decades has gone to the U.S. subsidiaries of Australian firms, not to Australian entities directly.

▲ Figure 5.4: DOD Prime Contracts with Australian Vendors and Their U.S. Subsidiaries, FY 2012–FY 2023. Source: FPDS; and CSIS analysis.

By examining DOD contracts with its first-tier suppliers with an Australian aspect (either Australian headquartered or owned by an Australian firm) by fiscal year, two stories emerge. Interviewees’ reporting high difficulty of selling directly to the DOD are supported by U.S. contracting data shown in Figure 5.4, although the data shows small but consistent gains since FY 2016 of Australian firms selling directly to the DOD. This success is massively outweighed by the much larger volume of sales by U.S. subsidiaries of Australian firms to the DOD. This distinction has supply chain implications, as despite the predominance of U.S. subsidiaries of Australian firms, direct sales by Australian firms are the larger provider of goods and services originating outside the United States.

Thus, both contracting data and interview findings make clear that having some form of U.S. corporate identity helps overcome some of the barriers for Australian firms selling to the DOD or working with U.S. primes. The first key advantage is having staff on the ground to connect with the personnel from the DOD and U.S. primes. Subsidiaries also make the legal and technical structuring of partnerships with U.S. entities easier—many Australian firms reported that their commercialization strategies involved bringing in more established U.S. companies to act as resellers or intermediaries. A U.S. entity with local staff also avoids many of the regulatory issues with ITAR and security clearances that prevent company staff from going on-site to classified areas in a timely manner. On top of local access and regulatory ease, one Australian manufacturer described buying a U.S. subsidiary as lowering the “activation energy” needed to do business in the United States, as U.S. companies often prefer dealing with a U.S. entity. U.S. defense primes also appreciate working with the U.S. subsidiaries of Australian defense firms, as it allows them to more easily communicate their requirements, hear about the Australian company’s capacities, and then decide about working with either the U.S. or Australian entity.

Australian firms that have had success working in the United States can help illustrate the benefits of establishing a U.S. subsidiary to navigate the challenges of doing business in the United States. One Australian engineering and manufacturing firm has contracts both with U.S. defense primes and with their Australian subsidiaries. This firm established a U.S. subsidiary to sell its products more easily to U.S. primes and to mitigate exchange rate issues with the U.S. dollar. The firm uses its U.S. subsidiary to manage capacity requirements—some of its products are manufactured in the United States and then transferred to its Australian entity to be sold to the end customer. Furthermore, some U.S. primes prefer to buy from the firm’s subsidiary to avoid any potential ITAR issues when buying from an Australian location. The Australian firm noted that some of the Australian products it transferred to its U.S. subsidiary were then sold to U.S. defense primes and then ultimately resold to the Australian government via FMS and DCS—a long way home for these Australian defense goods.

Concluding Thoughts

Barriers to cooperation appear as specific challenges but in fact have larger systemic causes and effects. Overcoming barriers means both recognizing and addressing challenges (e.g., the delays caused by ITAR and other export controls) and seeing how they are connected to other challenges (e.g., a broader cultural reluctance on the part of U.S. industry to do business with foreign suppliers). This research has affirmed that there are no simple solutions and that a consistent, deliberate, big-picture approach to continually scanning for barriers and working on solutions will be necessary to enhance defense industrial cooperation.

Recommendations

The strategic significance of enhancing defense industrial cooperation between Australia and the United States requires a response grounded in a clear understanding of the specific challenges of this bilateral relationship combined with a broader mastery of the acquisition process and the numerous obstacles to any form of defense industrial cooperation.

Cooperation can happen, and there are examples of the United States and Australia working together on defense production. The question is not whether this occurs but rather how to make such cooperation easier and more frequent by reducing the individual and systemic barriers identified here. Specific recommendations that can address these barriers are presented below and grouped by the type of barrier that they are intended to address.

Some of the recommendations focus on very specific problems, and others are broader. As discussed in Chapter 5, these barriers are often mutually reinforcing. For these reasons, some topics, such as standards, appear under multiple categories of barriers, and many recommendations have implications that go beyond the barrier that they primarily address.

Recommendations for Budgetary and Technical Barriers

For the United States and Australia, increasing the speed and quantity of defense production is crucial to addressing the threats that have been identified by their respective national strategies. Achieving these goals will be expensive, even with the opportunity provided by rising defense budgets. Australia recognizes that its desired sovereign defense industrial capabilities cannot be sustained without integration into other defense ecosystems and funding streams. The U.S. National Defense Industrial Strategy correctly identifies greater commonality with partners as an imperative. In short, commonality is an area where industrial integration can and should have a return on investment that offsets fiscal barriers to cooperation. The recommendations below take aim at the technical obstacles to commonality, which in turn will aid in justifying the budgetary investments in cooperation.

1. The United States and Australia should endeavor to align their requirements for new weapons systems or produce shared requirements, where possible, especially in the context of AUKUS. This would allow Australian and U.S. companies to more easily innovate, manufacture, and sell systems to both governments. A crucial related benefit is making operational forces more interoperable or even interchangeable.

2. Groupings such as AUKUS or the overlapping members of Five Eyes and the NTIB should be used as venues for implementing shared standards working groups. Common use of open standards, such as those pursued under the U.S. Modular Open System Approaches, would help standardize components and subsystems to support recommendation 1. To be successful, standards setters should allow partner nations to provide input into the process, to ensure that standards do not unwittingly create unnecessary barriers. The Future Airborne Capability is one example of this form of collaboration that could be emulated elsewhere.

Recommendations for Regulatory and Bureaucratic Barriers

Regulatory and bureaucratic barriers inevitably add friction to international cooperation. To alleviate some of these obstacles, the U.S. Congress legislated a partial ITAR exemption for AUKUS countries, only the second such exemption in existence. This AUKUS ITAR exemption is a generational shift in U.S. export and technology control policies, moving from mandating licensing to requiring tracking for a range of technology in the territories of Australia, the United Kingdom, and the United States. This change has the potential to be transformative not just for AUKUS projects but also for the bilateral U.S.-Australia relationship. Some analysts, such as William Greenwalt and Tom Corben, call for further liberalization in the next steps of implementation. The interviews for this project took place before the implementation language was released; therefore, the recommendations below do not seek to evaluate the implementation of the AUKUS ITAR exemption itself but instead focus on findings from the interviews and data that remain relevant in this rapidly changing environment.

Measures to address regulatory and bureaucratic barriers can be mutually reinforcing, as they decrease regulatory burden and streamline administrative workload. As part of the AUKUS implementing regulation, licensing will be expedited for transfers between Australia, Canada, the United Kingdom, and the United States in those cases when it is not exempted. Some of the recommendations below follow a similar logic by seeking regulatory or broad bureaucratic changes that would remove the need for approvals for recurring sources of friction that can be addressed on a systematic rather than a case-by-case basis.

1. The United States and Australia should enact equivalency agreements that recognize that certain defense standards are close enough to be mutually acceptable, even if these standards are not made in common. Currently, pursuing approvals for defense standards that are similar but not entirely in common is a grinding process that wastes staff time and incurs additional delay. To help alleviate this barrier, AUKUS governments could authorize existing technical working groups to extend their mandates to harmonizing standards and achieving equivalency agreements.

2. The United States and Australia should mutually recognize each other’s accreditation standards regimes where the requirements are close enough to be functionally interchangeable. The National Australian Testing Authority (NATA) is not currently recognized in the United States, which instead employs the National Aerospace and Defense Contractors Accreditation Program (Nadcap). U.S.-Australia cooperation would benefit from wider adoption in Australia of U.S. National Institute for Science and Technology (NIST) standards for document handling. Doing so would facilitate easier crossing of national lines for defense firms by reducing the need for duplicative and time-consuming reaccreditation.

3. A joint procurement vehicle, such as a pan-AUKUS panel, could be created to deepen AUKUS collaboration, especially in the key areas of AUKUS Pillar II. This panel—similar to what the General Services Administration and Australian government offer—would provide a common framework on which innovative companies could sell to all three countries. A combined Australian, UK, and U.S. call for innovation on electronic warfare within AUKUS resulted in prizes being awarded by innovation units within each country to high-performing national vendors. This “adjacent pools” approach could serve as a useful stepping stone toward a true “common pool” style of joint procurement in the future.

4. The United States and Australia should fully embrace mutual recognition of security clearances, within necessary parameters. Doing so would assist the efficient sharing of information that undergirds high-technology security cooperation. This recognition could fall under the Five Eyes intelligence-sharing arrangement or be a separate trilateral agreement among AUKUS countries. This step would build on the fact that classified information already appears on the AUKUS ITAR excluded technology list, which, alongside the Five Eyes intelligence-sharing arrangement, indicates significant existing trust on classified information sharing. The September 1, 2024, ITAR reforms include a provision for exemptions for dual nationals or third-country nationals, which allows for security clearances approved by the host-nation government for its employees to count toward the fulfillment of exemption requirements. AUKUS nations should continue to build on this approach to enable as wide an implementation as reasonably practicable of cross-recognition of clearances and should pay attention to the proper enabling changes needed to make such reforms widely used.

5. The U.S. Congress should explore passing legislation which would connect the AUKUS and Canadian ITAR exemptions to allow cross-compatibility. The larger NTIB would be invigorated by allowing free movement between the four countries of any technology that met the conditions of both the Canada and AUKUS exemptions. Though the excluded technology lists for AUKUS and Canada are different, they do share large areas of overlap. If the four nations were to agree to this step, it would facilitate NTIB expedited licensing by eliminating the need to consider technology that has already been approved.

Recommendations for Cultural, Political, and Strategic Barriers

Legislative and regulatory changes alone are often not sufficient to effectively overcome barriers to cooperation. Cultural change is often necessary to fully institutionalize new authorities or integrate regulations into everyday practice. In the absence of cultural change, new authorities and strategic objectives may be hindered by inertia. Cultural change can be further hampered by competing messages, such as when the United States’ Buy American Office was launched just before AUKUS materialized. Measures such as these create an acquisition culture of defaulting to what is known, streamlined, and easy. Overcoming this cultural default requires not just direction from senior leaders but also consistent reinforcement at all levels and periodic evaluation of success.

1. The DOD and ADOD should conduct an audit of the implementation and outcomes of industrial cooperation efforts in preparation for each annual Australia–United States Ministerial Consultation (AUSMIN). Tracking NDIS and DIDS implementation and measuring outcomes allows leaders to identify where strategic goals and rule changes have not yet translated into changed behavior. By looking at the types and levels of cooperation, and building on the larger independent efforts to track NDIS and DIDS goals, relevant departmental leadership can observe and reward cultural change.

2. The DOD and ADOD should furnish an annual report on the implementation of cross-national industrial integration initiatives to their respective legislatures. This report could be derived from the AUSMIN audit in recommendation 3.1. The national legislatures of both the United States and Australia have taken crucial steps to reform their respective export control processes as part of AUKUS. Annual reporting would facilitate legislative action in support of AUKUS and the broader bilateral relationship. This report would ideally be public, with a classified annex as needed.

3. The U.S. Department of State should conduct a rigorous and proactive outreach campaign to inform industry about the specific requirements of the 2024 new AUKUS waiver; Austrade should establish a pipeline to refer companies to the Defence Export Controls office to provide clear messaging and education to industry about ITAR rules and boundaries. ITAR is managed by the State Department and is generally regarded as exceptionally complex and difficult to understand. Both governments’ direct messaging and education on ITAR could help overcome industry’s inclination to be more conservative than the rules require.

Recommendations for Economic Barriers

Economic barriers to defense industrial cooperation are mainly the product of uncertain returns for vendors supporting international cooperation, which make it difficult to justify addressing the forms of friction introduced by borders. A common kind of friction is the difficulty of incorporating a foreign supplier into an established supply chain or the costs of establishing a subsidiary and building contacts in a distant foreign nation. Insufficient incentives undercut the role the U.S. and Australian defense industrial bases can play in support of defense cooperation. Barriers to international cooperation can resemble those of small or non-traditional U.S. vendors. The lack of a perceived “front door” access for AUKUS applicants complicates what would otherwise be a comparatively easy path for Australian vendors that have established a U.S. subsidiary.

1. Defense industry groups in the AUKUS countries should consider creating an AUKUS-focused consortium. Consortia are often used to gather a set of vendors with a common interest, such as working with a particular technology or involving a standard or architecture. They can be an entry point for vendors and can ease the discovery process for government customers. The innovation-seeking acquisition mechanism Other Transaction Authority (OTA) arrangements often rely on consortia for ease of entry. However, because consortium management companies want to avoid export controls, many consortiums are limited to U.S. companies (including those with foreign headquarters). Yet, there is precedent for allowing international participants in U.S. consortia.

2. The governments of Australia and the United Kingdom should consider subsidizing the overhead costs of establishing these AUKUS-focused consortia for AUKUS Pillar II topics. This would be similar to how the Canadian Commercial Corporation takes on the overhead burden for Canadian firms selling to the U.S. government. This step would allow smaller Australian firms to explore the U.S. market before taking the larger leap of establishing a U.S. subsidiary.

3. The U.S. acquisition workforce should use Other Transaction Authority arrangements for AUKUS acquisition coordination. This approach would build on the success of AUKUS prize challenges by creating a mechanism to manage intergovernmental AUKUS procurement. As covered in previous recommendations, AUKUS procurement vehicles and consortiums could address some of the multifaceted barriers to business-to-government cooperation. Multinational procurement vehicles would require top acquisition personnel from all three countries to pool their expertise and address the considerable challenges of designing a vehicle that meets the need of all three systems. Despite requiring up-front costs, this approach could bear significant fruit by resolving the challenge of reconciling the rules of three different national acquisition systems.

4. The Australian government should empower and provide additional funding to Austrade to enhance Australian industry understanding of the U.S. acquisition system and to aid Australian SMEs in establishing U.S. domestic subsidiaries. Building on its success assisting Australian firms through trade shows and personnel introductions, Austrade could also provide more detailed information on complex and lesser-known export options (e.g., EAR 600 and DSP5). Assistance with domestic U.S. subsidiaries would require Australian funding for firms in the United States, but this initiative would yield an overall benefit for Australian firms.

5. The DOD should expand the training and education of its acquisition workforce to include the financial and bureaucratic complexities of working with international companies. DOD officials are occasionally unprepared for the bureaucratic requirements of paying foreign entities via international wires, despite the availability of existing mechanisms. Defense Innovation Unit (DIU) staff were also unfamiliar with constraints unique to Australian firms, such as time zone differences and the difficulty of rapid travel to the United States. Small Australian firms reported funding difficulties created by slow payments, vague programs, and shifting deadlines. More rigorous international cooperation training could be usefully paired with hiring more U.S. acquisition personnel to alleviate the challenge of incorporating Australian firms into the U.S. defense industrial base.

6. The DOD and ADOD should embrace Modular Open Systems Approaches to lower barriers to entry and encourage competition. There is often the perception of industry gatekeeping by U.S. primes to prevent Australian firms from competing. U.S. law encourages the adoption of Modular Open Systems Approaches to the maximum extent practicable, though in practice more can be done. Private industry still retains key intellectual property under these arrangements, but the U.S. government has the ability to bring in new competitors, for example, by holding a competition for Australian vendors to compete to support an existing system built on open architectures that are accessible to Australians firms. This option would also be available to the Australian government when purchasing systems using Modular Open Systems Approaches from the United States or when employing such open standards in their own systems, even when developing them with international partners.

Concluding Thoughts

Enhancing defense industrial cooperation between Australia and the United States will take concerted efforts by government and industry from both nations. Senior government leaders need to reaffirm the importance of this integration through policy pronouncements and regular reviews. Ensuring that business practices and industry and government culture support cooperation will require both resources and a thoughtful requirement-setting process that enhances opportunities for collaboration. Simple solutions and single policy changes (e.g., “fix ITAR”) alone will not yield the results desired. To enhance cooperation outcomes, both systems must commit to a longer-term plan for change management, with a focus on sharing the strategic vision, providing necessary resources and training, and continually identifying and addressing barriers. Measuring and tracking cooperative activities can provide a useful metric to assess whether policy changes are having the desired effect.

Real and sustained change can only start once policymakers embrace a mindset that believes time is of the essence and that approaches the challenges of national and allied preparedness with a sense of urgency. The case for changing the model of defense industrial cooperation between the United States and Australia has been made and is widely acknowledged across both governments. Overcoming bureaucratic inertia to realize a tangible shift in how the U.S. and Australian industrial bases integrate, however, demands greater commitment. Given new collaborations between Beijing, Moscow, Pyongyang, and Tehran, as well as the rapidly deteriorating security conditions globally and in the Indo-Pacific region specifically, allied deterrence must transform into a collective endeavor. Such an enterprise necessarily demands more integration and alignment of defense systems and industries. AUKUS provides a superb opportunity to expand defense industrial collaborations by revitalizing the U.S.-Australian alliance with a laser-like focus on industrial policy. The national security of both counties, and the stability of the region, might well depend on it.

Cynthia Cook is director of the Defense-Industrial Initiatives Group and a senior fellow in the Defense and Security Department at the Center for Strategic and International Studies (CSIS). She is widely published on defense acquisition policy and organization, the defense industrial base, new technology development, and weapon systems production and sustainment. Dr. Cook is a member of the editorial board for the Defense Acquisition Research Journal and is an adjunct professor at the Pardee RAND Graduate School.

Charles Edel is a senior adviser and the inaugural Australia Chair at CSIS. He has also been a global fellow at the Wilson Center and a Henry Luce scholar at Peking University’s Center for International and Strategic Studies, and he was awarded the Council on Foreign Relations International Affairs Fellowship. Dr. Edel was a professor of strategy and policy at the U.S. Naval War College and served on the U.S. secretary of state’s Policy Planning Staff from 2015 to 2017.

Kathryn Paik is a deputy director and senior fellow with the Australia Chair at CSIS. Prior to joining CSIS, Kathryn served in the United States Marine Corps for over 23 years, most recently as the director for Southeast Asia and the Pacific on the National Security Council (NSC) (2021–2023), where she spearheaded numerous initiatives for the administration, including the creation of the first U.S. Pacific Partnership Strategy and the initial U.S.-Pacific Islands Forum Summit.

Gregory Sanders is former deputy director with the Defense-Industrial Initiatives Group and senior fellow with the Defense and Security Department at CSIS, where he manages a research team that analyzes data on U.S. government contract spending and other budget and acquisition issues. His recent research focuses on contract spending by major government departments, contingency contracting in Iraq and Afghanistan, and European and Asian defense budgets.