Developing A Defence Export Strategy

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The Hon Christopher Pyne MP

Minister for Defence Industry

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24 July 2017

Speech to ASPI: Developing a Defence Export Strategy

Thank you very much for that introduction and thank you to Lurssen and ASPI for arranging this event today.

Between the two – our nation’s leading think-tank on strategic issues and a global heavyweight in the field of naval shipbuilding – we have the perfect confluence of theory and practice – or thinking and doing, as I’d rather put it; thinking and doing with an international edge; the confluence of strategic issues and defence industry that is such a priority of the government.

Today’s gathering is another opportunity to recap all that we are achieving together.

I’ve said it before and I’ll say it again.

I am absolutely committed to the defence industry.

There is fascinating, inspiring work going on within the sector – and even more to come.

Everyone can play a part.

And everyone will benefit.

It’s why, whether here or overseas, I talk about our great national endeavour.

A transformation is underway with long reaching benefits not just for defence industry, but the entire country.

This government is committed to a stronger partnership with the sector to meet our defence capability requirements and foster an export-focused industry.

Let’s look at some of what we’ve already accomplished.

A little over 12 months ago the Turnbull government declared its intention to reshape the Australian Defence Force and our local defence industry to guarantee the future security of the nation.

We didn’t just mean security in a defence context.

We were also talking about the security that is brought by economic prosperity.

We see the defence industry as integral to Australia’s advanced manufacturing capability, to our future as a high-tech economy in the twenty-first century.

The process began at the end of February 2016 with the release of the Defence White Paper, the Integrated Investment Program and the Defence Industry Policy Statement.

The White Paper made it clear – Australia’s national security and economic wellbeing will be challenged not just more frequently but from a wider range of threats over the coming decades.

You don’t need to look beyond the daily headlines to know that the world is rapidly changing.

We are seeing a more assertive Russia and China – and then there is North Korea, with its dangerously unpredictable nuclear and ballistic missile brinkmanship.

Once, Australians thought that we were far removed from strife.

Now, we need consider the sobering fact that we sit in the heavily militarised Indo-Pacific region – a region which we share with seven of the world’s 10 largest standing militaries and five of the world’s declared nuclear nations.

The security of our nation is the foundation of our prosperity.

The two are inextricably entwined.

Day to day life and business activity in Australia fundamentally relies on free and uninterrupted passage in our region over the ocean through strategic sea-lanes.

This means we must have a stronger defence capability – a stronger defence capability supported by a sovereign defence industry.

This will underpin our ability to secure the future.

It will enable us to respond to strategic risks and act as a crucial driver of innovation and economic activity.

That the government has chosen to spend 195 billion dollars over the next decade to reinforce our national security should say it all.

We have chosen to do something no government in this nation has even done before – acknowledge the significance of defence industry to jobs and growth in this country.

The sector offers unique and unprecedented skilled and knowledge-intensive job opportunities in fields ranging from think-tanks to Australia’s universities and research institutions right through to defence contractors.

Acknowledging this inextricable link between our national and economic security requires a cultural shift in how we view defence procurement in this country.

It also requires the new emphasis the government has given to defence exports.

Defence exports help build the capability of defence industry to better meet our defence force’s needs.

They also contribute to Australia’s economic prosperity and drive innovation to deliver stronger growth and better capability.

Australian industry has proven its ability to develop world-leading capabilities that not only support the ADF, but are also sought after in the global market.

Working together, Australian industry and the government can foster demand for our products and develop opportunities to deliver both strategic advantages and economic prosperity for Australia.

Achieving export success will support the ADF and promote our strategic goals in a number of ways.

Defence industry exports will sustain our key industrial capabilities across peaks and troughs in domestic demand.

Defence exports will promote international engagement, capability building and greater interoperability with our allies and strategic partners.

Defence exports will position Australian companies as players on the global stage, driving competitiveness, which ultimately places industry in a stronger position and gives Australian taxpayers better value for money in defence procurement.

And defence exports will benefit Australians by creating jobs here at home – and a strong economy is a key factor in strong national defence and a firm ability to maintain a rules-based international order, in our own region and, when needed, further afield.

As we look across the world, it is clear that there is much our defence industry can do to prepare for and pursue export opportunities.

I am more firmly convinced than ever that there is considerable potential for defence exports and cooperation between government and industry to contribute to our strategic defence objectives.

Australian industry is continuing to build on our longstanding ties with our allies. We are deepening our participation in allied supply chains and industrial bases to maintain our collective capability edge.

In our region, many nations are revitalising their own defence capabilities. Australian industry is well placed to work with them in contributing niche functions and building cooperation with our neighbours while strengthening our regional role.

And as we expand our defence industry and capabilities Australia will continue to play its part as a responsible member of the international community and ensure our most vital technologies and defence exports contribute to global stability.

Already Australian companies are actively seeking out opportunities overseas, but opportunities remain to partner more closely with defence.

We’ve got some great success stories.

CEA has exported more than 260 million dollars of radar and other products in the past five years; products that are in demand by the United States as they beat anything they produce – an enormous achievement.

The Australian designed Nulka decoy system that protects ships from missiles not so long ago saved the USS Mason from an attack by Houthi rebels off the coast of Yemen.

Thales has been a major export success story while supporting our own defence needs. Over the past decade or so Thales has exported some 1.6 billion dollars worth of submarine sonars, air traffic control systems and Bushmaster armoured vehicles to Europe, Asia and the nations of the Caribbean.

Austal is exporting both Australian manufactured vessels and Australian designs and engineering innovations around the world.

In a major triumph for local industry they won a contract worth just under 800 million dollars to build the Independence Class Littoral Combat Ship for the United States Navy at the end of last month.

The Joint Strike Fighter is another great example of our export success, but not one that immediately springs to mind.

Because we committed early to the project, Australian Defence Industry is now reaping significant benefits.

Companies like Marand, who started life in the automotive sector are one of the biggest beneficiaries in Australia. Among other things, Marand make tail pieces and specialised engine trailers for the Joint Strike Fighter. They recently announced that, over the next decade their order book from the project will be worth more than $1 billion.

That’s not just for Australia’s Joint Strike Fighters – that’s exporting vital components made here in Australia overseas, to take their place on perhaps the most advanced combat aircraft the world has ever seen, that will be operated by the USA, the United Kingdom, Japan, Israel and many other countries.

There are more than 35 companies all over the country who have a similar experience with the Joint Strike Fighter programme. Companies like Varley, who have been operating for more than 100 years, and started making rail containers for the booming mining industry in the Hunter Valley, who now make the specialised secure trailers for forward deployments of the jets.

Or Chemring, who are based outside of Geelong and who make flares for the Joint Strike Fighters – expected to be over 350,000 of them, 90% of which will be for export. I could go on.

Now, our challenge is to make these more than just showcase examples of Australian innovation and capability.

They need to become the new normal.

Australia ranks thirteenth in the world for defence expenditure.

We are the fifth largest importer of defence material – but only the twentieth largest exporter.

Yet we know what a driver of an innovative, high-technology, high-skill, outward-focused, prosperous, twenty-first century economy an efficient defence export industry can be.

That is why the government has put defence at the centre of our national industry policies.

It’s why we’re developing the Defence Export Strategy to build on the vision of the Defence Industry Policy Statement by providing a plan to grow our defence industry exports in support of our broader defence capabilities.

This Strategy will plan, guide and measure defence export outcomes that will support our foreign and trade polices and defence industry, defence capability and national security objectives.

Industry is already beginning to benefit from this export focus in a number of ways.

I’ve already visited the United States, Britain, Europe and the Middle East on several occasions to spread the word about Australia, promoting the export of our defence materiel.

The government already has a number of programs in place to support defence exports and the Defence Export Strategy will further raise awareness of these programs.

Now, we’re looking to understand how the inclusion of Australia, along with the UK and Canada, in the United State’s National Technology and Industrial Base will allow us to provide some of our world leading capabilities to this vital ally.

This Strategy will consider a range of issues.

It will examine the contribution of Australian defence exports to defence capability.

It will look at the relationship between defence industry export outcomes and Australia’s broader foreign, defence, trade and national security objectives.

It will evaluate Australian defence industry export opportunities, challenges and priority markets, along with measures of defence industry exports and goals for future outcomes.

It will seek to further refine cooperation and coordination between government and industry to support Australian defence exports and, naturally, examine the management of sensitive technologies.

How we identify Australian industry’s exports strengths and priorities export opportunities is a key area of interest we are constantly working to refine.

It’s fair to say that not all parts of Australia’s defence industry are export ready and not all countries wish to buy what our defence industry has to sell.

That’s why it’s so important to understand where Australian capability, future potential and global demand align, considering both past export successes and current and newly-emerging export opportunities.

Exporting can be both a daunting and demanding undertaking for any business, and the nature of the defence industry can introduce further levels of complexity.

Businesses may face challenges such as identifying export opportunities, obtaining export market access and complying with export regulations.

That’s why determining the optimal ways government, defence and industry can work together to provide effective support to defence industry exports is so important.

We will need to facilitate export development so Australian firms can broaden their ambition with minimal exposure to risk.

I’ve already written to our Defence Attaches at our embassies and high commissions around the globe to ask them to focus on how they can identify local opportunities for Australian industry and, more importantly, help our companies get that first foot in the door.

At the same time, our successful Global Supply Chain and Team Defence Australian initiative continue to deliver.

Defence’s resources, however, are finite – and so we need to consider how we best marshal what we have to deliver the greatest benefit to local industry and the economy as a whole.

While we have some great programs, we need to have a clear strategy and the ability to plan government, defence and industry efforts based on clear prioritisation.

Our approach also has to take account of different markets, likelihood of success and the different industry needs of our small to medium enterprises and primes.

The fundamental issue we seek your assistance in determining is this: what can defence support do to offer a unique benefit and expansion of an export-focussed Australian defence industry.

We very much value your contribution – and I look forward to sharing the results of our endeavours when I detail the government’s plans with the release of the Defence Export Strategy later in the year.

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