US Industry Associations Pushing to Reform Export Controls
America’s ITAR system for controlling military exports has become a persistent complaint abroad – and at home. Abroad, it is often seen as being about protectionism first, and protection second. At home, the system is widely seen as a stumbling block to joint projects with US allies, and to America’s defense industry more generally. Britain’s ITAR-related disputes with the USA (now resolved) over the multinational F-35 program, and recent problems with approval that tipped a major foreign weapon purchase in favor of a particular US competitor, illustrate both types of complaints at work.
At the same time, legitimate security concerns around military technology transfer must be satisfied – and hopefully updated in an era where nations like China have used “American” front businesses as vehicles for major espionage coups. Now an industry initiative is underway to change key aspects of the US defense export control system, with support from several European firms. A recent GAO report is adding fuel to the fire, noting vulnerabilities in the existing system and recommending rethink and reform.
In the coalition’s March 6 press release, Aerospace Industries Association president and CEO John Douglass said:
“Making these improvements will increase our ability to fight shoulder-to-shoulder with our allies and friends around the world… Past experience has made it clear that multilateral operations enhance success, and military interoperability is vital to this endeavor… It is hard to overstate how important this is to our nation.”
Electronic Industries Alliance interim president and CEO Charlie Robinson said the regulatory process must catch up with industrial advances.
“We measure modern technology in nanoseconds, but it often takes two months or more to complete this regulatory process… Federal officials are making strides to bridge that gap, but we must do better. We need an export control policy that puts security first, while helping our allies abroad win and our companies at home compete.”
A coalition of 8 US industry associations have now banded together to improve the allied cooperation and industry opportunity facets of export controls. The “Coalition for Security and Competitiveness” includes:
- Aerospace Industries Association
- Association for Manufacturing Technology
- Coalition for Employment through Exports
- Electronic Industries Alliance
- Information Technology Industry Council
- National Association of Manufacturers
- National Foreign Trade Council
- U.S. Chamber of Commerce
Their stated goal is a “modern U.S. export control system that is more efficient, predictable and transparent,” and they note that:
“The current system regulating the export of defense and “dual-use” items (i.e., those with both civil and military application) is administered by the U.S. departments of State and Commerce, respectively, but often involves other federal agencies. The Commerce Department processes more than 18,000 authorizations per year. The State Department processes more than 65,000 licenses each year, a figure that has been increasing about 8 percent annually. Some cases take months to process, causing a detrimental impact on allies.”
In June 2007, a group of major European defense firms backed the Coalition for Security and Competitiveness initiative. William H. Swanson of Raytheon Company and Charles Edelstenne of Dassault Aviation led their respective groups at the annual meeting between the leadership of the Aerospace Industries Association of America and AeroSpace and Defence Industries Association of Europe. Other executives taking part were Thomas Enders of EADS and Ã…ke Svensson of Saab Aerospace on the European side and Northrop Grumman’s Ronald D. Sugar, Rockwell Collins’ Clay Jones, and BAE Systems Inc.’s Walt Havenstein on the U.S side.
ITAR Improvement, or Avaricious Accommodationism?
Their “Recommendations for Modernizing Export Controls on Munitions List Items” are fairly straightforward. The proposals don’t make any major contributions to the most pressing security challenges the industry currently faces, but they would significantly improve efficiency and execution within the existing system.
Their “Recommendations for Modernizing Export Controls on Dual-Use Items” may prove more controversial. They ask for greater freedom of technology transfer within multinational firms, changes to some re-export restrictions on approved items, and a major revamp of the encryption controls process. All of these recommendations have the potential to weaken rather than strengthen security controls; for instance, technology transfer within a multinational firm could be very convenient for allies (Raytheon USA to Raytheon Australia, for instance), but it could also allow technology bleed to divisions or countries involved in other defense technology partnerships whose results are outside US defense export controls.
The July 2007 GAO Report
On July 26/07, the US Government Accountability Office released GAO-07-1135T: “Export Controls: Vulnerabilities and Inefficiencies Undermine System’s Ability to Protect U.S. Interests.” As one might imagine, it was not sanguine about the current system’s performance. A quote from the abstract will suffice; the entire report is available via the indicated link:
“Two key weaknesses relate to the most basic aspects of the system’s effectiveness.
First, State and Commerce have yet to clearly determine which department controls the export of certain sensitive items. Unclear jurisdiction lets exporters – not the government – determine which export restrictions apply and the type of government review that will occur. Not only does this create an unlevel playing field among U.S. companies, it also increases the risk that items will fall into the wrong hands.
Second, a lack of clarity on exemption use has limited the government’s ability to ensure that unlicensed exports comply with export laws and regulations. These weaknesses compound an already challenged enforcement community, which has had difficulty coordinating investigations, balancing multiple priorities, and leveraging finite resources.
[The US Department of] State’s initiatives to facilitate defense trade by reducing the time it takes to process export license applications have generally not been successful. For example, D-Trade, State’s new automated application processing system, has not yet achieved anticipated efficiencies. Overall, processing times have increased – from a median of 13 days in 2002 to 26 days in 2006. Also, at the end of 2006, State’s backlog of applications reached its highest level-more than 10,000 open cases. While Commerce’s license processing times have been relatively stable, the overall efficiency of its processing is unknown.
Despite the existence of known vulnerabilities, neither department has conducted systematic assessments of its export control system. Federal programs need to reexamine their priorities and approaches and determine what corrective actions may be needed to ensure they are fulfilling their missions in the 21st century. Given their export control responsibilities, State and Commerce should not be excused from this basic management tenet.
Ultimately, GAO’s work demonstrates both the ineffectiveness and inefficiency of the export control system – a key concern that compelled GAO to designate the effective protection of technologies critical to U.S. national security interests as a new high risk area.”
Pressure is clearly building for a rethink of the ITAR system, and a consensus is growing that this is long past due. The question is how to make changes that will improve both allied weapons program cooperation AND national security.
January 2008: Presidential Directives
On Jan 22/08, President George W. Bush signed a package of directives. They amount to a proposed speed up of the approval process, and better coordination on the government side of the table. The treaties this President has signed with Britain and Australia will address many of the defense industry’s other requests with respect to those countries only, if they are ratified in the Senate.
“USA Moves to Improve Arms Export Regulation Process” has the details.
Additional Readings & Sources
- US GAO (July 26/07, #GAO-07-1135T) – Export Controls: Vulnerabilities and Inefficiencies Undermine System’s Ability to Protect U.S. Interests.
- US Department of State – Defense Trade Controls – The International Traffic in Arms Regulations (ITAR) [HTTPS connection]. See the official version, and an unofficial consolidated version that integrates recently-introduced amendments. Note that all documents here are in PDF format.
- USA’s International Trafficking in Arms Restrictions – excerpts in HTML. Warning: older version.
- AIA (April 2/09) – Satellite Export Control Rules are Damaging Space Industrial Base. “U.S. market share for commercial satellites dropped from 73 percent to 27 percent after legislation passed in 1998 to control commercial satellites as military items. The Center for Strategic and International Studies reports that the United States is the only country that requires stringent and time-consuming reviews and approval processes for exports of commercial communications satellites and related components. AIA recommends that the government undertake a review of all space technologies to determine which ones should be controlled as commercial or military items.”
- DID (Sept 10/07) – Australia Signs Defense Trade Agreement With USA. The agreement framework is similar to Britain’s.
- AW Aerospace Daily & Defense (Sept 6/07) – Now Is Best Chance To Remake U.S. Export Controls
- British MoD (June 22/07) – UK and US Sign Treaty on Defence Cooperation. In effect, it’s a special set of arrangements re: ITAR for qualifying British firms.
- Aviation Week’s Ares (June 5/07) – US Technology? No Thanks! “The only way to resolve technology access and U.S. government export restrictions imposed by ITAR is by “not including any U.S.-sourced technology into our products,” [Dassault CEO Charles Edelstenne] the President of the Aerospace and Defense Industries Association of Europe (ASD) said yesterday… In the context of space programs, steps are already being made towards completely excluding U.S. input in order to stay clear of the ITAR restrictions, adds Francois Gayet, the permanent Secretary-General of the ASD…”
- DID (Nov 9/06) – US Export Restrictions Hand Korean E-X Competition to US Firm. It only takes one or two incidents like this to generate a lot of mistrust, and strong counter-reactions. DID lays out the situation, and explains the policy problem.
- DID (Feb 14/06) – Love on the Rocks: CASA’s $600M Venezuelan Plane Sale In Heavy Turbulence. A good example of export controls at work – but even when the security concerns are legitimate, they can generate unwanted backlash unless they’re handled carefully. This case illustrates both sides of that coin.
- DID (Dec 7/05) – ITAR Fallout: Britain to Pull Out of F-35 JSF Program? The threat was real, and Britain had a ‘Plan B’ – but an accord was eventually reached with all F-35 member countries.
- DID (Dec 1/05) – UK Warns USA Over ITAR Arms Restrictions. Describes what ITAR is, how it works, and some of the policy issues it presents.
- DID (Apr 19/05) – EU Stymied, Conflicted on Lifting China Weapons Embargo
- National Defense Magazine (August 2004) – Multinational Aircraft Program Tests Transatlantic Cooperation. They’re speaking of the F-35 JSF, and some of its ITAR-related snags and teething problems. Also addresses additional efforts to add restrictions contained in various US appropriations bills.