With elections approaching and a worsening unemployment outlook, observers are wondering if 2010 will be the year when Congress begins reforming the regulations that control the export of military technology and data overseas.
“I’m more optimistic today than I have been in some time that there is going to be some kind of fundamental change,” said an industry executive, who has worked on export control in the government and the private sector for the past 25 years.
The International Traffic in Arms Regulations code controls goods and data that can be used by foreign militaries. The ultimate goal is to prevent sensitive defense technologies from ending up in the hands of potential adversaries.
Every military item, from nuts and bolts on trucks to fighter jets, requires an export license. The Department of Commerce processes licenses for “dual-use” times — those that have commercial as well as military applications. The most sensitive technologies and know-how are on the “munitions list,” which requires more stringent controls. The State Department’s directorate of defense trade controls is responsible for issuing licenses for munitions list items.
Among the technologies on this list are small arms and ammo, explosives, tanks and other military vehicles, sensors, body armor, certain biological agents and spacecraft systems.
Proponents of reform say the list is outdated and contains many items that are no longer exclusive to U.S. manufacturers. The onerous requirements for gaining a license causes them to lose business to overseas manufacturers that produce the same technologies and are not under the same tightly controlled regulations.
Industry advocacy groups are making a renewed push to reform the regulations. Meanwhile, the Obama administration is reviewing the policies and one House committee has already held a hearing on aerospace export control reform.
“As far as how extensive the reforms are going to be, it’s kind of tough to tell,” said Shaun McDougall, international military arms analyst at Forecast International. “The storm has been brewing for years … especially with the economy in the shape that it’s in. The pressure is increasing.”
There are three possibilities this year, said the executive, who wished to remain anonymous because his company prefers to speak on the issue through industry advocacy groups.
The strongest possibility for reform this year would come in the form of bilateral agreements with trusted partners like the United Kingdom and Australia.
“It will be ‘you trust us, we trust you,’” he said.
“It’s almost a lock that there will be some movement on bi-lateral treaties” this year, he said. “The only question is how far do you push the envelope?” In other words, what items should or shouldn’t be put on the munitions list for trusted partners?
A second prospect for reform this year may zero in on specific industries, he said. The space sector, both in launch services and satellite manufacturing, is an area where reform is clearly needed, he said.
“There does seem to be a consensus building that the one industry that has really taken it in the shorts during this long debate on export rules has been the space industry,” he added.
In 1996, satellite manufacturer Space Systems/Loral was convicted and heavily fined after sharing technical data on rocket technology with China. Shortly after that scandal, satellites and their subcomponents were placed on the munitions list.
That move has severely damaged the U.S. space industry, said Rep. C.A. “Dutch” Ruppersberger, D-Md., at the GEOINT Symposium in San Antonio, Texas.
“Our launch industry is highly strained to meet our needs while nations like France are moving ahead,” he said. The policies designed to protect the nation are having the opposite effect. Customers buying commercial satellites are going to foreign manufacturers. That degrades the U.S. space industrial base, and has had a cascading effect on the nation’s ability to build its next generation of military and spy satellites. Experienced engineers are leaving the profession for a lack of work, Ruppersberger, and others, have argued.
The congressman introduced a bill, H.R. 3840, Strengthening America’s Satellite Industry Act, to address some of these issues.
“There does appear to be a ground swell, that that whole [space] area needs to be reviewed and perhaps brought back under the Commerce Department,” the executive said. “There appears to be a fair amount of support for that on the Hill.”
The only problem with industry specific reform would be criticism from other sectors, the executive said. “Some people would ask why they’re doing that just for them,” he added.
As for prospects this year for a complete ITAR overhaul, he gave it a 50-50 chance, “which is higher than it’s been,” he noted.
The Export Administration Act, which ITAR falls under, expired in 1989, and has not been revised. It has received a series of incremental extensions since then, which the president is allowed to do under the International Emergency Economic Powers Act.
ITAR is Cold War-era legislation, but the world has changed since then, the executive said. It’s true that some sensitive technology has fallen into the hands of potential adversaries because of illegal exports, but today, old-fashioned espionage and security breaches on the Internet are more effective ways to steal military secrets.
Sensitive items such as nuclear weapons, high-end computer processing, night vision and other sensors, and special materials — such as those that enable stealth technology — will not be removed from the list, the executive predicted.
The rules not only cover technologies, but data and expertise as well. In the Space Systems/Loral case, engineers did not export technology to the Chinese, but rather shared data that made their rockets more dependable. That resulted in a clamping down on the information side of export controls. A university professor, for example, must obtain a license from the State Department to deliver a technical paper overseas.
“If industry could pick one area that drives them crazy, it’s this implied export where a scientist goes over and needs an export license to deliver a technical paper,” the executive said. “Someone needs to take hard look at it.”
He added: “Loral was blatant and stupid. And that’s what got everyone bent out of shape.” Attempting to restrict basic science and research is impossible, he said.
A major rewriting of the act would have support in the House, but the Senate is another matter, the executive said. It does not seem to be a priority for senators this year.
Ruppersberger said the House does not intend to play hardball with the Senate on export reform. All he can do is continue to educate his peers on the matter. As a senior whip for his party, he is in a good position to do so, he told reporters at the conference.
When most of his fellow lawmakers wake up in the morning, they don’t think about export control issues, he said. But if he can continue to educate them on the damage some of the rules are doing to the space industry, then he thinks they will come around to his side, he said.
The House Foreign Affairs Committee’s terrorism, nonproliferation and trade subcommittee held a hearing in December on aerospace ITAR reform. A second off-site hearing is scheduled for mid-January in Palo Alto, Calif. One of the main topics representatives discussed at the first hearing was job creation.
The executive said the worsening unemployment problem could drive reform this year as lawmakers look for ways to take action on the economy. Looser export controls would create business opportunities overseas for arms manufacturers, and therefore boost the job market, or so the argument goes.
Henry Sokolski, executive director of the Nonproliferation Policy Education Center, testified at the hearing against allowing more aerospace exports to go license free.
Satellite technologies are the “crown jewels” of the U.S. defense industry. Aerospace export regulations should be tightened, rather than loosened, he told the subcommittee.
Lawmakers who wanted fewer items on the munitions list and those who wanted to maintain the status quo both made arguments that doing one or the other would create jobs, Sokolski said. If technology goes overseas, then there would be job losses as U.S. arms manufacturing moves offshore, the opponents said.
“I think for every action, there is an equal reaction. The system is too complex. How you would know what the net [job creation] effect would be I think is perhaps beyond human calculation,” Sokolski said in an interview after the hearing.
“They have to do something to give the impression that they are doing something about jobs,” he said of Congress.
McDougall agreed that the job creation argument was weak. “It’s tough to tell when you’re talking about technology transfer agreements, and things of that nature,” he said. “For the most part, the job creation argument can’t hold water.”
Sokolski added that for specific sectors, manufacturers could make valid arguments that alleviating ITAR controls would create more jobs.
“In the aggregate, over the entire complex economy, I don’t know how it washes. I don’t think anybody does,” he added.
McDougall said with reform, Congress might try to put in place caveats in the legislation that protect U.S. jobs “to avoid a situation where you export a technology and have a foreign manufacturer controlling the knowledge behind that technology.”
The primary purpose for ITAR regulations is to protect national security, not opening markets, Sokolski said.
Nevertheless, he acknowledged that the wind is blowing toward reform. Both he and the executive noted that some of the stalwarts in the House and Senate who opposed ITAR reform have moved on. Chief among them was the late Rep. Henry Hyde, R-Ill., who chaired the House International Relations Committee. The experts were hard pressed to come up with names of legislators who would stand in the way today.
Sokolski said: “The industry that can lobby the best with the most money is going to win even if it’s not in the best interest of our national security.”
“I just hope they go slow,” he added.