Administration’s Export Reforms Are a Step in the Right Direction
By Lawrence P. Farrell Jr.
President Barack Obama recently noted that the U.S. export control system is rooted in the Cold War era and must be updated to address the threats the nation faces today and in the changing economic and technological landscape.
Current rules do not reflect the dramatic changes in the geopolitical and global economic realms that have occurred during the last 15 to 20 years. There are now less clear-cut distinctions between military and commercial technologies and increased availability of high-tech equipment and services from non-U.S. companies. Suppliers need greater speed and efficiency in meeting global market demands.
Exports of dual-use items are regulated by the Department of Commerce under the Export Administration Act, and defense/military items are regulated by the Department of State under the Arms Export Control Act.
The export control system is contributing to the erosion of the competitive position of U.S. companies in the global marketplace.
In the 2010 Quadrennial Defense Review, Secretary of Defense Robert Gates said, “The U.S. export system itself poses a potential national security risk … [It] impedes cooperation, technology sharing, and interoperability with allies and partners … [and] hinders U.S. industrial competitiveness and cooperation with allies.”
In recent years, a number of our closest allies have formally advised the U.S. government that its export control policies and procedures are a major impediment to defense cooperation. European contractors have even indicated their preference to exclude U.S. suppliers from competing for work. In their view, this is due to U.S. companies’ difficulty in reliably meeting schedule and availability requirements, which are attributable to a cumbersome, slow-moving export control system. Indeed, in recent competitions, a major criterion has been the ability to demonstrate that export-licensing procedures will not impede a U.S. supplier’s capacity to perform if chosen.
On March 11, President Obama announced the National Export Initiative, which is intended to enhance national security by focusing on the enforcement of strict controls around the export of the most critical technologies and products. It also seeks to strengthen the competitiveness of key manufacturing industries in the United States by streamlining the regulation of exports. The president has tasked the secretary of defense to lay out these reform proposals as soon as possible. At this time, it is not known if legislative action by Congress will be needed to implement any of the proposed changes.
Some of the specifics of this new reform policy include reducing the delay of U.S. exports of encryption products, such as cell phone or network storage systems. Currently, makers of products with encryption capabilities need to apply for a Commerce Department technical review of the product before it can be exported. The review can take between 30 to 60 days. There are more than 3,300 such filings each year. This proposed rule is intended to replace the current review-and-wait process with a more efficient one-time notification-and-ship process, which may eliminate up to 85 percent of all the technical reviews of these products.
Another proposed reform would be to eliminate obstacles to exporting to companies employing dual nationals. Currently, U.S. exporters and foreign customers of U.S. goods have to comply with two different, conflicting sets of standards. Under this reform effort, the administration will begin to eliminate about 2,000 munitions licenses a year, which should have a dramatic impact on the compliance programs of both U.S. exporters and foreign customers. It will touch on at least half of the more than 85,000 munitions licenses the United States issues each year.
Protection of our national security and technological edge in key capabilities must continue to be the principal focus of our export control laws. The war on terrorism has increased concerns about key technologies falling into the wrong hands. We should aim to build higher walls around fewer technologies. The scope and enforcement of export controls should address these legitimate concerns.
We must not, however, lose sight of the security and economic benefits of a more targeted and efficient export control system that allows interoperability with our allies. The actions proposed by the National Export Initiative should enhance the ability of companies to comply with government requirements, improve interoperability with our closest allies while protecting national security and strengthening U.S. competitiveness in global markets. It also would help to preserve a cutting-edge industrial base, including a highly skilled work force.
Many of the export reform issues announced in the National Export Initiative have been among NDIA’s top policy concerns for a number of years. NDIA’s International Division is actively engaged in reviewing and commenting on the new proposals and is committed to working with the administration in the successful implementation of the export control reforms.
After many years of virtually no activity to modernize the export control procedures, I am encouraged by the president’s new initiative.