Arms Export Reforms Kick Into High Gear

Defense Secretary Leon Panetta hands a model of the F-35 to UK Defense Secretary Philip Hammond.
It was not long ago that a truck would pull up in front of a nondescript office building in Crystal City, Va., to deliver large boxes containing export license applications that the State Department needed the Pentagon to review.
After years of bureaucratic wrangling and head butting, Defense and State agencies finally are doing that paperwork electronically, in a shared database.
A single computer system for processing defense industry export licenses was long overdue, says former Pentagon official Al Volkman. And that is just one of several changes to the export licensing process that the Obama administration hopes to have in place by the end of the president’s term.
“We have made significant process progress,” says Volkman, who recently retired as director of international cooperation at the office of the secretary of defense. For 20 years, he oversaw the contentious process of trying to overhaul the government’s procedures and policies for reviewing, accepting or denying companies’ applications to sell equipment overseas.
U.S. arms manufacturers have sought these reforms since the end of the Cold War. The pressure to ease strict controls on exports intensified with the onset of globalization, when all of a sudden technologies that used to be only supplied by U.S. companies became more widely available. Fear of losing market share in the international arms market has fueled industry lobbying efforts to have technologies that are not exclusively military removed from the State Department’s “U.S. Munitions List.” Items on the USML are highly restricted, versus those on the Commerce Department’s list, which are easier to export and might not even require an export license.
The three previous administrations pursued reforms, with limited success. It wasn’t until former Defense Secretary Robert Gates took charge of the effort for the Obama administration that things started happening, Volkman tells a group of industry executives who work in international arms sales.
Gates was less interested in boosting U.S. industry than he was in strengthening ties with allies that were fighting side-by-side with American forces, as well as other friendly nations who depend on U.S. weaponry for internal security.
Gates convinced Obama to initiate aggressive reforms of export controls, which mostly were under the jurisdiction of State and Commerce. He quickly discovered that the Pentagon's opaque foreign disclosure process was perhaps a larger part of the problem. Gates kick started the creation of the Technology Security and Foreign Disclosure Office. TSFDO, a clearinghouse that approves the handover of U.S. military technologies to foreign allies, marked a significant improvement in the attitude of the administration toward disclosure of technology security, Volkman says. 
TSFDO opened for business in Feb. 2011, so it might be too soon to tell how much of a difference it has made. Industry insiders have long criticized the Defense Department for operating on its own timeline, while manufacturers operate on tighter schedules, driven by the pressure to score sales in a cutthroat defense market. They also point out that, despite recent reforms, there are still fiefdoms within Defense and State that do not see eye to eye on export controls.
Volkman says many of the administrative improvements -- such as timely processing of export control requests -- seen over the past two years are a credit to Robert S. Kovac, managing director of the State Department’s defense trade controls office. Kovac was the former head of the Pentagon’s Defense Technology Security Administration. “I respect the job he’s done as head of DTC,” says Volkman. Before Kovac took over, the State Department was notoriously inefficient in the administration of the licensing process, he says. “There was enormous pressure from the Defense Department and industry on State to clean that up,” says Volkman.
But even under the new regime, moving applications can be far from smooth sailing, especially when committee staffers and lawmakers decide to challenge a particular sale during the congressional notification process. “There is still a lot of resistance in some places in Congress" to the administration’s export control reform proposals, Volkman says. Members and staff of the House Foreign Affairs Committee have raised questions, for instance, about removing items from the USML and about recent Commerce Department initiatives to allow trusted allies to purchase non-sensitive equipment without an export license.
The recent Commerce proposals are a "big step,” says Volkman. Technically the administration does not need congressional approval to do this, but State officials have been cautious about keeping friendly relationships with Congress and often do not want to ramrod changes without the committee’s blessing. The items that Commerce wants to make available license-free are entirely mundane and noncontroversial, says Volkman. “Brake pads that are used in commercial trucks and tanks should not be on the munitions list,” he says. “It’s not a big danger if you make it export license free.” Items that have little national security implications should be on the Commerce list, he says. “Some staff and Congress want to retain control and influence, but that’s not a good reason to keep items on the munitions list.”
House and Senate committees currently are working on a highly anticipated legislative proposal that would remove satellites from the USML. Satellite manufacturers have argued that restrictions on satellite exports have cost the industry billions of dollars in sales.
 
Volkman says it is unlikely that much will be accomplished in the runup to the 2012 election, but he warns that if there is a change in administration, it is conceivable that Obama’s reforms could be overturned.
Andrew J. Shapiro, assistant secretary of State and head of the Bureau of Political-Military Affairs, is the administration’s point man on export reforms. In a July 17 speech at a conference hosted by the Commerce Department’s Bureau of Industry and Security, Shapiro pushes back on speculation that reforms are losing momentum in an election year. “To suggest that is just wrong,” he says. “By January of next year we will have either crossed the goal line, or we will be so close, that whoever is in these jobs will just need to dive into the end zone and do a touchdown dance.”
Shapiro credited his agency for accomplishing tough reforms while still ensuring that all export rules are consistent with U.S. foreign policy. “We only allow a transfer of items after we carefully examine issues like human rights, regional security and nonproliferation concerns and determine that a sale is in the best foreign policy and national security interests of the United States,” he says.
Defense exports are valued for economic reason, he says, as they support “tens of thousands of American jobs.”
It is no longer just ambassadors who promote U.S. security cooperation abroad, he says. “Senior State Department officials regularly advocate on behalf of U.S. bidders on foreign government and foreign military procurements.”
As the defense trade expands, he says, the “strain put on our aging export system has only increased.” The U.S. Munitions List protects too much and tries to “control everything – from the weapon system, itself, to every nut, bolt, and screw that may be used on that system.” Shapiro says. The current rules were written before the Internet and smartphone age. “It generally treats all items the same and applies the same controls across the board. … The system doesn’t distinguish between a generic bolt on the F-16 and the F-16 itself. This, to say the least, is nuts.”
Shapiro’s office is overseeing modifications to the USML and the Commerce Control List, or CCL. The goal is to “create clear bright lines between munitions and dual-use items,” he says. Items that might be removed from the USML include unarmored military vehicles, cargo and utility aircraft, auxiliary surface vessels and commercial communications satellites. “We are working category by category,” says Shapiro.
Volkman says he is confident that the administration’s reforms are going to help U.S. industry increase exports.
He is less optimistic, however, about the prospect of foreign firms in the U.S. defense market.
During his time at the Pentagon, Volkman was an advocate of international cooperation in weapons programs as a means to bolster ties with allies and to expand the field of competitors vying for Pentagon sales.
In times of tight budgets, he says, foreign competition can help drive prices down. Multi-nation programs means resources are shared and everyone saves money, he added.
The U.S. military, with the notable exception of the F-35 Joint Strike Fighter, has generally resisted partnering with other nations in the development of weapons programs, says Volkman. In 20 years on the job, he did not see demonstrable change in the willingness of the military services or the Defense Department as an institution to buy foreign equipment. “I think that is unfortunate,” says Volkman. “I wish I had been able to change the culture.”
The “not invented here” syndrome will make it tough for foreign suppliers to gain ground in the U.S. market, he suggested. The U.S. military prefers to develop its own equipment, and always has had the resources to do so. With entire bureaucracies and corporations now in place to support the development and procurement of weaponry, the chances that the Pentagon will be more open to foreign technology are slim, he says. The military services and their contractors are going to fight tooth and nail to thwart foreign competitors, he adds.
When the Pentagon does buy a piece of foreign equipment, it tends to over-customize it, which negates any cost benefits, says Volkman. The presidential helicopter that Gates cancelled in 2009 is a case in point.
Volkman also laments the outcome of what was once a promising multinational venture, the Medium Extended Air Defense System. MEADS is a mobile air defense weapon developed by the United States, Italy and Germany to replace the aging Patriot. The U.S. Army decided to terminate participation in the program last year, although it agreed to fund it until tests are completed. Volkman says he blames the Defense Department, not the foreign partners, for backing away from MEADS. It was under budgeted, it wasn’t designed to be produced efficiently, says Volkman. “They stretched it out. The government didn’t have the best management team early in the program.”
Now that the Army has decided to pull the plug on MEADS and stay with Patriot, MEADS is performing well in tests. Volkman called this a “real tragedy” because the U.S. Army has invested years and billions and dollars, and will end up with no new systems.

Topics: Defense Department, DOD Leadership, DOD Policy, Interagency Issues, International, Missile Defense