Defense Exports: What Are the True ‘Crown Jewels’?

By Sandra I. Erwin
Tens of thousands of pieces of equipment and spare parts supplied by Pentagon contractors soon could become easier to sell to foreign countries.
Following nearly three years of deliberations, Defense and State Department officials have agreed to seek the removal of non-sensitive technologies from the U.S. Munitions List. Any item on the USML is subject to tighter export controls.
These highly anticipated export-control reforms have been sought by U.S. weapon manufacturers since the end of the Cold War. In the face of Pentagon budget cutbacks, companies increasingly are looking for opportunities in the overseas defense market.
The Obama administration has since 2009 put significant pressure on the Pentagon and State bureaucracies to whittle down the USML. Many government and defense industry officials agree that these reforms were long overdue, but nobody should expect the new measures to open the floodgates for the sale of the Pentagon’s most prized technology, such asnight-vision systems or unmanned air vehicles.
Disagreements among agencies on what exactly constitutes “dual use” technology versus “crown jewels” will persist, and likely will keep technologies that are coveted by foreign buyers off limits.
“What should be dual use and what should be crown jewels?” said Andrew J. Shapiro, assistant secretary of state for political-military affairs. “That’s where the real debate lies,” he said July 27 during a breakfast meeting with reporters.
Night vision sensors are sold commercially, but they also are technologies that give the U.S. military an edge over adversaries, Shapiro said. Defense and State officials do not always agree on “where we have the advantage,” said Shapiro. “Those are some of the toughest discussions we are having.”
Manufacturers of unmanned air vehicles that had hoped for lesser restrictions on exports will continue to be disappointed.  
In an April speech, Northrop Grumman Corp. CEO Wes Bush said export restrictions are “hurting this industry in America without making us any safer.” He said current export regulations treat UAVs as if the United States had a corner on the technology. The same thinking led to restrictions on satellite exports, which cause U.S. industry to lose market share, said Bush. “The very policies that were intended to keep this technology secure for us actually encouraged others, who could not buy it from us, to develop their own,” he said. “America lost valuable export opportunities.”
The United States is “struggling to sell unmanned aircraft to our allies while other nations prepare to jump into the marketplace with both feet,” Bush said.
Shapiro noted that there is “intense interest in UAVs,” and all export requests are reviewed on a case-by-case basis.
When considering sales of sensitive technologies, Defense and State officials also weigh the relationship that the United States has with the potential buyer and what impact that sale might have on the regional balance of power, said Shapiro.
This is one area where government officials make judgment calls with which exporters might disagree.
Within the  Pentagon’s export-control bureaucracy alone, there are 13 working groups that must clear certain classes of exports before the State Department system kicks in. UAV export license requests are vetted by the group that administers the Missile Technology Control Regime. In cases when the lower level groups do not concur, Shapiro’s office has the final word.
“UAV exports have been very tightly controlled in the past, but I see some indications the administration may be taking a more pragmatic position,” said Frank Cevasco, president of Cevasco International, an industry consulting firm.
Advanced UAVs have been sold to Germany, Italy and the United Kingdom. “However, it will not be easy to export the more capable UAVs in the future," Cevasco told National Defense. "I suspect the administration is considering an approach that is increasingly sensitive to who will operate the UAVs [such as an ally that is fighting side by side with U.S. forces] rather than simply stalling for several years followed by deciding ‘no.’”
In a speech last week to the Defense Trade Advisory Group, a panel of outside experts that works for the State Department, Shapiro touted the administration’s reforms as a contributing factor to rising exports. He cited a $10 billion increase in fiscal year 2011 in items authorized for transfer. “In 2011 the Directorate for Defense Trade Controls processed more than 83,000 licenses. The most ever,” said Shapiro. Foreign military sales surpassed $50 billion in fiscal year 2012. “This represents at least a $20 billion increase over 2011 and we still have a chunk of the fiscal year left,” he said.
Shapiro said State also is taking action to improve the congressional notification process that is required by law for defense exports exceeding specified dollar values and for which Congress has a limited number of days. Congress can halt the “pre-notification” process if a member objects.
The USML review was been under way for two years. Defense and State officials are taking the various USML categories — one or two at a time — and submitting proposed changes, such as moving a category from the USML to the Commerce Control List.
Additional categories will be submitted for formal notification this year, Shapiro said. He did not say what reaction, if any, he had received from Congress.
“This administration has made it a top priority to promote U.S. business abroad,” Shapiro told the trade advisory group. “We view the American defense industry as an integral part of our efforts to advance U.S. national security and foreign policy.” At the State Department, he said, “We advocate tirelessly on U.S. companies behalf. … I have the frequent flier miles to prove it.”
Shapiro said he continues to be surprised by the fact that, “despite our high bar for approving transfers and our aggressive monitoring, more and more countries want to partner with the United States.”

Topics: Defense Department, DOD Policy, International

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