Center for Strategic Communication

The threat of sequestration continues to loom over Capitol Hill, and the defense industry is facing a great deal of uncertainty as to whether they will face across the board cuts to their programs. The uncertainty of the fiscal climate has led to increased lobbying efforts along with public announcements of potential layoffs. Defense firms have already begun to look overseas for new areas of business growth, and are increasingly seeking to compensate for the potential reductions in their bottom line through foreign sales.

International sales of defense technology and equipment are complex and deeply interwoven into a bureaucratic web of regulation, licensing, and compliance enforcement. Defense firms are required to navigate export control regulations put in place to protect against the transfer of sensitive military technology and capabilities to countries wishing to harm the United States (understandably so).

Many defense contractors, however, have begun to circumvent export controls or at least lobby to ease their restrictions. Recent violations regarding the sale of weapons technology indicate the relevance of such reform, and demonstrate that the export control regime may be failing the private sector but more importantly the overall national security of the United States.

Export controls include a perpetually growing list and are often focused on the wrong technologies (some of which are already widely available). Comprehensive reforms are needed to protect national security needs while maintaining American competitiveness in the production of defense technology and capabilities.

Currently, the export control regime is governed by multiple government departments and agencies who do not all agree on the same rules and regulations they are supposed to enforce. Increased pressure to provide licenses and a tendency to focus on low-risk technology has prevented the export control regime from adequately regulating the proliferation of dual-use and defense technologies according to many senior defense experts.

In addition to the export controls established by the United States, there are also international agreements which also govern the transfer of military and nuclear technology:

1) The Wassenaar Arrangement: conventional arms and dual-use goods and technologies

2) The Nuclear Suppliers Group: nuclear exports and nuclear related exports

3) Australia Group: chemical and biological weapons

4) Missile Technology Control Regime: unmanned aerial delivery systems and missiles

The path to export control reform is complex, and there are still no definite answers as there are disagreements within government as to what needs to be changed (if anything) within the export control regime.

The defense trade between the private and public sector has evolved dramatically over the past few decades. Often dual-use technologies (technology with peaceful and military applications) are developed in the private sector without defense applications, but are sought out by government due to their “dual-use”. Rep. Howard Berman of the House Foreign Affairs Committee provides examples of such dual-use technologies and has also introduced legislation in the past to reform export controls.

Many believe the situation is a catch-22; the DOD will sometimes favor loosening export controls so that the U.S. defense industrial base can sell technologies (and compete) with European firms that are already being selling the same products to foreign markets. A loosening of export controls would also increase overall production, reduce costs, and give contractors more capital for R&D.

Export controls which are too loose, however, could potentially jeopardize U.S. national security and be used by enemies of the United States.

Export controls are currently implemented under the authority of the Arms Export Control Act which provides for the International Traffic in Arms Regulations (ITAR), a set of regulations for military-specific/defense technology. ITAR is administered by the State Department and enforced by the DOD.

The Export Administration Act (EAA) covers dual-use technologies and is administered by the Department of Commerce through Export Administration Regulations (EAR). Not to mention nuclear technology – regulated by the Nuclear Regulatory Commission.

Confused yet?

This brief outline demonstrates the complexities of export control regulations, especially as more technologies have dual-use applications and as defense corporations continue to pursue business development overseas.

There are no clear answers as how to centralize the regulatory regime and streamline the process. And while many disagree as to how to balance industrial competitiveness with national security, there appears to be some consensus that the regime needs reforms.

Export controls must be re-focused towards technology that is not already being sold by other countries, and must remain central to those technologies which pose a direct threat to national security.

A strategic review and consolidation of the export control lists would aid in streamlining the process.

Furthermore, more transparency regarding expectations and will assist with defense contractor’s internal compliance standards (which the U.S. government depends upon due to relatively weak enforcement).

Centralization of regulation, transparency, and better enforcement appear to be  a part of the solution. As export controls have received some attention in Congress and the President has even launched a reform initiative, the issue appears to be gaining a greater amount of attention. A measured overhaul by Congress and the Executive Branch is still needed, however, in this important area of national security where global trade and strategic regulation intersect.

For a more a more in-depth analysis of the Export Control Regime, read  ASP’s paper by Evelyn Farkas, Ph.D.

U.S. Export Controls: Emerging Consensus on Increasing Risk