Editorial | A Long Time Coming

by

It took 14 years, but the U.S. Congress finally undid its own mistake by passing legislation this past December that rationalizes the export licensing regime for satellite hardware, technology and know-how.

In dramatic contrast, it took just over half a year to draft and pass the self-defeating legislation that clamped down on exports in the first place, wreaking havoc on the industry. The entire saga testifies to the danger of allowing fear, politics and haste to drive the legislative process; it’s far easier to break something than to turn around and fix it.

The National Defense Authorization Act (NDAA) for Fiscal Year 2013, signed into law Jan. 3 by U.S. President Barack Obama, restores the president’s authority to determine export licensing jurisdiction for satellite-related items. It repeals a provision of the Strom Thurmond NDAA for Fiscal Year 1999 that ostensibly was intended to protect U.S. national security but wound up undermining an industry on which national security depends.

Prompted by allegations that China was using launches of U.S. commercial satellites to perfect its long-range missiles, the 1999 law mandated that all U.S. satellite technology, regardless of application, sophistication or international availability, be placed on the U.S. Munitions List. Anything related to satellites was henceforth officially classified as potentially dangerous weaponry whose exports are tightly controlled by the U.S. Department of State based exclusively on national security and foreign policy considerations. Up until the law was passed, the White House was moving some communications satellites to the Commerce Control List governed by the Department of Commerce, which also takes economic factors into account in its export licensing decisions.

It’s clear that some tightening and clarification of the rules was necessary at the time; satellite manufacturers were not properly safeguarding sensitive technology in supporting launches of their hardware on Chinese rockets. But it’s equally clear that lawmakers reacted hastily and injudiciously. To wit, the House passed an initial, and highly restrictive, version of the legislation before beginning its own investigation into the matter.

Part of the reason was politics. The crackdown was championed most vociferously by congressional Republicans, who trumpeted the technology-transfer allegations and conjured up worst-case scenarios to bolster the narrative that their political nemesis, then-President Bill Clinton, was cozying up to Beijing at the expense of U.S. national security.

Take politics out of the equation and the result might have been a more measured response that plugged potentially damaging technology leaks without disrupting a brisk and economically beneficial trade, mostly among close U.S. allies, in commercial satellite technology.

The extent of damage caused by the 1999 NDAA, which passed in late 1998, is a matter of debate. Although the U.S. share of the international satellite manufacturing market has undeniably declined since then, there were other factors at play including Europe’s emergence as a world-class competitor and an overall market decline following the telecom bust. Further, while frustrating licensing delays were commonplace in the years immediately following the crackdown, things gradually improved as State and industry, particularly the big satellite makers, adapted.

But even as U.S. companies of all sizes learned to live with the new rules, and bear the associated cost, the weapons designation assigned to their products was inevitably viewed by the marketplace as a liability, one that overseas competitors were happy to exploit. One European satellite manufacturer, Thales Alenia Space, went so far as to develop a satellite devoid of U.S. components, reasoning that some customers would be willing to pay the higher price of that product to circumvent Washington’s regulatory reach.

Interestingly, given the stated purpose of the crackdown, it was the U.S. national security community that emerged as one of the most important advocates of reform. The surge in U.S. defense spending that followed the Sept. 11 terrorist attacks had helped blunt the impact of the restrictions. But as the subsequent spending slowdown loomed, concerns about the health of the space industrial base landed front and center, and Pentagon officials came to view the export control regime as a part of the problem.

China’s launch industry, meanwhile, has shown no ill effects from being shut out of the commercial market. Over the past decade Chinese rockets have proved to be highly reliable while launching at rates that in some years have eclipsed those of the United States.

It was only in the face of overwhelming evidence that the export rules were doing more harm than good, both from a national security and economic standpoint, that Congress agreed to repeal the mandate that anything destined for a satellite — down to the simplest fastener — be classified as weaponry. It still wasn’t easy, even after lawmakers got the message: The House version of the reform legislation would have saddled the White House with onerous reporting requirements, and thus slowed the implementation. Thankfully, that language was excluded from the final bill.

The White House is now free to draft a new set of export rules, which shouldn’t take too long given how much time the State and Defense departments have already invested in studying the issue. The stated approach — strengthening controls on the most sensitive technologies while loosening those on commodities — is encouraging and, more importantly, reasonable.

In a political era defined by Washington gridlock, the export reform measure in the NDAA for Fiscal Year 2013 stands out as a major accomplishment that enhances both national security and the economy. Those responsible for getting it passed are to be commended. Yet, one still has to wonder where the space industry would be today had the voices of reason prevailed in 1998.