Report: Export Reforms Needed for U.S. National Security

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WASHINGTON — Outdated U.S. export restrictions combined with a decline in defense spending are eroding the U.S. industrial base for space components, compromising national security as a result, according to a new report by an industry advocacy group.

Based on a survey of U.S. satellite and satellite component makers, the report said U.S. export policies discourage some firms from competing in overseas markets and called on the White House to support space systems as part of its National Export Initiative aimed at doubling U.S. exports over the next five years. Prepared by the Aerospace Industries Association (AIA) and released to media Jan. 23, the study also found that the restrictions are encouraging other countries to develop components for which they once relied on U.S. suppliers.

“Maintaining a strong industrial and supplier base is, in itself, a major national security issue; enabling this critical sector to compete internationally will become increasingly important as government spending is constrained,” Marion C. Blakey, AIA’s president and chief executive, said in a cover letter accompanying the report.

In addition to publishing selected results of a member survey, the report, “Competing for Space: Satellite Export Policy and U.S. National Security,” cited numerous other studies and statements by government officials on the adverse impact of the current export control regime. “This paper sounds an urgent call to our national leaders to bolster opportunities for satellite exports by modernizing the U.S. export control system,” Blakey said.

The administration of U.S. President Barack Obama is in the midst of an export reform push that would reduce the number of items on the U.S. Munitions List, a registry of militarily sensitive items whose exports are licensed by the U.S. Department of State. However, the reforms face opposition in Congress, which passed legislation in 1999 transferring export jurisdiction for all satellites and related technologies to State. Previously, the U.S. Commerce Department had export licensing responsibility for commercial communications satellites with the exception of those containing the most sensitive technologies.

The AIA said 20 of its member companies responded to the survey and that of those, 90 percent drew a connection between export controls and an eroding U.S. space industrial base, while virtually all said their business had been adversely impacted. One “small firm” said it lost $5 million in annual sales as a result of the International Traffic in Arms Regulations (ITAR), the rules under which State licenses U.S. Munitions List items.

Similarly, respondents noted that the rules have had the unintended consequence of encouraging overseas development of technologies in which U.S. companies once had a dominant position, according to the report. One company noted that the European Space Agency, which has a policy of helping European companies become more competitive in satellite communications technologies, has attempted — so far unsuccessfully — to develop unfurlable mesh antennas of the sort that are used today on some of the most capable U.S.-built commercial and national security satellites, according to the AIA.

Another company, described as mid-sized in the AIA report, said it loses between $500,000 and $2 million in potential sales for every so-called ITAR-free satellite that gets manufactured. Thales Alenia Space of France and Italy markets an ITAR-free satellite, meaning a spacecraft devoid of restricted U.S. technologies and thus not subject to State’s licensing rules, and has booked several sales to customers including China, which is off limits to U.S. satellite and satellite component makers.

The report cited a section of the 2010 National Defense Authorization Act directing the State and Defense departments to evaluate the national security risks of removing satellite components from the U.S. Munitions List. An interim report released in 2011 found the risks for all but the most sensitive components to be manageable, but more than 70 percent of survey respondents believe the legislation will have no impact unless Congress authorizes the president to make “substantial revisions” to the Munitions List, the report said.

“ITAR licenses, recordkeeping requirements and increased potential for delays magnify the risk and cost of competition for U.S. businesses,” the report said. “Ultimately, these circumstances damage the reputation of U.S. industry, and reduce predictability and profitability for the U.S. exporter, thus threatening the health of the domestic space industrial base.”

The AIA recommended that that the administration promptly complete and release its review of space systems being considered for removal from the Munitions List and that Congress give the president the authority to determine export jurisdiction for space-related technologies. The president should use this authority to transfer items to the Commerce Department and give that agency more resources to handle its broader responsibilities, the report said.

The report also recommended the U.S. Export-Import Bank, which provides financial backing for U.S. export sales, become more involved in the space sector, particularly in support of U.S. companies whose overseas competitors are receiving similar support for their governments. The Defense Department, meanwhile, should encourage U.S. allies to utilize U.S. spacecraft and related systems, AIA said.

“For our national policymakers, promotion of satellite exports should rank among the most viable options to aid our economy, reinforcing U.S. preeminence in space and ensuring our aerospace industrial base remains second to none,” Blakey said.

 

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