Backed by industry, government reforming defense export controls

March 27, 2011

Backed by industry, government reforming defense export controls

The government is moving to adjust restrictions on defense-related exports in an effort to consolidate multiple layers of bureaucracy and allow more to be sold overseas while strategically protecting key technologies. The initiative has received strong backing from the defense industry and its advocates, who see foreign sales as a way to potentially soften the blow of shrinking U.S. spending.

Last year, Defense Secretary Robert M. Gates announced that, as directed by the Obama administration, he was working with State, Commerce and Homeland Security officials to review the export regulations and make key consolidations. The plan, Gates said, was to produce a single export-control list, a single licensing agency, a single enforcement agency and a single information technology system to manage the data.

This approach “would allow us to concentrate on controlling those critical technologies and items -- the ‘crown jewels' if you will -- that are the basis for maintaining our military technology advantage,” Gates said.

In a statement, the National Security Council said the effort is focused on controlling fewer parts and components. Additionally, the NSC said it's working to create a license that would cover an entire program, rather than requiring each part to be licensed.

Joel Johnson, executive director for international at the Teal Group, said the Pentagon and the Obama administration are seeking to draw a clear boundary between specialized military equipment that is difficult to replicate and basic equipment, like components produced at local machine shops.

“There is a line, and what they're trying to do is figure out where that line is,” he said.

As concerns grow over a slowdown in U.S. defense spending, contractors have targeted export reform as an mechanism to improve efficiency and make sure they remain viable.

Wes Bush, president and chief executive at Northrop Grumman, in a February speech said overly strict regulations have hurt U.S. companies and encouraged other countries to come up with their own versions of any given technology. As a result, U.S. companies are weaker and the country is no safer, he said.

“We have been so focused on protecting our technological edge that we have actually done severe and unnecessary damage to our defense industrial base,” Bush said.

Marion C. Blakey, president and chief executive of the Aerospace Industries Association, said the initiative could be critically helpful to defense and aerospace contractors.

“It really goes to the health of our industrial base . . . because if you do not have enough demand for any given technology you'll lose the capability to produce it,” she said.

But Todd Harrison, an analyst at the Center for Strategic and Budgetary Assessments, said foreign sales still make up just a fraction of what the U.S. spends on defense programs.

Since 1970, the ratio of foreign military sales to U.S. military procurement spending has averaged 23 percent, according to Harrison.

“It can't completely make up for a significant downturn in U.S. acquisition spending, but it can help,” he said. “The problem though right now is if you look at other countries . . . that we would normally sell to, they're having budget problems of their own.”

by Marjorie Censer

The government is moving to adjust restrictions on defense-related exports in an effort to consolidate multiple layers of bureaucracy and allow more to be sold overseas while strategically protecting key technologies. The initiative has received strong backing from the defense industry and its advocates, who see foreign sales as a way to potentially soften the blow of shrinking U.S. spending.

Last year, Defense Secretary Robert M. Gates announced that, as directed by the Obama administration, he was working with State, Commerce and Homeland Security officials to review the export regulations and make key consolidations. The plan, Gates said, was to produce a single export-control list, a single licensing agency, a single enforcement agency and a single information technology system to manage the data.

This approach “would allow us to concentrate on controlling those critical technologies and items -- the ‘crown jewels' if you will -- that are the basis for maintaining our military technology advantage,” Gates said.

In a statement, the National Security Council said the effort is focused on controlling fewer parts and components. Additionally, the NSC said it's working to create a license that would cover an entire program, rather than requiring each part to be licensed.

Joel Johnson, executive director for international at the Teal Group, said the Pentagon and the Obama administration are seeking to draw a clear boundary between specialized military equipment that is difficult to replicate and basic equipment, like components produced at local machine shops.

“There is a line, and what they're trying to do is figure out where that line is,” he said.

As concerns grow over a slowdown in U.S. defense spending, contractors have targeted export reform as an mechanism to improve efficiency and make sure they remain viable.

Wes Bush, president and chief executive at Northrop Grumman, in a February speech said overly strict regulations have hurt U.S. companies and encouraged other countries to come up with their own versions of any given technology. As a result, U.S. companies are weaker and the country is no safer, he said.

“We have been so focused on protecting our technological edge that we have actually done severe and unnecessary damage to our defense industrial base,” Bush said.

Marion C. Blakey, president and chief executive of the Aerospace Industries Association, said the initiative could be critically helpful to defense and aerospace contractors.

“It really goes to the health of our industrial base . . . because if you do not have enough demand for any given technology you'll lose the capability to produce it,” she said.

But Todd Harrison, an analyst at the Center for Strategic and Budgetary Assessments, said foreign sales still make up just a fraction of what the U.S. spends on defense programs.

Since 1970, the ratio of foreign military sales to U.S. military procurement spending has averaged 23 percent, according to Harrison.

“It can't completely make up for a significant downturn in U.S. acquisition spending, but it can help,” he said. “The problem though right now is if you look at other countries . . . that we would normally sell to, they're having budget problems of their own.”

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