ITAR has made it more difficult for US companies to sell commuications satellites and spacecraft components to customers in other countries, even those who are close allies. (credit: Boeing)

ITAR’s failure

by Taylor Dinerman
Monday, March 17, 2008

The history of the 20th century is littered with failed attempts to control the flow of weapons and weapons technology. There have been a few successes, but they tend to simply slow proliferation and increase the costs. Any nation with enough time and money can buy the means to develop just about any weapon or weapons system it wants. Sometimes moderate gains can be achieved by international means such as the Coordinating Committee for Multilateral Export Controls (CoCom), which lasted from the late 1940s until the Clinton Administration abolished it in 1993, or by covert sabotage and other active measures. This last was used by the Reagan administration against the USSR and by the Israelis against Saddam Hussein’s nuclear program in the 1980s.

ITAR (International Traffic in Arms Regulations), which since 1999 has included not only weapons but communications satellites and virtually all spacecraft and most detailed information about them, has been one of the most spectacular “own goals”, as they say in soccer, in US history. Reduced to its essentials, it was a declaration of economic and technological war by the US government against the US national interest.

ITAR handed over control of an important part of the US high tech economy to a set of hyper-cautious, hyper-legalistic, and slow-moving bureaucrats. In response to a critical GAO report in January of this year, the late Congressman Tom Lantos (D-CA) complained about “years and years of fundamental mismanagement at the Directorate of Defense Trade Controls (DDTC).” He was right: the problem goes back to 1999, when Congress passed the regulatory power from the Department of Commerce to the State Department.

Big companies, large organizations such as NASA, and the big universities have the time and the resources to overcome these obstacles. However, small companies or individual researchers do not. Even large companies have seen their profit margins reduced by the need to waste their recourses coping with these regulations.

Some attempts have been made to try and improve this situation. In November 2007, Don Manzullo (R-IL) and Brad Sherman (R-CA) joined with a small bipartisan group of representatives to offer a couple of small but useful steps in the right direction. First, they would require the State Department to double the number of licensing officers on staff from 42 to 84. More importantly, it would allow space parts for systems that have already been exported to close allies to be shipped without having to go through the ITAR process. These are useful changes, but they fail to address the space industry’s most pressing problem, which is the classification of communications and other commercial satellites as “weapons systems”, something no other nation on this planet does.

In late January the White House made a few, minimal changes in the way the ITAR regulations would be administered. Even taking into account the statutory limits involved, few serious changes were offered. The most potentially important part was the promise to require decisions on licensing to be made within sixty days of the application.

Other changes include a new dispute mechanism and an upgrade of the electronic licensing system. One change that may be more significant than it seems is the establishment of a new multiagency working group that would include both the Departments of Commerce and Defense. The DoD in particular is painfully aware of the damage that ITAR has done to US industry and can be expected to put real pressure on the State Department to improve this situation.

In the long run only Congress, with strong support from the White House, can resolve this problem. The Bush Administration has run out of time, so it will be up to the next administration to attempt to resolve this problem. The question involves more than just helping US companies to sell their products in the global marketplace. It involves a deeper question: how does a superpower balance the needs of its national security system and its need to trade?

During the Cold War this question arose over and over again as the US attempted to wage economic warfare against the USSR and its empire. While it was often frustrated by the Europeans and Japanese and their mercantile philosophies, the US did raise the “hassle factor” for companies trying to sell high technology goods and services to Moscow. A similar campaign is now underway against Iran, but it will be many years before its full effects are felt by Tehran.

A rebalancing of the US government’s approach must take place. ITAR as it now exists was an overreaction to the Clinton Administration’s all-out embrace of a mercantilistic philosophy. If the new President and Congress simply free up the flow of technology in the name of export promotion, he or she will simply insure that at some future date Congress will re-impose ITAR-like restrictions, perhaps in an even more draconian form.

Part of a future solution would be to re-establish the CoCom, a tiny and highly effective multilateral Cold War organization that brought together the US and its NATO allies, as well as Japan and Australia, in an informal setting where they could agree on what and what not could be exported. The organization’s extreme discretion and its lack of a formal legal structure insured that no nation could publicly lose face. The fact that it lacked any means to enforce its decisions did not mean that it did not have clout. One example: in the 1980s, when it was found that Japanese and Norwegian firms had sold equipment to the USSR that significantly improved their submarine technology, the US retaliated against those firms without arousing much of a backlash.

While a new CoCom would be useful, the most important thing is for the US to find a way to trade with its close allies that treats them as trusted friends. The Validated End User program for a few highly reputable foreign firms is a small step in the right direction. However, much more is needed, and this can only be accomplished if the legislation is changed. It is doubtful that many foreign governments or firms are ready to spend any time or effort to help the US out of this dilemma. They are profiting—or at least they think they are profiting—from America’s mistake.

This time next year the new President should put in place a small task force on ITAR reform that will report directly to him or her. This task force should work closely with Congress to present comprehensive legislation that can be passed and signed during the first year of the new administration. Otherwise, the problem will just get kicked down the road. The US space industry will continue to suffer and good, high paying jobs will continue to be lost.

Taylor Dinerman is an author and journalist based in New York City.

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