ITAR Update
© 2010 FrontLine Defence (Vol 7, No 3)

Canadian defence and security companies are waiting to see how U.S. President Obama’s proposed overhaul of export controls will affect them. Defense Secretary Robert Gates offered some insight during an April 20th speech in Washington, but the details are still evolving – as well as ­vulnerable to political pressure and protectionism. There are, however, grounds for optimism. In contrast to previous reform initiatives, this latest one is driven by widespread concern in the White House and beyond about the shrinking U.S. share of export markets and the resultant job losses at home.

Obama set the process in motion by ordering a comprehensive policy review which would affect, among other things, the currently constrictive International Trade in Arms Regulations (ITAR) that have backfired on U.S. companies by fostering more international competition in the defence and security sectors. An interagency task force found that the current array of complicated export controls has not had the desired effect of improving national security because it is often redundant and overly-protective.

As outlined by Gates, in his speech to Business Executives for National Security, a non-partisan group founded in 1982, the central element of Obama’s agenda is a single Export Control List which would meld the Munitions List with the Commerce Control List. The intent is increased clarity about what products and/or services need an export licence. The government would concentrate on critical products rather than wasting resources on redundant and often conflicting interests of different departments and agencies. “The current arrangement fails at the critical task of preventing harmful exports while facilitating useful ones,” he said. A former U.S. Air Force officer who went on to spend 26 years at the Central Intelligence Agency, including serving as Director, Gates explained that an “overly broad definition of what should be subject to export classification and control’’ had become a “major culprit’’ in how controls have evolved.

“This… was evident even before the collapse of the Soviet Union. In 1982, when I became deputy director for intelligence at CIA, my responsibilities included tracking prohibited transfers of U.S. technology. It soon became apparent that the length of the list of controlled technologies outstripped our finite intelligence monitoring capabilities and resources. It had the effect of undercutting our efforts to control the critical items. We were wasting our time and resources tracking technologies you could buy at RadioShack. . . . We need a system that dispenses with the 95 percent of ‘easy’ cases and lets us concentrate our resources on the remaining five percent. By doing so, we will be better able to monitor and enforce controls on technology transfers with real security implications while helping to speed the provision of equipment to allies and partners who fight alongside us in coalition operations.”

This senior level acknowledgement is welcomed by Canadian industry representatives who had persevered in their attempts to persuade U.S. government officials to examine the negative impact caused by ITAR. Tim Page, president of the Canadian Association of Defence and Security Industries, said that the Gates speech, so close on the heels of Obama's announcement, “seems to provide clear evidence” of the Administration’s understanding of ITAR as an issue that adversely affects the competitiveness of the entire North American defence-industrial base.

“Canada’s defence industry is deeply integrated into the North American defence industrial base,” Page pointed out to FrontLine. “This is as a consequence of a conscious decision made 70 years ago by the political leadership of the day and is manifested today through 100-plus bilateral defence agreements between Canada and the United States… Any effort to improve the administrative efficiency of the ITAR environment… is welcome news for Canada. Wherever there are other issues that affect Canada’s ability to fully serve the North American defence industrial base, they too need to be remedied.”

Obama also wants to consolidate sundry lists of prohibited exporters and end-users into a single list designed to make it easier for companies and their agents to ensure that they aren’t inadvertently exporting to a restricted person or entity. A single export licensing agency would have jurisdiction over military and dual-use technologies, ostensibly reducing confusion over where and how to apply for licences, streamlining review, and make approvals more consistent.

All this would be underpinned by a single database overseen by a central Enforcement Coordination Agency, which would consolidate what Gates’ dismissed as a “byzantine amalgam” of functions currently split between the Commerce and Homeland Security departments and the Federal Bureau of Investigation.

“The United States is thought to have one of the most stringent export regimes in the world, but stringent is not the same as effective,” Gates acknowledged. “It creates more opportunities for mistakes, enforcement lapses, and circumvention strategies such as ‘forum shopping’, where exporters with problematic licence applications try different agencies looking for the best result. In one instance, an individual was caught intentionally exporting a controlled item (a carbon composite used in missile nose cones) without a license, but escaped prosecution by presenting two conflicting determinations from two different government agencies.”

There is corresponding frustration in the private sector as companies with a single purchase order may need export licences from two discrete agencies, raising the spectre of being approved by one and denied by the other. This could result in multinational companies moving their production outside the U.S. which not only erodes the industrial base but also compromises controls. “At the same time, onerous and complicated restrictions too often fail to prevent weapons and technologies from going places they shouldn’t. They only incentivize more creative circumvention strategies on the part of foreign companies – as well as countries that do not have our best interests at heart.”

Then there is the U.S. military’s accelerating transition to off-the-shelf rather than custom solutions. This can be problematic because some consumer-level electronics are finding applications in military equipment: components in the latest cellular devices also are found in stealth-defeating radar systems. Gates said the current U.S. setup “impedes the effectiveness of our closest military allies, tests their patience and goodwill, and hinders their ability to coordinate with U.S. forces” – in an era in which Washington has relied increasingly on allies’ support in foreign theatres such as Afghanistan.

Not too long ago, he recounted, a British C17 Globemaster that had become disabled in Australia was prevented from continuing to its destination for some time because U.S. law required the Australians to get permission to do the repair. “These are two of our very strongest allies for God’s sake!” Gates exclaimed. Other allies such as South Korea have bought U.S. aircraft only to encounter difficulties and delays in getting spares, an embarrassing and even insulting situation for Gates and some of his predecessors. “We have all, at one time or another, had to sit across the table from defence ministers from important allies or new partners and explain why the U.S. government is unable to follow through expeditiously on its commitments to provide the weapons, equipment, and support they have been promised and have paid for. It is not an edifying experience.”

Three years ago, the U.S. signed defence trade cooperation treaties with the U.K. and Australia. They both still await U.S. Senate ratification and Gates said that streamlined export controls would enhance Washington’s ability to equip and support its own and allied forces by providing for fast-track export for authorized groups of “trusted” companies, largely precluding the need for individual export licences.

“International agreements are still no substitute for the kind of fundamental systematic reform of export control that this country urgently needs,” he continued. “America’s decades-old, bureaucratically labyrinthine system does not serve our 21st-century security needs or our economic interests. It is clear our current limitations in this area undermine America’s ability to work with and through partners to confront shared threats and challenges… Our security interests would be far better served by a more agile, transparent, predictable, and efficient regime. Tinkering around the edges of our current system will not do.”

So when will all this bear fruit? The first two phases of Obama’s proposed reforms – the transition toward a single export control list and a single licensing agency, followed by implementation of the control list – can be achieved by Executive Order and through regulation. But the administration can expect resistance, even criticism, from entrenched interests in Congress, from state governments protective of local industry and potentially even from within the private sector too – despite undeniable evidence that many U.S. companies have suffered from the currently outdated approach. Moreover, congressional approval is necessary for the creation of any new agency or other bureaucracy, paving the way for all manner of political horse-trading. Canada, Australia, Britain and other U.S. allies are watching with great interest.

Ken Pole is a Contributing Editor for FrontLine Defence magazine.
© FrontLine Defence 2010