Graham Warwick/WASHINGTON DC
During the Kosovo conflict, the Italian Coast Guard tried to buy air-sea rescue flares with which to locate downed NATO aircrew. The US manufacturer's request for an export licence was refused. Italy was a coalition ally, the flares had already been approved for sale to 30 countries, but the US licensing officer still said no.
This is just the farcical tip of an iceberg of embarrassing export control anomalies that threaten to wreck US efforts to foster a coalition approach to resolving conflicts. It is far from being the only example of the vagaries of an export control system that has branded the USA an unreliable ally in the eyes of some of its potential coalition partners.
Licenses to send Greece updated repair instructions for helicopter engines took five months. A licence to provide the Netherlands with critical components for helicopters needed for peacekeeping operations in Bosnia took two months. A licence request to modify helicopter radios for the Netherlands to ensure NATO interoperability was turned down.
These and other "horror" stories have emerged as the US aerospace and defence industry has mounted an increasingly strident campaign to reform the export control regime. Its targets are the government departments involved in licensing exports. Its battleground is Congress, which is debating whether to revamp US export control legislation.
Now the Department of Defense (DoD) has switched sides and joined the battle for more logical and reliable export controls. Whereas industry is concerned about losing its competitive edge if licences are delayed or denied, the DoD is concerned about losing a future war if military interoperability and its underpinning industrial co-operation are harmed.
What happened? Three things, says David Oliver, principal deputy undersecretary of defence for acquisition and technology. "During Kosovo, interoperability was not what it ought to be," he says. This affected the coalition's capabilities. "We saw warfighters recognise the interoperability issues."
Second was the rapid consolidation of the European industry, with the merger of British Aerospace and GEC-Marconi and the formation of the European Aeronautic, Defense and Space company. "They had to be the same size their US counterparts," he acknowledges. "But it is easier to become a fortress UK or fortress Europe if you have one company."
If that happens, the USA "will have to take retaliatory action", Oliver warns. "If Europe closes down, the USA will lock out European companies. That's the political reality." The DoD's concern, he says, is the impact on NATO interoperability if Europe and the USA close their defence markets. While the USA spends $60 billion a year on defence procurement, all of Europe spends less than $35 billion, he says. "That is not a big enough production base to maintain an effective defence industrial base."
The third warning shot across the DoD's bows was the emergence of evidence that European manufacturers were considering replacing US components in their products "because the export control process is so unreliable", says Oliver. He cites a DaimlerChrysler Aerospace policy document circulated in October which told designers to find alternatives to Honeywell equipment. "We are seeing more companies abroad saying they will not buy US because of our export controls."
These three factors have convinced the DoD leadership that US export controls are putting at risk military interoperability and industrial co-operation. "We want our allies to buy compatible communications systems and sensors," Oliver says. "We don't want them to buy inferior systems just because of an artificial barrier." Revamping export controls is the key, he says.
Proponents of export control reform argue that the current system, administered by the Department of State with DoD assistance, has not kept pace with globalisation. Bluntly, Oliver says: "[The DoD] has a whole group of people who do not know what is going on in the world and what is good for the country. And the same is true at State."
The existing system was established during the Cold War and designed to prevent US technology falling into Soviet hands. "It was estimated there were 5,000 Soviet systems that required US parts to operate," Oliver says. "So we put together a control system that was right for then, but is wrong for now."
Too many requests
Industry and government agree that the biggest problem with the current system is resources - too few people handling too many licence requests. The State Department's Office of Defence Trade Controls receives 45,000 licence applications a year, representing sales averaging around $27 billion, and passes them to the DoD for technical review.
"We go through the entire process even if we've done it before, and 80% of this stuff is repeat business," Oliver says.
"If we tagged [each repeat application] with the last decision, and checked it for any change, we could eliminate 80%," he says. About 85% of all licence approvals are for NATO nations, other Western European countries and close US allies such as Australia, Egypt, Israel, Japan and Saudi Arabia. "We could eliminate 30% [of licence applications] if we did not worry about the UK and Australia," says Oliver.
The DoD has proposed to the State Department that the UK and Australia be exempted from the International Traffic in Arms Regulations (ITAR) that govern the export of US weapons and technology. Only Canada has such an exemption.
Oliver argues such a move would encourage closer industrial co-operation and military interoperability with two of the USA's staunchest allies. "We already share such sensitive information with them," he says. More significantly, Oliver believes extending ITAR exemption to the UK and Australia would "send a message" that the USA is ready to open its defence market to countries prepared to meet its requirements for reciprocal export controls, industrial security and open competition.
The State Department is not convinced. Vigorously defending the export control system before Congress last week, senior adviser for arms control and international security John Holum warned that extending ITAR exemption to countries willing to align their export controls with the USA's "raises many difficult legal, regulatory and policy issues".
Holum said State "would be supportive of more extensive Department of Defense use licensing exemptions that are currently provided in the ITAR. We believe that better use can further interoperability, coalition warfighting and other national security objectives". But granting blanket exemptions from the ITAR may be a step too far for State.
Joel Johnson, US Aerospace Industries Association vice-president, international, says: "DoD sees this from a security angle. State's focus is on foreign policy. It wants the flexibility to change its mind. In the Cold War, security and policy were the same thing. They have not come to grips with the changes."
Oliver argues that extending ITAR exemption to key allies could benefit both national security and foreign policy. He cites the example of Canada. When certain elements of its ITAR exemption were withdrawn last year, the close links developed between Canadian and US industry were adversely affected. US companies had to seek export licences to work with their Canadian subsidiaries.
The seriousness of the situation quickly raised the issue to the highest levels of government of both sides of the border. Noting that Canada and the USA are close to agreeing changes that will allow the full ITAR exemption to be reinstated, Oliver says: "Granting an exemption makes it more important if it is taken away. When that happens, it gets raised to the highest level. You get higher security."
Oliver sees ITAR exemption as a powerful incentive for countries to improve the technical security and export controls. "If there is a violation, you can stop the exemption. It is both a stick and a carrot." The current US export control system "provides a stick, but no carrot - and the stick is so short we keep hitting ourselves in the kneecaps".
Ultimately, it is the State Department, and not the DoD, which controls export licensing, and industry considers the granting of blanket ITAR exemptions unlikely. Instead, Congress is expected to back streamlining initiatives outlined by Holum. These include:
• Umbrella approaches, such as a global co-operative project licence when a programme is covered by a government-to-government memorandum of understanding;
• programme licences, which would reduce the number and extend the life of hardware licences for major commercial programmes;
• special handling of licences associated with particularly important programmes, such as NATO's Defence Capabilities Initiative, which aims to improve coalition interoperability.
The DoD and State Department continue to improve the speed with which they review and approve export licences, but this will not prevent all the idiocies which have plagued the system. Modernising US export controls remains "critical to warfighting, interoperability and the industrial base," says Oliver.
Source: Flight International
