ManuFACTS: Export Controls

It’s Time to Modernize a Cold War Policy

• Secretary of Defense Robert Gates has stated, “The U.S. export system itself poses a potential national security risk.” Modernization of the U.S. export control system is needed to strengthen U.S. national security and meet the threats of the 21st century. • High-technology industries play a vital role in defending our nation and promoting a strong and vibrant economy. Companies in this sector employ 2.5 million workers, but this is down 26 percent from 2001. With the appropriate reforms, U.S. high-tech exports are estimated to increase by $60 billion and create 350,000 jobs. • High-tech exports are a declining percentage of total U.S. exports, accounting for 36 percent of all exports in 2001 and only 28 percent in 2008. • The current export control system creates a competitive disadvantage for U.S. companies and negatively impacts jobs and U.S. exports. • The NAM is a co-founder of the Coalition for Security and Competitiveness and is providing practical recommendations to the Administration and Congress as both work to review and modernize the export control system. • The NAM believes a modernized export control regime must prevent proliferation of sensitive technologies; promote foreign sales and interoperability; support U.S. technological and scientific leadership; strengthen U.S. competitiveness in global technology markets; and preserve a cutting-edge industrial base.

How Congress Can Help
• Work with the Administration and industry to modernize the export control system and implement the “four singles” announced by the President in April 2010: a single licensing agency, a single control list, a single enforcement agency and a single IT system.

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More Information
The current export control system: • Hinders private sector growth of the high-tech industrial base and the development of the critical technologies on which the military depends. • Strains the ability of small and medium-sized enterprises (SMEs) to act as suppliers for the military. • Diverts necessary research and development from the next cutting-edge technologies. • Puts U.S. companies at a competitive disadvantage. The U.S. must modernize its export control system. • Defense trade and technological cooperation with friends and allies strengthens America’s competitive edge and sustains the defense-industrial base. • High-tech R&D generates cutting-edge innovation to protect U.S. national security and promote the prosperity of our nation. • The high-tech industrial base is eroding as more and more SMEs are pushed out of the market. Consequently, vital parts and components cannot be secured domestically. • According to the 2010 Quadrennial Defense Review, second, third and fourth tier suppliers are critical to protecting national security, yet many are unable to compete due to the complexity and lack of transparency in the current export control system. The NAM offers the following principles for modernizing the export control system to improve both national and economic security. • Prevent proliferation of and access to America’s most sensitive and military critical technologies by adversaries. • Promote foreign sales and interoperability with partners and allies, consistent with U.S. foreign policy and national security objectives. • Support U.S. technological and scientific leadership while leveraging the benefits of foreign technological innovation. • Strengthen U.S. competitiveness in global markets and preserve a cutting-edge industrial base, including highly-skilled workers. The NAM believes these principles can best be accomplished in the near term by structuring reform around the following themes: • Draw clear lines of agency responsibility. Dual use items and munitions are properly controlled by different agencies subject to different criteria. However, interagency conflict and the attendant confusion in the government and business communities must be overcome. Much can be done to clarify the lines of authority and areas of responsibility.

• Control lists should be revised and reduced. Failure to keep up with rapidly changing technology means that many items are controlled at inappropriate levels even though they are widely available and no longer state of the art. In other cases, lowsensitivity but high commercial value technology only available from the U.S. is being held back, which reduces the competitive edge and limits the market share for U.S. companies. • Fully transition to an end user-based system. Licensing decisions are increasingly based on the acceptability of end users. Procedures have been developed to determine the bona fides of end users and to monitor their use of technology after export. It is time to complete the transition by developing more efficient procedures for trusted end users and exporters. • Enhance cooperation with business community. SMEs need help with application procedures and development of robust compliance programs. Without support and clarity, SMEs are reluctant to export and take on additional risks. The adversarial nature of the current system must be changed to help exporters share information on prospective buyers that could be important to U.S. enforcement and intelligence authorities.

Bottom Line
The NAM believes it is vitally important for both national and economic security to modernize the export control system. Modernization will enhance the government’s ability to protect national security interests while removing the burdens and disadvantages placed on U.S. high-technology manufacturers. The government should thoroughly modernize export controls to strengthen the industrial base, enhance national security and improve economic competitiveness.

U.S. High-Tech Exports

Source: Department of Commerce and World Bank

More Information
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February 2011

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