Export controls exist at the intersection of business and security, where goods leaving a country’s border meet regulation to certify a transaction based on its end use or end user. In the United States, export controls are a series of laws that function to monitor and, limit or promote the products that U.S. manufacturers pump into global trade. Modern systems of export control began during the second half of the 20th century and have remained structurally unchanged since the Cold War era.
Current Export Controls
Currently, before exporting, or re-exporting a product, a U.S. seller must ensure that the buyer is eligible to receive the particular product. To do this, the seller is obligated to check various lists from the Department of Defense and the Department of Commerce. To export or re-export certain material or to export to a particular buyer who raises a national security red flag, the seller must acquire licensing through an agency. Violations may lead to blacklisting of the primary seller, the reseller or the third party recipient and blacklisting is effectively denial of access to U.S. markets. Different agencies were assigned to oversee the sale of defense related material, technological products and dual use items yet there was purpose to this overlap. It was thought that agencies which oversee Commerce and Defense could increase checks on commercial interests with national security concerns and vice-versa. However, Defense Secretary Robert Gates stated that in the modern trade market, the overlap has created a cumbersome system that has worked to deter international buyers from the U.S. market. Secretary Gates also expressed that the system has created an atmosphere where sellers were forum shopping, using the dual licensing system to avoid the more onerous but correct agency requirements.
Reform
In his 2010 State of the Union Address, President Obama announced that “We will double our exports over the next five years, an increase that will support two million jobs in America. To help meet this goal, we’re launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security.” This position, coupled with an added emphasis on exports to Latin America was echoed in President Obama’s March 19, 2011 address.
Reform to Continue Despite a Changing World
The recent upheaval in North Africa, has led some to place an emphasis on the risks of reform in export controls which would loosen certain licensing requirements. The current political dialogue indicates that the Obama Administration intends to adapt quickly as situations emerge, fully cognizant of the dangers of U.S. manufactured arms and technology falling into the wrong hands. The reform is aimed at creating a more cohesive system, with a focus on loosening requirements on some dual use technology and military equipment. As an example administration officials have stated that “the brake pads on a M1A1 tank are subject to restrictions, even though they are almost identical to pads for fire trucks that can be exported without a license.” According to Secretary Gates’ outline, the reform does not augment the sanctions system or the far reaching violations penalty, rather, it focuses on streamlining the actual process of enforcement. The plan is to decrease the overlap in federal agency oversight creating one list for export licensing requirements, one database containing the list and banned end users, one agency carrying out the licensing and a single enforcement entity that will coordinate with foreign intelligence, all of this being done while keeping in mind the end goal of increasing the amount of US products in the world market. In any case, it is apparent that the Administration intends a shift in market output as President Obama emphasizes regional export potential, looking towards Latin America as an outlet for products.
In the end, buyers will forgo investment in U.S. exports if bureaucratic obstacles drive down product usability. By increasing the efficiency of our export systems, the value of the products that we export will be increased do to easier ability to acquire, replace and maintain parts and equipment. Therefore, it is paramount that the United States institute reform to insure reliability and consistency in our export systems.
For more, check out: