The Washington Post today reports on a speech by Wes Bush, chief executive and president of Northrop Grumman, commenting on the top issues facing defense contractors and the federal government. Export controls figured prominently in his remarks, as modernization of the rules are of key importance to U.S.-based manufacturers competing in the global marketplace.

From “Northrop CEO says export controls should be eased“:

The government needs to launch new programs and ease export controls to ensure defense contractors remain capable and viable, said Wes Bush, chief executive and president of Northrop Grumman, in a speech to the region’s technology community last week.
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In his remarks today to the President’s Export Council, President Obama ran through the various parts of his National Export Initiative, intended to double U.S. exports within five (now a little more than four) years. He reaffirmed the the importance of the U.S.-Korea Free Trade Agreement and closed on export controls.

Finally, we’ve also been working to reform our export control system with high-tech companies like some of yours in mind, so that American firms that make products with national security implications can stay competitive even as we better protect our national security interests.

When this council met in September, some of you asked that we make it easier for businesses to participate in these reform efforts.  So today, I’m pleased to announce that we’re publishing a first set of guidelines for what products should be controlled going forward, and the licensing policies that will apply to them.  As an example, we’ve applied those policies to one category of products.  In that one category, about three-quarters of products previously subjected to stricter controls will be shifted to a more flexible list, and many are expected to fall off the list altogether.  And we want input from businesses, from Congress and from our allies as we complete this reform.

 Today, we’re also unveiling a new export control reform web page as part of the revamped Export.gov.  This is something that Secretary Locke mentioned in our last meeting.  Typically, all businesses that export have to go through a maze of different lists, different formats, from different departments, to make sure they’re not selling their products somewhere or to someone that they shouldn’t be.  As important as that is, the process is repetitive, it’s redundant, and particularly onerous for small businesses without the means to navigate it all.

So we’re changing that.  Effective today, businesses can, for the very first time, go to Export.gov and download one consolidated list of entities that have special export requirements.

Here’s the webpage at Export.gov for the President’s Export Control Reform Initiative.

The President’s announcement embraces many of the recommendations the National Association of Manufacturers and member companies have developed, included in “The NAM Blueprint for a 21st Century Export Control Regime.” As NAM President John Engler said in a statement, “These proposed changes will strengthen national security, improve U.S. competitiveness, and increase export opportunities for manufacturers.”

The President’s Export Council, which includes many representatives of manufacturing and NAM-member companies, convenes at 9 a.m. today. Here’s the agenda, and the meeting is being webcast at http://whitehouse.gov/live.

President Obama is expected to speak at 10:15 a.m. unveiling new Administration proposals on export controls.

• Reuters, “Obama fleshes out plan to revamp US export controls“
• Bloomberg, “Obama Proposes Easing Export Controls on Europe, Japan, Canada“

Bloomberg’s Mark Drajem previews tomorrow’s announcement by President Obama, “Obama Proposes Easing Export Controls on Europe, Japan, Canada“:

The Obama administration proposed easing controls on the export of technology items that may be used for military purposes to 37 allies, including Canada, Japan, Germany and France.

In a rule set to be published tomorrow, the Commerce Department asked U.S. industry groups to review its plans to ease limits on sales for a number of products. Commerce Secretary Gary Locke proposed eliminating export controls for sales to close allies a year ago, and has pushed to get the rules released.

“Conceptually this is a very important move forward,” said Catherine Robinson, the director for high-technology trade policy at the National Association of Manufacturers…

The Milken Institute in January released a report sponsored by the NAM, “Jobs for America: Investments and policies for economic growth and competitiveness.” Modernizing export controls was a key recommendation:

Modernizing U.S. export controls could increase exports in high-value areas. By 2019, these policy adjustments could enhance real GDP by $64.2 billion (0.4 percent), create 160,000 manufacturing jobs, and heighten total employment by 340,000.

President Obama took steps forward this weekend to promote both U.S. trade and national security by announcing significant  export control reforms with India.  According to a Whitehouse Fact Sheet, “Indian Prime Minister Singh and President Obama committed to work together to strengthen the global non-proliferation and export control framework and further transform our bilateral export control cooperation to realize the full potential of the strategic partnership between the two countries.”

So what does this really mean?  For one, the United States is going to actively work with India to help the country gain membership in the four multilateral export control regimes.  This is significant not only because the National Association of Manufacturers specifically called for improved multilateral engagement in our Manufacturing Blueprint for a 21^st Century Export Control Regime, but also because effective proliferation controls depend upon strong multilateral controls. India’s membership will promote greater harmonization of export control systems and help drive consistent implementation of standards across member countries. Given India’s ever increasing and growing role in global security and economic matters, this integration is important for U.S. national security and the manufacturing sector.

Second, the United States will “realign” India in its dual-use export control regulations to reflect India’s status as a strategic partner, effectively treating India similarly to other close allies and partners. India will no longer be listed as a “country of concern” and will establish re-export controls to prevent bad actors from trying to export U.S. technology in India to proscribed third countries. This realignment is significant given the President’s previously announced reforms.  Under the Administration’s proposed three-tiered control list, allies and partners will receive considerably more favorable treatment and exports to those countries will be subject to fewer restrictions.
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James Jay Carafano, a senior research fellow for national security at the Heritage Foundation, recalls President Reagan’s difficulties in addressing export controls and lauds President Obama for making smart, balanced reform proposals:

 From The Washington Examiner, “Export controls are an issue of good governance”:

To his credit, President Obama has made a good faith effort to manage export controls in a way that is both pro-trade and pro-national security. He has proposed several major reforms that are reasonable, responsible and — at the end of the day — very practical.

First, Obama wants to have clear, consistent rules for how licensing requirements are established and managed. Second, he plans to establish an Export Enforcement Coordination Center to “coordinate and strengthen the U.S. government’s enforcement efforts — and eliminate gaps and duplication — across all relevant departments and agencies.”

Third, he wants to create a common, government-wide information technology system to manage export controls.

The challenge will be to overcome entrenched political and institutional opposition, Carafano writes. Bureaucratic maneuvering can be anticipated, to be sure. Administration of export controls now rests with the State Department, Defense and Commerce. Still, the agencies have so far been willing to work in good faith toward a necessary modernization of the controls.

See also the National Association of Manufacturers’ statement from Aug. 30, “Manufacturers Support Efforts to Modernize Export Controls.”

Today, the Administration announced some important steps in our effort to modernize America’s outdated export control system. These steps will help increase exports, create jobs and make manufacturers more competitive while strengthening America’s national security. The President will make a formal announcement tomorrow.

The steps outlined today focus on the criteria for determining what products need to be controlled, the development of a common set of policies for determining when an export license is needed and the creation of an Export Enforcement Coordination Center to coordinate the federal government’s enforcement efforts. The NAM has been a leading proponent of export control reforms that enhance the government’s ability to protect U.S. national security interests while removing the burdens and disadvantages placed on U.S. high-technology manufacturers.

Manufacturers welcome these steps and have repeatedly stressed the importance of export control modernization.

A round-up of trade related news that mentions the National Association of Manufacturers:

Pat Mears, NAM’s director for international commercial affairs, spoke at the 2010 Trade Conference in Rockport, Me. The Bangor Daily News reported, “Maine looking to Canada, Asia for growth“:

Domestic demand is going to be slow in the U.S. Real growth is outside of the U.S.,” she said during her talk. “Ninety five percent of the world’s consumers live outside the United States.”

As for Maine, Mears said it is in a unique position. Most states, she said, do not have an international view of the world, but because Maine shares a border with Canada, Maine companies tend to think out-side of country lines already.

“Maine should be doing what Maine is doing,” she said. This includes working on exporting natural resources, working on wood composites and creating international ties.

Gov. John Baldacci also spoke. From his office, “Governor Unveils New Investment Initiative“:

ROCKPORT – Governor John E. Baldacci today unveiled a new Foreign Direct Investment initiative at the 30th Maine International Trade Day event held at the Samoset Resort.

The initiative will focus on increasing investments in Maine’s renewable energy and advanced materials fields, enhancing Maine’s capacity to be a center of excellence in wind energy, composites and advanced materials. The initiative will attract investments in business and R&D, further strengthening Maine’s internationally active, exporting companies and supporting the State’s universities.

Diagonally across the country in San Diego, Michele Nash-Hoff, president of ElectroFab Sales, reports on a speech by the Commerce Department’s point person for manufacturing. From “Can U. S. exports be doubled in five years?“:

Nicole Lamb-Hale, Assistant Secretary of Commerce for Manufacturing and Services, would answer “yes” to this question—if manufacturers diversify their sales in multiple markets and take advantage of the Department of Commerce’s International Trade Administration programs to help them.

“While the U.S. is a major exporter, we are underperforming,”  said Lamb-Hale at the Pathway to Manufacturing Prosperity conference held last week by Industry Week and New Equipment Digest. “Currently, less than one percent of American’s 30 million companies export outside the U.S.  There’s great potential for improvement.”

Before charging American manufacturers with “underperforming,” Lamb-Hale would do well to acquaint herself with her own department’s foreign trade regulations administered by the Bureau of Industry and Security (BIS).

We’ll assume the assistant secretary’s comments are not a shot at manufacturers, and we look forward to reading her speech for context. Suffice it to say, the Administration could help manufacturers perform if it submitted the pending free trade agreements with Colombia, Korea and Panama to Congress and pushed for their enactment. Those agreements have been negotiated, agreed to, are ready to go and could pass.

The pending FTA’s are certainly much further along than the Trans-Pacific Partnership, a worthy initiative from the Administration but still in its early stages. (Here’s a novel approach: A listening tour!) The Wall Street Journal covers the nascent TPP today, “US Tries To Build Consensus For Trans-Pacific Trade Talks.” The NAM’s Vice President for International Economic Affairs Frank Vargo is quoted.

Frank has recently been in an information-packed exchange with Global Trade Watch, a group that supports trade in theory but rarely in practice. Brad Peck covers the debate at the U.S. Chamber of Commerce’s blog, the Chamber Post, “Trade and Facts Win — Will the Economy?.” Brad tips his hat to GTW’s Todd Tucker for recent reasonable comments but then locates this paragraph from a 2004 essay Tucker wrote on “Chávez, Venezuela and US Reaction:”

The success of the global struggle against neo-liberalism and imperialism will depend on the ability of counter-hegemonic efforts to survive and present compelling alternatives to neo-liberal globalization. Part of this struggle necessarily involves defending state actors who are able to harness the power of the state apparatus for development and to show the possibility of pursuing more independent paths. Like other instances in the hemisphere’s history, the US Empire is most threatened by the power of example of successful, independent states. International solidarity is crucial to the ongoing success of this democratic, development-oriented example.

Hah! Since then Chavez’s counter-hegemonic efforts have produced 30 percent annual inflation and a wave of expropriations and human rights abuses.

Secretary of Defense Robert Gates gave a speech Tuesday outlining the Administration’s proposals for modernizing the U.S. system of export controls. (Speech, Shopfloor coverage.)

Later that day, James Hursch, acting director, Defense Technology Security Administration, held a roundtable with bloggers explaining the policy proposals in more detail. The transcript is here. Excerpt:

The current U.S. export control system poses in our view a potential threat to national security, because the foundation is over 50 years old. It is essentially a system that was designed for the Cold War bipolar world and is not sufficiently focused on the most critical threats we face today.

The world has changed. The threats we face today are different, including global terrorism and the proliferation of mass destruction and advanced conventional weapons. And these threats come not from a single block of countries but from individuals, entities and countries located throughout the world.

In addition, the leading edge of some technologies has spread to other parts of the world from the U.S. And there are competitors for many systems that the U.S. is controlling elsewhere in the world.

The National Association of Manufacturers has made export control reforms a top priority. Recent materials:

• Statement, “Manufacturers Encouraged by Administration’s Export Control Changes“
• NAM’s Blueprint for Fundamental Reform
• Near- and medium-term recommendations from the NAM-led Coalition for Security and Competitiveness.

Secretary of Defense Robert Gates’s speech on export controls Tuesday did an excellent job in clearly laying out the Cold War roots of our complicated approval system and explaining it present-day consequences.

[A] major obstacle we face is the bureaucratic apparatus that has grown up around export control – a byzantine amalgam of authorities, roles, and missions scattered around different parts of the federal government. In theory, this provides checks and balances – the idea being that security concerns, customarily represented by DoD, would check economic interests represented by the Commerce Department and balance out diplomatic and relationship-building equities represented by State. In reality, this diffusion of authority – where separate export-control lists are maintained by different agencies – results in confusion about jurisdiction and approval, on the part of companies and government officials alike. 

The upshot of which is:

The system has the effect of discouraging exporters from approaching the process as intended. Multinational companies can move production offshore, eroding our defense industrial base, undermining our control regimes in the process, and not to mention losing American jobs. Some European satellite manufacturers even market their products as being not subject to U.S. export controls, thus drawing overseas not only potential customers, but some of the best scientists and engineers as well.  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.