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. 

From the American Forces Press Service, “Gates Proposes Revamp of Export System“:

WASHINGTON, April 20, 2010 – The United States must totally revamp the Cold War-era export control system, because as currently configured, it actually harms national security, Defense Secretary Robert M. Gates said here today.

Gates told members of Business Executives for National Security that the export control system does not adequately protect crucial American capabilities and makes it nearly impossible to quickly share needed capabilities with allies and partners.

Gates said his proposal for a new export control process would make it more difficult for critical technologies to get into the hands of rogue states and terrorists while facilitating the transfer of technology to U.S. allies.

“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 said. “A number of lapses in recent years – from highly sensitive materials being exported to vital homeland security capabilities being delayed – have underscored the flaws of the current approach.”

The transcript of Secretary Gates’ speech is available here.

The National Association of Manufacturers released a statement on the proposal, “Manufacturers Encouraged by Administration’s Export Control Changes. NAM Vice President for International Economic Affairs Frank Vargo said:

Manufacturers are pleased the Administration is moving forward with changes to modernize the current Cold-war era system. These changes are critical to keeping America secure and competitive globally.  We are particularly encouraged by the announcement of a single control list and a unified information technology platform, but we believe the Administration must also move forward on near- and medium-term reforms along the way to creating a single agency. 

Coverage …

• Wall Street Journal, “Plan Would Revamp Export Controls“
• Financial Times, “Gates plans arms sales rethink” (That’s an unfortunate headline. The issue is definitely NOT the sale of arms.)
• Washington Post, “href=”http://www.washingtonpost.com/wp-dyn/content/article/2010/04/20/AR2010042002921.html”>US to revamp export controls“
• Bloomberg, “U.S. to Consolidate Export Controls to Boost Trade“

Reuters, “U.S., citing security, to revamp export controls“:

(Reuters) – Defense Secretary Robert Gates announced plans on Tuesday to overhaul Cold War-era export controls, saying confusing and excessive U.S. rules undermined national security, the defense industry and ties with allies.

Bloomberg, U.S. to Consolidate Export-Controls to Boost Trade, Gates Says”:

April 20 (Bloomberg) — The Obama administration will push Congress to simplify and consolidate controls on exports of U.S. goods with potential military applications into one government agency to boost trade, Defense Secretary Robert Gates said.

Two good quotes of many from Gates:

• “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.”
• “Multinational companies can move production offshore, eroding our defense industrial base, undermining our control regimes in the process, not to mention losing American jobs.”

Reporters cite the NAM’s study from the Milken Institute, “Jobs for America,” on export controls that estimates modernizing export controls on commercially available technology products could boost exports by 1.9 percent (or $56.6 billion), and increase 340,000 jobs by 2019.

Also, from DOD, “DoDLive Bloggers Roundtable: U.S. Export Control System”:

Secretary Robert Gates will be giving a significant speech today at 1:30 PM EDT to the Business Executives for National Security on reforming the U.S. export control system.  At 4 p.m. EDT, we will hold a DoDLive Bloggers Roundtable with the Mr. James A. Hursch, director, Defense Technology Security Administration, who will provide details on DoD’s position on export controls.

Listen live to the roundtable.

After months of inter-agency meetings and years of talk, Secretary of Defense Bob Gates today is expected to announce the most sweeping changes to the U.S. export control system in years. The National Association of Manufacturers is hopeful his announcement will lead to a system that’s more transparent, predictable and efficient. We have been working with this Administration and previous ones on export control reform and are keenly anticipating Sec. Gates’ speech at the Business Executives for National Security . Early reports suggest that the Administration will announce creation of a single agency.

The NAM neither supports nor opposes creation of a single agency. As stated in the NAM’s Manufacturers’ Blueprint for a 21^st Century Export Control Regime, a single agency could represent an important structural change if the culture within the trade control agencies is changed, and if near and medium-term reforms are implemented along the way to a single agency. If the latter is ignored, creation of a single agency will not magically fix the problems that exist in the current system.

Unlike other industry groups, the NAM submitted two sets of recommendations to the Administration on reform — near and medium-term, and fundamental or long-term. We believe the near- and medium-term recommendations are critical to improving the system, addressing immediate national security, the defense industrial base and manufacturing imperatives while also laying a solid foundation for the future.

Fundamental reform is necessary to create a system that will serve the needs of the United States well into the future. The two time frames for action are not mutually exclusive and both are vitally necessary — certainly so if the United States is to achieve President Obama’s goal of doubling exports within five years.

I’ll be tweeting live from the event as the proposals are announced. A modernized system could be great for America’s manufacturers and go a long way toward improving national security, expanding the industrial base and increasing U.S. global competitiveness.

• The Hill, “Gates to lay out next steps to overhaul export control system“
• DefenseNews.com, “Obama Administration Renews Export Control Reform Push“
• Reuters, “Obama eyes export control reforms to boost exports“

Catherine Robinson is the NAM’s director for high technology trade policy.

From The Hill, “Gates to lay out next steps to overhaul export control system“:

Defense Secretary Robert Gates on Tuesday will deliver a much-anticipated speech laying out the next steps the Obama administration will take to overhaul the nation’s outdated export control system, seen by many as a Cold War relic.

The recent Milken Institute report, “Jobs for America,” made the case for such a reworking of the Cold War era system of export controls:

Modernizing export controls on commercially available technology products for some countries would allow U.S. firms to capture increased international market share. In this scenario, real exports of goods and services rise by 1.9 percent (or $56.6 billion), and 340,000 jobs are added by 2019 (160,000 of them in the manufacturing sector).

Last week, the NAM called for a fundamental overhaul of the system. The NAM’s Frank Vargo, vice president of international economic affairs, said:

Earlier this year we submitted short-term goals to the Administration that focused on improving U.S. security and global competitiveness. As the Administration now considers fundamental, long-term reform, we are putting forth seven comprehensive recommendations that will help establish the framework for an export control regime that protects national security, supports the high tech industrial base and allows manufacturers to compete in the global marketplace.

The NAM’s seven recommendations include establishing a permanent interagency team to review and assess overall policy objectives, creating one central location for technical experts to develop a unified control list and improving multilateral engagement.

The NAM’s blueprint for the reforms is here.

Reuters, reporting on President Obama’s most recent call for modernizing the U.S. system of export controls, comments made at his meeting with economic advisors Friday. From “Obama eyes export control reforms to boost exports“:

“We are losing business opportunities unnecessarily,” Obama said in a meeting with outside economic advisers just days before Secretary of Defense Roberts Gates is expected to lay out plans for revamping U.S. export controls.

U.S. manufacturers have long complained they are losing high-tech sales to competitors in Europe and Asia because of cumbersome rules designed when the United States was locked in an ideological battle with the Soviet Union.

“We’re also, I actually think, impeding effective monitoring of our national security because if you have export controls across everything you’re not spending time focusing on the handful of things that really do touch on sensitive national security,” Obama said

On April 13, the National Association of Manufacturers issued a news release announcing the NAM’s “Manufacturers Blueprint for a 21st Century Export Control Regime.” The blueprint is available here.

Great news about the Administration’s new export initiative! The National Association of Manufacturers has long been supportive of a significant effort to boost U.S. exports. Of the 15 major manufacturing nations the United States is dead last in the proportion of production that we export.

So how do we double exports in five years?

The dollar cannot be overvalued. Global currencies should reflect their actual market values.

Modernize export controls. Modernizing the export control system will strengthen national security, focus limited resources on truly sensitive technologies, promote U.S. technological and scientific leadership, and improve economic competitiveness. In addition, modernization creates more than 340,000 new jobs and increases exports by nearly $60 billion over the next 10 years.

Open access to markets. The United States enjoys a manufactured goods trade surplus with countries we have a free trade agreement with. We already have low tariffs, and FTAs work to lower the tariffs of other countries.

Export promotion. Thousands of U.S exporters export to only one or two countries. Adding one or two more to their markets would increase total exports by a third.

We applaud Secretary Locke’s new export initiative and look forward to work with Administration to increase manufacturing exports.

Frank Vargo is NAM’s vice president, international economic affairs.

Commerce Secretary Gary Locke speaks at the National Press Club at noon today to flesh out the President’s State of the Union remarks calling for a doubling of U.S. exports within five years, a speech entitled, “”Back to Basics: A Blueprint for Exports-Driven Job Growth.”

AP reports:

The president’s National Export Initiative will target three key areas – expanding trade advocacy, improving access to credit especially for small and medium-sized businesses and rigorously enforcing international trade laws. The government-wide strategy will be coordinated at the cabinet level, Locke is set to tell a National Press Club audience.

“Increasing the export of American products and services to global markets can help revive the fortunes of U.S. companies, spur future economic growth and support jobs here at home,” Locke said in remarks prepared for delivery to a National Press Club audience. “This initiative will correct an economic blind spot that has allowed other countries to slowly chip away at the United States’ international competitiveness.”

The Washington Post on Wednesday carried an excellent column by C. Fred Bergsten of the international trade think tank, the Peterson Institute, outlining key strategies for achieving the export goal, “How best to boost U.S. exports.”

The AP story cites the National Association of Manufacturers commissioned study by the Milken Institute, “Jobs for America,” on the value of modernizing export controls. The analysis finds that export growth would boost real GDP by $64.2 billion (0.4 percent) relative to the baseline projection in 2019.

UPDATE (9 a.m.): Bloomberg reports:

The U.S. will provide $6 billion in export financing for small businesses and take a tougher line on foreign trade barriers as part of a bid to double exports, Commerce Secretary Gary Locke is due to say in a speech today.

“While the U.S. is a major exporter, we are underperforming,” Locke will say at the National Press Club in Washington, according to excerpts released by the Commerce Department. The administration “is going to provide more funding for export promotion and more coordination between government agencies.”

NPR also had a reasonable, politically oriented story this morning, “Obama’s Efforts To Boost Exports Face Hurdles.”

From the President’s State of the Union:

[We] need to export more of our goods. (Applause.) Because the more products we make and sell to other countries, the more jobs we support right here in America. (Applause.) So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. (Applause.) 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. (Applause.)

That’s a welcome target to achieve export-driven growth, and it’s notable that the President regards the export controls issue important enough to warrant a mention.

Correctly so, the NAM believes. The new Milken Institute study, “Jobs for America,” concludes “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.” The in-depth analysis is here.

The President also reaffirmed the Administration’s oft-stated belief in the value of trade agreements.

We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. (Applause.) But realizing those benefits also means enforcing those agreements so our trading partners play by the rules. (Applause.) And that’s why we’ll continue to shape a Doha trade agreement that opens global markets, and why we will strengthen our trade relations in Asia and with key partners like South Korea and Panama and Colombia. (Applause.)

But let’s do more than “strengthen” — let’s ENACT. The President would have helped achieve the goal he had just set by calling on Congress to enact the U.S.-Colombia Free Trade Agreement, the U.S.-Panama Free Trade Agreement, and the U.S.-Korea Free Trade Agreement.

As NAM President John Engler said in a press briefing Monday, “”We believe we absolutely have the votes for the Panama and Colombia agreements.” And… “We think if they’re serious on the jobs front, they have to look at trade. We’ve got a lot of companies that send a big amount of their production abroad for sale.”

The National Association of Manufacturers on Tuesday hosted a news briefing by members of the Coalition for Security and Competitiveness, a broad coalition of business groups that support modernizing the U.S. system of export controls.

Defense News summarized the day’s news, “U.S. Firms Launch Export-Control Reform Push“:

Declaring that the Obama administration presents the best opportunity in years to overhaul export rules that limit weapons sales, 19 industry lobbying groups have relaunched a campaign for sweeping reform.

The groups want to de-emphasize the current reliance on munitions and dual-use technologies lists, and base export decisions on such factors as whether an item can be bought from another country, whether it is widely used outside of defense and whether the buyer is a trusted partner.

The 19 groups, which represent hundreds of U.S. companies from warplane manufacturers to software coders, said Jan. 12 that a review of export control regulations now underway by the Obama administration offers real hope for change.

As the Coalition explained in the news release accompanying the event:

The United States export control system has not been significantly revised in more than twenty years. The result is a system that no longer fully protects our national security, has not kept up with accelerating technological change, and does not function with the efficiency and transparency needed to keep the United States competitive in the global marketplace.The Administration’s export control review, as well as impending legislative proposals, provides an opportunity to strengthen our security and give business the clarity and guidance it needs to comply with the rules and remain competitive.

(Photo: Chris Hansen, Tech America CEO (left); Frank Vargo, vice president for international economic affairs, NAM.)

More …

• CSC Letter to the President…
• The CSC Issues Principles and Objectives for Export Control Modernization
• The Hill, “Coalition recommends export control reforms”
• Reuters, “US business gives Obama export control reform plan“
• The Journal of Commerce, “Trade Groups Ask Obama for Change”
• Seattle Post Intelligencer, “Industry groups push for easing export restrictions”