A new era for export controls?

A new era for export controls?

Vice President-Government Relations, AMTThe Association For Manufacturing Technology

Barack Obama is coming into office with great hopes and expectations. He faces daunting challenges in the economy and in foreign affairs, but polls show that the American people believe that he is up to the challenges. If anything, the expectations may be too high, given the level of complexity involved in solving the major problems that lie ahead.

One of the difficult areas that will confront the new President is the question of international technology transfer and what the American approach to it ought to be.

Interestingly, it is one of those problems where economic and foreign policy issues come together. International technology transfer, or as it is commonly referred to, export controls, can affect our economic success but it also has implications for our national security and hence our foreign policy.

As the leading technological power in the world and as the only major industrial nation to emerge from World War II with its economic infrastructure intact, the approach of the U.S. government has been to be conservative and cautious about sharing its technology with the rest of the world – even in some cases pursuing a highly restrictive policy with our allies.

For the first 45 years, the policy made sense.

We could not match the Soviet Union tank for tank and man for man, so we relied on our superior technology to defend ourselves and our allies. Using international organizations such as CoCom — the Coordinating Committee for Multilateral Export Controls — we ensured that the Soviet Union and its allies could not acquire advanced technology that might enhance their military capabilities.

But the Cold War is over. CoCom has been dissolved. We now have a brisk trade with the former Communist Bloc, as our $253 billion bilateral trade deficit with China would attest.

Yet there is still one policy that is carried over from the highly restrictive trade policies of the past, and that is export controls.

Study after study over the past two decades has called for reform of the U.S. export control structure. Yet it still remains the slowest, the least predictable, and the most restrictive export control system in the world.

With the end of the Cold War and the end of CoCom, our allies quickly changed their policies and now have a highly open technology transfer policy towards China, as well as for India and Russia.

But many in our industry, particularly those who make items such as five-axis machine tools and carbon fiber manufacturing equipment, will say that the U.S. policy is one of unilateral control, denying or delaying for inordinate amounts of time, export licenses for their products.

This has seriously undermined our reputation for reliability, not only with regard to controlled products. It has hurt our reputation in non-controlled industrial products as well.

With U.S. manufacturing indices at 30-year lows and with China’s economy growing at 8 percent per year, and its market for machine tools already three times the size of the United States, we can ill-afford to have an export control policy that does not reflect the current world situation.

Defense Department officials will cite the risk of increased trade with China. That risk already exists, only it is our allies and trade competitors supplying the equipment that enable China to become a formidable aerospace manufacturing subcontractor for companies such as Boeing and Airbus.

With a new Administration, it is time for a re-evaluation of the costs and benefits of our export control policy. It is apparent that we are setting an example of selfrestraint that none of allies are willing to follow.

A new Commerce Department “foreign availability” study of five-axis machine tools is due to be released soon. It is likely to make the points that I am making here. The Obama Administration ought to use it as a guide for redesigning the export control structure to fit the 21st Century.

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