Just How Many Weapons Can America Sell?

When the leaders of the global aerospace industry met late last month at the 50th anniversary staging of the Paris Air Show, one word predominated: exports. With military budgets leveling off or declining in the United States and Europe, arms companies are looking to deals in the Middle East and Asia to bolster their bottom lines.

Nowhere has this strategy been more successful than in the United States, where an export-friendly Obama administration has presided over the largest arms-export boom in history. In 2011, the most recent year for which full statistics are available, the United States entered into arms sales agreements worth over $66 billion — an astounding 78 percent of the world market.

The current U.S. dominance of the trade will not go unchallenged. For example, as purchasing nations clamor for their own drones, China and other suppliers are seeking to develop cheaper alternatives to U.S. models. Last month, three European arms firms urged their governments to invest in a "Euro-drone" that would supplant systems currently being imported from the United States.

But the Obama administration will not yield market share without a fight. At a congressional hearing in April, Tom Kelly of the State Department’s Bureau of Political-Military Affairs noted that the Obama administration was doing everything in its power to promote U.S. arms exports:

It is an issue that has the attention of every top-level official who is working on foreign policy throughout the government including the top officials at the State Department … in advocating on behalf of our companies and doing everything we can to make these sales go through … and that is something we’re doing every day, basically [on] every continent in the world.

The pointy end of that spear is the administration’s ongoing effort to dramatically overhaul (read: relax) the nation’s export-control system. The current approach, while far from perfect, involves scrutinizing all significant transfers of arms or arms technology to assess their potential impacts on human rights and nuclear proliferation, as well as the risk of weapons-related items reaching terrorist groups. Sales that raise red flags in any of these areas are supposed to be denied an export license. In addition, sales of major items like combat aircraft, armored vehicles, or air-to-air missiles are reported to Congress, which is empowered to weigh in against questionable deals. The lead agency for these activities is the State Department.

The Obama administration’s proposed reforms threaten to undermine this system of controls and increase the risks of weapons technology falling into the wrong hands. This is far too high a price to pay for any increases in efficiency or economic benefits that may result from an easing of controls.

It’s not as if the current export control system is particularly onerous. The State Department processes around 7,200 export licenses per month, with an average wait of about 18 days. The value of licenses approved has more than doubled since 2006, a further indication that legitimate exports are moving through the system at a healthy pace.

Despite its significant risks and limited potential benefits, the Obama administration has made easing export controls a central policy goal. The administration first announced its intention to radically change the way the U.S. government vets potential arms sales in August 2009, when it unveiled an approach dubbed the Export Control Reform Initiative (ECRI). The initiative was music to the ears of the arms industry, which has spent nearly two decades pressing for many of the changes it suggests.

At first glance, the ECRI appears to be a commonsense effort to clean up the export control process by reducing scrutiny on thousands of smaller items, mostly weapons components, thereby freeing up resources to focus on equipment that would be more likely to undercut U.S. military superiority or undermine its policies if transferred into the wrong hands. Administration officials have described this approach as establishing "higher fences around fewer items."

To critique the current export control system, the administration’s example of choice has been its assertion that a bolt for an F-18 fighter plane receives the same level of scrutiny as the aircraft itself. But Will Lowell, the former head of the State Department’s Office of Defense Trade Controls, has pointed out that this is not the case. Shipments of components that cost less than $500 — like bolts — are exempt from extensive vetting, and the administration can increase this cutoff price without a change in law. In other words, if over-regulation of relatively inconsequential parts is the main issue, the administration can address the problem directly without overhauling the entire arms export control system. Furthermore, the suggestion that the ECRI is mostly about spare parts is belied by the fact that the initiative would also eliminate controls on major items like older-model C-130 transport planes, Black Hawk and Huey helicopters, and engines for C-17 aircraft.

What exactly does the ECRI propose to do? It is a complex undertaking, but its goal is to "decontrol" the bulk of items that are on the United States Munitions List — a compendium of weapons and weapons components subject to licensing by the State Department prior to export. While officials involved in the reform effort repeatedly claim that nothing is being decontrolled, the administration’s own announcement of the ECRI’s goals says otherwise: "At the end of this process, we anticipate that a significant percentage of the items that are transferred off of the Munitions List would be permitted to be exported without a license."

Thus far, the reform process has involved taking thousands of items off of the Munitions List and either moving them to the less restrictive Commerce Control List or freeing them of licensing requirements altogether. As its name suggests, the Commerce Control List is administered by the Department of Commerce — an agency better known for export promotion than export control. As noted above, the Munitions List is administered by the State Department, which has a long history in implementing arms export controls.

The danger of the administration’s new export control approach is that it could make it easier for significant military articles to reach major human rights abusers, countries seeking nuclear weapons, or destinations where they may be more likely to fall into the hands of terrorists. Although the administration claims that items moving from the Munitions List to the Commerce Control List will be subjected to strictures similar to those on the Munitions List, there are strong reasons for skepticism. The Commerce Department has no history of vetting potential exports on human rights grounds. And there are 36 friendly nations that will be allowed to import almost anything on the Commerce Control List without first getting specific licenses for the items — including articles that could be useful to terrorist groups or technology that could help countries develop nuclear weapons. The problem is that many of these three dozen states have spotty records of keeping sensitive U.S.-supplied technology out of the hands of less trusted third parties like Iran, China, and Venezuela.

Even if the Commerce Department does come up with sensible restrictions on arms-related technology, they can easily be changed by this or a future administration. As the American Bar Association’s Center for Human Rights noted in a January 2013 report, "Such regulations are easy to amend and are not an adequate substitute for the carefully crafted statutory regime enacted by Congress."

The primary reason for making it easier to sell arms? Money. Both government and industry sources have touted the alleged economic benefits of export control reform. For example, Andrew Shapiro, formerly the assistant secretary of state for political-military affairs, has suggested that the initiative will have "a real impact on our economy at a time when competition is ever more fierce and at a time when our manufacturing base could really use a boost."

The National Association of Manufacturers has asserted that export control reform could generate 340,000 new jobs by 2019. The figure, which comes from a 2010 study funded by the association and conducted by the Milken Institute, is built on faulty assumptions. It assumes that U.S. exports to key countries like China and India will increase dramatically if export control reform goes through — but it provides no evidence.

There are two reasons that the claimed economic benefits from export control reform are unlikely to materialize.

First, the United States already dominates the world arms market. It is hard to see how its current share of the trade can be pushed much higher. There is also strong evidence to suggest it is not particularly difficult to export weapons from the United States under current procedures. Only 3 percent of U.S. technology exports are subject to licensing in the first place, and, as noted above, the value of export licenses approved for those items has more than doubled since 2006. Given this, one business analyst has suggested that any uptick in U.S. arms exports resulting from export control reform is likely to be "infinitesimal."

Second, a number of provisions of the administration’s export control reform policy could make it easier to produce components of U.S. weapons overseas. This may be good for arms-exporting corporations, but it is a bad deal for American workers. For example, to the extent that the ECRI decontrols machine tools and other high-tech items, it will make it easier to export production technology or produce U.S.-designed parts to China. Beijing has already been building up its aerospace industry using U.S.-supplied technology provided as a quid pro quo for Chinese purchases of U.S. airliners. The ECRI will accelerate this process not only in aerospace, but in other industrial sectors as well.

The seemingly simple process of eliminating unnecessary items from the Munitions List has opened the door to a series of potentially negative consequences. And the purported economic benefits of dramatically revising the current arms export control regime will be marginal at best. For all of these reasons, it is time for Congress to take a closer look at the administration’s arms export control reform effort with an eye towards stopping or rolling back any changes that pose direct or indirect risks to U.S. policies of protecting human rights, preventing terrorism, and stopping the spread of nuclear weapons.