Defense trade reform to boost jobs, security-Obama

Mon Aug 30, 2010 12:49pm EDT

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* Obama says reforms will boost security, create jobs

* Exporters complain Cold War-era rules stymie sales

By Doug Palmer

WASHINGTON, Aug 30 (Reuters) - Streamlining U.S. export restrictions on defense goods and high-technology products will help create U.S. manufacturing jobs while boosting national security, President Barack Obama said on Monday.

"While there is still more work to be done, taken together, these reforms will focus our resources on the threats that matter most, and help us work more effectively with our allies in the field," Obama said in remarks videotaped for a Commerce Department conference on export controls on Tuesday.

"And by enhancing the competitiveness of our manufacturing and technology sectors, they'll help us not just increase exports and create jobs, but strengthen our national security as well," Obama said.

The initiative, which already has been one year in the making, responds to frustration felt by U.S. defense and high-tech companies, who say export controls that date to the Cold War cost them billions of dollars in lost sales.

U.S. allies also complain they often face long waits to get spare parts for U.S.-made weapons systems because of licensing requirements as rigorous as for the weapons themselves.

Obama said his administration was moving to reduce licensing delays by harmonizing and eventually consolidating two separate export control lists -- the Commerce Control List run by the Commerce Department and the U.S. Munitions List overseen by the State Department.

That "will allow us to build higher walls around the export of our most sensitive items while allowing the export of less critical ones under less restrictive conditions," he said.

Big U.S. defense manufacturers such as Boeing (BA.N), Honeywell (HON.N) and United Technologies (UTX.N) are expected to benefit from the reforms, much of which the administration can implement without approval from Congress.

Simplifying the system will also help the competitiveness of small and medium-sized companies, which "rarely have the resources to ensure compliance with the current export control regime," said Marian Blakey, president of the Aerospace Industries Association.

TURF BATTLES

In the past, turf battles between the Commerce Department and State Department over which agency controls a particular technology has led to lengthy licensing delays.

The new system creates a "bright line" between the two lists to clarify to exporters and foreign buyers which department has jurisdiction.

It also classifies weapons, technology and related goods in three tiers, according to their military and intelligence importance and how available they are from other suppliers. Weapons of mass destruction are on the top tier.

Starting with one category on the U.S. Munitions List, tanks and military vehicles, the administration expects about 42 percent of the 12,000 items it licensed last year to be moved to the Commerce Control List and about 32 percent could be decontrolled altogether.

About 26 percent are expected to remain on the U.S. Munitions List, with none in the highest tier, about 18 percent in middle tier and the remaining 8 percent in the lowest tier.

In the coming months, the administration will go through the same process for the 19 other categories on the U.S. Munitions List, which includes electronics, firearms, ammunition, aircraft, naval vessels and spacecraft, with the aim of finishing by early 2011.

Eventually, the administration wants to create a single control list run by an independent agency outside of the Commerce Department or State Department. It also wants to create a single enforcement agency. All three goals require congressional approval and are not expected to happen this year.

However, in his videotaped comments, Obama said he would sign an executive order giving U.S. Immigration and Customs Enforcement authority to coordinate enforcement of export controls now divided among several government agencies.

The administration is also moving licensing operations at the State Department, Commerce Department, Defense Department and other agencies onto a single information technology system. It does not need congressional approval for that. (Editing by Mohammad Zargham)

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Comments (1)
mbahde wrote:
I think this is the first smart thing this guy has done since he got into office. Kudos to you Obama…but still won’t be enough to save the Democrats in November.

Aug 31, 2010 9:38am EDT  --  Report as abuse
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