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Obama Wins Praise for Export Controls Overhaul


Defense and aerospace companies are giving the President rave reviews for his plan to ease export controls that executives call too broad and burdensome

President Obama has taken plenty of heat from business lobbyists for his health-care and financial regulatory overhauls this year. However, his plan to ease export-control rules that executives have called too broad and burdensome is winning raves from defense and aerospace companies—and even the usually critical Heritage Foundation, a famously conservative Washington think tank.

Following a yearlong review by Defense Secretary Robert Gates, the White House on Aug. 31 unveiled blueprints for a new control system that governs the export of technologies like encryption software and airplane parts for both commercial and military use. The government has long maintained a single U.S. Munitions List of restricted items for export abroad. Under Obama's plan, the list would be modified into a three-tiered system that would include items with critical military value available only in the U.S. and which would continue to require export licenses. Another group would involve products that can be bought in both America and abroad that could be sold overseas after government approval. A final category would involve items widely available worldwide that may not require export licenses.

Obama also hopes to launch the Export Enforcement Coordination Center, an agency that, if approved by Congress, would aim to improve enforcement and coordination among the Commerce Dept. and State Dept., the Pentagon, and other agencies that currently handle the regulation of export controls.

"This initiative is good for national security, good for government reform, and good for American competitiveness," says Michael Froman, Deputy National Security Adviser for International Economic Affairs. The White House says the plan would further Obama's goal of doubling U.S. exports in five years, to about $3.1 trillion. Aircraft controls maker Honeywell International (HON), software developer Microsoft (MSFT), defense contractor Northrop Grumman (NOC), and airplane builder Boeing (BA) are among the companies that may benefit. "This action will improve the functioning of the government and protect sensitive and critical U.S. technologies while enhancing industry's ability to compete in global markets," Northrop Chief Executive Officer Wes Bush said in an e-mailed statement.

Executives want the government to bring more consistency to its export-control regime. For instance, the brake pads on a M1A1 tank under current rules are subject to restrictions even though they are almost identical to pads for fire trucks that can be exported without a license. An Administration analysis of the new approach shows the changes may reduce the number of items that require export licenses. Of the 12,000 in the tank and truck category on the U.S. Munitions List and the Commerce Control List, 74 percent will be on the less restrictive list or not be subject to limits under the new export control regulations.

Critics applaud the Administration's proposal. "It does stimulate exports, and it does have security benefits," says the Heritage Foundation's James Carafano.

The bottom line: Obama's proposed revamp of export controls of dual-use technologies has broad support among defense and technology companies.

Nichols is a reporter for Bloomberg News. Ratnam is a reporter for Bloomberg News.

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