Strengthening the economy at home and U.S. military partnerships abroad

The U.S. Congress exercises an essential oversight function by requiring the U.S. Department of State to notify America’s elected representatives of all significant military equipment intended for export, but it is now time for Congress to be informed of all denials of major defense export requests as well.

The current notification requirement allows Congress to monitor, and at times intervene, on pending arms sales to ensure such arms exports serves American interests. These interests include preventing an arms race, averting the proliferation and risks associated with weapons of mass destruction (WMD), avoiding human rights abuses, and encouraging military balances among countries that promote peace and freedom around the world.

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This arrangement has served the United States well during a period when American industry exercised extensive control over global defense and aerospace markets, preventing or substantially delaying the proliferation of a wide range of defense technologies through export restrictions.

Today, however, global market conditions are considerably different. America’s defense and aerospace industry is faced with significant competition, and its dominance in a variety of critical defense technologies is under threat. As a result, restrictions on U.S. arms exports can now accelerate non-U.S. manufacturing, indirectly promoting advanced defense capabilities to be transferred abroad.

In certain ways, counter-proliferation policies now encourage proliferation. As a Pentagon official in the Office of the Secretary of Defense, I witnessed multiple cases of the U.S. government denying foreign partners’ requests for American defense products, only to have those countries acquire the same or similar capabilities from another source. In a number of instances, the U.S. government would reverse its denial in time, but by then it was too late. The sale and opportunity to partner with the foreign government had been lost, and instead, a market had been opened to stimulate foreign defense manufacturing.

Increasingly, when American industry is forced to abandon these markets, the gap is filled by Russian and Chinese companies, and their presence inhibits future American defense industrial partnerships because of counter-intelligence concerns. One export denial creates a cascade of future denials. Alarmingly, policies aimed at preventing the spread of WMD delivery systems are now encouraging foreign countries to turn to Chinese capabilities that do not come with the monitoring requirements that mitigate the risk of WMD use or loss of control.

As the U.S. Congress evaluates American interests associated with arms exports moving forward, it ought to also consider measures that will help avert promoting rival defense manufacturers through export restrictions. There are times when it is in America’s interest to deny defense exports to a country — even when that country will respond by purchasing the same or a similar capability from another foreign supplier. Diplomatic, strategic, and ethical considerations are reasonable grounds to justify export denials. But there ought to be a transparent, reviewable record to ensure that the economic and strategic implications of export denials are taken into account. A historical record would also be a valuable decision-making resource, enabling policymakers to use past cases and trend analysis to inform future decisions.    

Every export denial of major defense equipment should be accompanied by a written assessment of the economic consequences. The assessment should gauge the likelihood of an end user receiving the same or similar capability from an alternative source, as well as the estimated effect on American jobs. Because exports decrease the per-unit cost of acquisitions by the U.S. military through economies of scale, these impact statements ought to assess costs to the U.S. military department that manages the defense item under review. Maintaining a healthy U.S. defense industrial base and sustaining American leadership in emerging technologies will require serious and sustained consideration of these factors and more.

The U.S. government is capable of producing these assessments, and the end product will be better if American industry has an opportunity to share its own data. Companies have a vested interest in understanding competitors and market trends to a degree that government officials do not. In export review decisions, American industry should have an opportunity to make a case before regulators through mechanisms that ensure industry input will be a factor, even if not the decisive factor, in export review decisions.

Institutionalizing such consideration of the economic and strategic implications of arms export restrictions is a prudent and practical step that can strengthen America’s economy at home and our military relationships abroad.

Benjamin Schwartz is the Executive Director of the U.S. Chamber of Commerce’s Defense and Aerospace Export Council and formerly served in the Office of the Secretary of Defense.